CAYMAN ISLANDS Law and Practice Contributed by: Jason Ta, Ben Magahy, Paul Walters and Gemma Walters, Travers Thorp Alberga
and • includes its owner or operator, but does not include a platform that only provides a forum where sellers and buyers may post bids and offers and a forum where the parties trade in a separate platform or in a peer-to-peer man - ner. If the secondary market trading of blockchain assets amounts to “virtual asset service” under the VASP Act then it will not be regulated. As noted in the definition of “virtual asset trading platforms” trading in a peer-to-peer manner is The Cayman Islands does not currently impose any specific restrictions on staking per se. How - ever, staking generally involves the process of depositing or locking up virtual assets and in return, participants earn rewards, which can be in the form of additional virtual assets or other- wise as may be agreed. Where staking is undertaken by a person for their own account, it is unlikely to fall under a regulatory regime. However, if a person provides staking as a service to other persons, then they would need to carefully consider whether they fall within a virtual asset service under the VASP Act – in particular, the provision of custodial ser - vices or the provision of financial services related to a virtual asset issuance. Additionally, the staking arrangement must be carefully assessed to ensure it cannot be char - acterised as a securities investment business under SIBA or relevant financial business under the Proceeds of Crime Act which could trigger AML/CFT regulations. not regulated. 10.6 Staking
The nature of the tokens, the types of rewards being earned and delivered and whether the issuer of the tokens provides or delivers such rewards on its own tokens or if the rewards are provided by a third party or independent proto - col could all be relevant to the assessment. 10.7 Crypto-Related Lending As a general matter, Cayman Islands law does not specifically regulate lending as a standalone activity, so there are no significant specific regu - lations applying to lending services relating to cryptocurrencies. However, the provision of lend - ing business would likely fall within the scope of the AML Regulations as “relevant financial busi - ness” and which will consequently result in AML/ CFT obligations on the lender. Lending can also be considered a financing and leasing business under the economic substance regime of the Cayman Islands unless an exemption applies. 10.8 Cryptocurrency Derivatives Offering derivatives denominated or settled in cryptocurrencies that meet the test of “security” under SIBA may be regulated if other require - ments of SIBA are met and no exemption applies. Virtual assets representing or convertible into derivatives could also be subject to SIBA. 10.9 Decentralised Finance (DeFi) The question of whether a decentralised (ie, DeFi) exchange will be regulated under the VASP Act depends on whether it falls into the definition of “virtual asset trading platform” which means a centralised or decentralised digital platform: • which facilitates the exchange of virtual assets for fiat currency or other virtual assets on behalf of third parties for a fee, commis - sion, spread or other benefit; and • which:
162 CHAMBERS.COM
Powered by FlippingBook