CAYMAN ISLANDS Trends and Developments Contributed by: Alan Bercow, Jae Shin and Ross McLeod, Appleby
• the extent to which protocol governance decisions can trigger fiduciary duties under Cayman Islands law; and • the application of restitutionary remedies such as unjust enrichment to blockchain- based assets. The Cayman courts have yet to rule on these questions. However, principles of equity and unjust enrichment are likely to be highly relevant in due course. Cross-border co-operation The Cayman Islands’ cross-border co-operation in digital asset fraud cases operates through the following key mechanisms. • Mutual legal assistance treaty (MLAT) – the Cayman‒US MLAT is potentially particularly valuable in digital asset investigations, given the concentration of major exchanges and blockchain companies under US jurisdiction. The treaty enables evidence sharing, witness testimony, and potential asset freezing in cross-border investigations. • Tax information exchange agreements (TIEAs) – the Cayman Islands has established TIEAs with 36 jurisdictions as of 2024; 29 of these TIEAs are in force. These agreements increas - ingly include provisions for sharing informa - tion relevant to cryptocurrency-related tax fraud investigations. • Freezing orders – the Cayman Islands courts can grant freezing orders in support of pro - ceedings elsewhere to protect assets within the Cayman Islands or controlled by parties which are subject to the jurisdiction of the Cayman Islands courts. • Enforcement of foreign judgments – the recognition and enforcement of foreign judg - ments related to digital assets in the Cay - man Islands follow established common law
enforcement, with adaptations for the digital context. • Challenges in decentralised contexts – enforcement becomes more complex when assets exist on decentralised protocols with - out clear controlling entities, such as decen - tralised autonomous organisations (DAOs). The Cayman Islands courts are likely to be pragmatic in such scenarios, focusing on identifiable actors with control over protocol governance or access keys. This will obvious - ly be highly fact-specific to different DAOs. Conclusion The Cayman Islands has positioned itself as a jurisdiction adapting proactively to the fraud challenges presented by digital assets. Through the implementation of the VASP Act, develop - ment of specialised regulatory expertise, and the ability to obtain swift and effective relief in the Cayman Islands courts to assist victims of fraud, the jurisdiction offers increasingly robust mechanisms for both preventing and addressing digital asset fraud. For professionals advising clients operating in the digital asset space, the following key takea - ways emerge: • regulatory compliance is increasingly non- negotiable, with the VASP registration regime now fully operational and enforcement actions against non-compliant entities accel - erating; • technical due diligence remains essential, particularly for institutional investors engaging with cryptocurrency exchanges, custodians, and DeFi protocols with Cayman Islands con - nections; • asset recovery options are expanding, with the Cayman Islands courts demonstrating willingness to grant remedies that account
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