The Cayman Islands Releases Phase 1 of Its Regulatory Framework for Virtual Asset Service Providers (VASPs)
The Cayman Islands, the Caribbean British Overseas territory, has announced through its Ministry of Financial Services that it has commenced developing a regulatory framework for Virtual Asset Service Providers (VASPs) within its jurisdiction. The island, which is notoriously famous for its ‘tax haven’ status, is looking to clear up ambiguities in running crypto operations as part of compliance with the Financial Action Task Force (FATF) guidelines, which were rolled out last year.
According to the press release on Oct 31, Cayman Islands classifies a virtual asset as a ‘digital representation of value that can be electronically traded and used for investment purposes.’ It has already enacted a set of rules to guide developing a VASP regulatory framework; these came into effect on Oct 28. Going forward, the island plans to roll out this process into two phases, with the initial one having commenced on Oct 31.
The first phase focuses on the compliance, supervision, and enforcement of Anti-money laundering (AML) and terror financing rules in line with the FATF and Cayman Island’s local guidelines. Prospective VASPs and those already operating in this tax haven will be required to register with the Cayman Islands Monetary Authority (CIMA). The second phase is slated for June 2021, and will focus on licensing requirements and prudential supervision.
Notably, the prospectus VASP regulatory framework will feature the FATF guidelines, some of which include the popular ‘Travel Rule.’ Currently, the island’s compliance with FATF is under assessment by the Caribbean Financial Action Task Force (CFATF), which will later report its FATF ratings. The Cayman Islands is optimistic that developing a regulatory framework will attract more firms to launch within its jurisdiction. The press release highlights,
“The Cayman Islands’ ability to regulate and attract persons and entities that deal with virtual assets as a business is now strengthened, with the commencement of legislation for virtual asset service providers (VASPs).”