The Cayman Islands Government has taken a significant step in the regulation of virtual asset service providers (VASPs) with the commencement of the licensing regime under the Virtual Asset (Service Providers) Act (as revised) (the VASP Act).
The Virtual Asset (Service Providers) Act (Commencement) Order, 2025 (the Commencement Order) has now activated the requirement for certain virtual asset services, including custody services and the operation of a virtual asset trading platform, to be conducted under a full licence issued by the Cayman Islands Monetary Authority (CIMA).
Key Implications for Virtual Asset Businesses
Licensing Requirement for Custody and Operation of a Trading Platform: With the Commencement Order now in effect, entities providing custody services or operating a virtual asset trading platform must obtain a licence from CIMA to continue operating lawfully in the Cayman Islands.
Impact on Existing Registrants: VASPs previously operating under a registration and are engaging in activities now classified as licensable, are now required to uplift and transition to a full licence. This means that all such businesses must submit applications for licensing and satisfy the relevant requirements under the VASP Act.
Regulatory Compliance and Governance Expectations: CIMA is expected to apply a robust assessment to licensing applications, particularly regarding corporate governance, internal controls, risk management, and anti-money laundering (AML) procedures. Businesses should ensure that their policies and procedures align with CIMA's expectations to facilitate a smooth transition from registration to licensing.
How We Can Assist
Conyers is well-positioned to support virtual asset businesses navigating these new regulatory requirements. We have extensive experience advising VASPs on compliance with the Cayman Islands' evolving regulatory framework. Existing and future applicants should reach out if you require assistance with any of the following:
a) Assessing whether your business activities fall within the scope of the new licensing requirements;
b) Preparing and submitting licensing applications to CIMA;
c) Advising on corporate governance, AML, and other relevant prudential and conduct arrangements in line with regulatory expectations; and
d) Supporting existing registrants with the transition to licensed status.
With the Cayman Islands reinforcing its position as a leading jurisdiction for virtual asset innovation and regulation, it is critical for businesses to ensure compliance with the new licensing regime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
