by Jason Gorringe, Tax-News.com, London
17 November 2020
The Government of the Cayman Islands has published legislation in its Official Gazette to introduce a regulatory regime for virtual asset service providers (VASPs).
The Virtual Asset (Service Providers) Law, 2020 is intended to strengthen the Cayman Islands’ ability to regulate and attract persons and entities that deal with virtual assets as a business.
The legislation allows for the supervision of persons and entities who are involved in providing business services that use or rely on virtual assets, such as cryptocurrencies, on behalf of another person or entity.
On October 28, 2020, Cayman gazetted primary and secondary legislation to bring into law certain provisions of the Virtual Asset (Service Providers) Law, 2020, namely:
Virtual Asset (Service Providers) Law, 2020 (Commencement) Order, 2020;
Virtual Asset (Service Providers) Regulations, 2020;
Monetary Authority (Amendment) (No.2) Law, 2020 (Commencement) Order, 2020;
Securities Investment Business (Amendment) Law, 2020 (Commencement) Order, 2020; and
Mutual Funds (Amendment) (No.2) Law, 2020 (Commencement) Order, 2020.
The regulatory framework for VASPs will commence in two phases.
Phase one, which began on October 31, will focus on anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance, supervision, and enforcement. Current VASPs and new entrants will need to notify and register with the Cayman Islands Monetary Authority (CIMA).
Phase two, which will include licensing requirements and prudential supervision, is expected to come into force in June 2021. To better facilitate the phased commencement approach, the Virtual Asset (Service Providers) (Amendment) Bill, 2020, was published on October 29 and will be presented at the next sitting of the Legislative Assembly.
The Cayman Government said the AML/CFT focus in phase one provides VASPs with the opportunity to demonstrate their compliance with global standards for AML/CFT and also countering proliferation financing (CPF). Cayman hopes that its work in this area will be recognized by the Caribbean Financial Action Task Force and the Financial Action Task Force.