Financial Services Minister André Ebanks has indicated several pieces of proposed legislation will be released later this year as part of Cayman’s effort to innovate and modernise its financial services offering.
Addressing 500 delegates at the GAIM Ops conference, held 24-27 April at The Ritz-Carlton, Grand Cayman, Ebanks acknowledged there are lingering and pressing challenges such as the remnants of COVID constraints, concerns over the war in Ukraine and related sanctions, ever-evolving regulations, inflation and climate change.
However, he said at his address on Monday, “The Cayman Islands financial services industry did not slow down despite the pandemic.”
Ebanks noted that Cayman remains the top domicile for hedge funds, with more than 27,000 registered mutual and private funds. The captive insurance and reinsurance sector as well as family offices were seeing solid growth and company and partnership registrations were rising.
Going forward, the minister said Cayman would have to “innovate in a smart way”.
wwThis included Cayman’s virtual assets framework, which will be implemented in two phases. While phase one has already been checked off by the Financial Action Task Force as compliant, the minister said, phase two would plan the commercial aspects.
The implementation of the second phase of the Virtual Asset (Service Providers) Act, which includes a licensing regime for service providers in the digital asset space, was originally slated to come into effect in July 2021.
According to the minister, the government will still be taking feedback.
“We will build this right and build it in a way that it makes sense for existing financial services in the Cayman Islands,” he said.
The Cayman Islands Monetary Authority held a public consultation, which ended 7 March, on draft rules and guidance for the provision of services by custodians and trading platforms for virtual assets.
CIMA advised earlier this year that a section of the Anti-Money Laundering (Amendment) (No. 2) Regulations, 2020 that outlines the identification and record-keeping requirements relating to transfers of virtual assets will become effective on 1 July. Service providers had to inform the regulator how they were intending to comply with this so-called travel rule.
Ebanks further referenced government’s reform of Cayman’s restructuring regime which provides a new tool and was passed with amendments to the Companies Act in December 2021. The changes to the act introduced a formal restructuring procedure under the supervision of a restructuring officer outside the traditional winding-up process.
In addition, government is working on a new reinsurance product with capital redemption contracts or funding agreements, as well as a new category of insurer. Drafting for this has started and the bill should presented in Parliament sometime in the summer.
“We’re also going to be issuing drafting instructions next month to add commercial enhancement for exempted limited partnership. That should be key for [private equity] funds,” Ebanks said. A consultation will be issued shortly.
This will be followed by commercial enhancements to the Companies Act, he added.
Late last year, government announced that it was also working on a legislative framework for the implementation of environmental, social and governance (ESG) criteria for Cayman’s financial services industry, especially for Cayman funds.
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