In recent years Cayman has emerged as a favoured jurisdiction for digital asset businesses, with its success underpinned by a mix of government regulations and private-sector innovation.
Cayman passed the Virtual Asset Service Providers Act in 2020 to meet requirements from international anti-money laundering body, the Financial Action Task Force. Passing and implementing the VASP Act was one reason why Cayman was removed from the task force’s grey list in October 2023.
The solid regulatory framework created by the VASP Act explains why so many digital asset businesses have opted for the Cayman Islands.
Speaking on Compass TV’s Forefront show on 13 Nov., financial regulation attorney Elisabeth Lees noted that “People want to come to a jurisdiction that not only is well regulated but where those boundaries are very clear.”
Lees, who is also the co-founder of boutique regulatory compliance firm, Claritas, believes that digital asset businesses prefer Cayman because “They know what is expected of them. They know what the parameters are and they know what they have to do in order to comply.”
Speaking on the same show, Petri Basson, chair of the Blockchain Association of the Cayman Islands, said, “In Cayman we have had those guardrails. We have got the licensing and everything else now. So, a lot of people are choosing Cayman as a jurisdiction and I am sure now with the full licensing we will see much more coming here.”
Constantly evolving
In 2024, Cayman amended its VASP Act, aiming to become more compliant with task force regulations, which in turn make the jurisdiction more attractive to tech firms looking for the best international option. That amendment came into force 1 April 2025, after the regulations to the act were published in February.
Being an early adopter of VASP regulation has helped Cayman, but at the same time the digital asset sector is undergoing rapid change. That means the regulations needed to oversee the sector must also be updated.
For example, there is growing momentum for traditional financial funds to adopt blockchain technology to improve the efficiency of transactions, meaning this emerging trend of ‘tokenisation’ needs to be covered by the regulations. To that end, the Ministry of Financial Services opened a consultation to clarify which firms should be subject to VASP and which can be covered by existing financial regulation, such as the Mutual Funds Act.
Another driver of change comes from the impending task force evaluation in two years. “We know that the next review is going to be done by way of an onsite inspection in 2027 and we’re getting ready for that,” said Lees.
One way the Cayman Islands is preparing is via the ongoing National Risk Assessment, which checks all aspects of the economy – including digital asset businesses – to ensure there is no breach of international financial regulations.
Of course, any jurisdiction can write nice-sounding regulations, but the task force also wants to see those rules being followed.
Cayman recently saw “the first enforcement action against a virtual asset service provider,” said Lees. “Their licence was cancelled and one of the reasons given there related to enhanced due diligence.”
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