The Cayman Islands has gazetted a number of regulations that have provided the necessary legislation for virtual asset service providers in the country.
Five different orders were gazetted at the end of October that provide various regulatory processes for cryptocurrency service providers and companies to operate in the territory.
The gazetting of these orders allowed the government to enact certain provisions of the Virtual Asset Law which was also published on October 29 2020. This all falls under phase one of the rollout of regulatory frameworks for service providers.
The first phase officially started on 31 October and is focused on anti-money laundering (AML) and countering financing of terrorism (CFT) compliance, supervision and enforcement. Cryptocurrency service providers currently operating in the country and new entrants will have to register with the Cayman Islands Monetary Authority.
Phase two is expected to be enforced from June 2021 and will include licensing requirements and ‘prudential supervision’ of service providers in the country.
Plans to draw crypto companies to Cayman Islands
The government’s announcement highlights its aim to both regulate and attract individuals and companies that operate within the cryptocurrency space to set up shop in its jurisdiction.
This has been laid out in the Virtual Asset Bill which was published on 29 October and is set to be presented to the Cayman Islands Legislative Assembly. The bill includes a number of amendments to the ‘commencement’ bill that was published alongside the five other orders mentioned previously.
The regulations set out by the Cayman Islands are in line with standards set out by the Caribbean Financial Action Task Force and the Financial Action Task Force. The Cayman Islands AML/CFT procedures and its efforts to counter proliferation financing are still being assessed by the two bodies. Counter proliferation refers to the act of funding in some way the production of weapons of mass destruction.
“The AML/CFT focus in phase one provides VASPs with the opportunity to demonstrate their compliance with global standards for AML/CFT/CPF. The launch of phase one will be communicated to the CFATF for its consideration prior to the outcome of Cayman’s CFATF re-rating, which will be reported on at their November plenary. The FATF review of our regime is to be completed shortly thereafter, with the Government anticipating the FATF to announce its findings by the end of Q1 2021.”
The Cayman Islands was previously added to the European Union’s black list of tax havens in February 2020 as reported by the BBC.
At the time the EU said that the country does not have the ‘appropriate measures’ in place to prevent tax abuse. The Cayman Islands has no income tax, capital gains tax or corporation tax according to the report.