Cayman Islands: A FinTech Legal Overview

The Cayman Islands has established itself as a leading jurisdiction for digital asset and FinTech structures, building on its long-standing role as a leading international financial centre. Its common law legal system, political stability, tax-neutral environment and sophisticated regulatory and professional services ecosystem continue to attract high-quality projects.

The Cayman Islands government and the Cayman Islands Monetary Authority (CIMA) pursue a policy of openness to innovation, while remaining aligned with global regulatory, AML/CFT/CPF and tax transparency standards. The Virtual Assets (Service Providers) Act (As Revised) (the “VASP Act”), together with related guidance and AML measures, provide a comprehensive statutory framework for virtual asset service providers (VASPs). With the licensing regime for virtual asset trading platforms and custodians now in force, and the implementation of the OECD Crypto-Asset Reporting Framework (CARF), Cayman offers a mature and well-regarded FinTech regulatory regime.

Business Models and Regulatory Landscape

Cayman foundation companies are widely used to support protocol governance and ecosystem treasuries, while exempted companies and exempted limited partnerships remain the principal structures for operating entities and investment funds.

CIMA supervises banking business, securities investment business, mutual and private funds, insurance business, trust business, money services business, corporate services business and VASPs.

For FinTech projects, the key statutory and regulatory frameworks to consider include:

• VASP Act,
• Securities Investment Business Act (As Revised),
• Mutual Funds Act (As Revised),
• Private Funds Act (As Revised),
• AML/CFT/CPF and sanctions framework, which applies to VASPs and many unregulated entities conducting relevant financial business,
• Data Protection Act (As Revised), and
• International Tax Co-operation (Economic Substance) Act (As Revised),

together with associated regulations, rules and guidance.

Early, fact-specific regulatory analysis is critical. Depending on how a project is structured, and the proposed activities, it may fall within multiple regimes or, conversely, sit outside financial services regulation.

Foundation Companies for Decentralised Projects and Decentralised Autonomous Organisations (DAOs)

Cayman foundation companies are a popular governance and treasury vehicle for decentralised projects and DAOs. They combine separate legal personality and limited liability with the ability to operate without shareholders or beneficiaries.

A foundation company is a vehicle unique to Cayman and may be formed with or without share capital. After incorporation, a foundation company may cease to have members, provided it maintains at least one Supervisor, being a person other than a member who has a right to attend and vote at general meetings. A foundation company must also have a Secretary that is a Cayman licensed service provider and maintain a registered office in the Cayman Islands. Its memorandum and articles of association can allocate rights or powers to specified persons, and optional by-laws often cover DAO governance mechanics, including processes for the board to implement on‑chain proposals, subject to directors’ fiduciary duties and applicable law.

Where a foundation company proposes to exchange, transfer or custody virtual assets for others, it must assess the applicability of the VASP Act, alongside any fund or securities considerations.

Virtual Assets Regulatory Framework

The VASP framework was introduced in Cayman in 2020 and implemented in phases in response to the Financial Action Task Force recommendations on virtual asset activities. The registration regime became effective on 31 October 2020, supported by enforcement powers from 31 January 2021. On 1 April 2025, the full licensing regime came into effect for virtual asset trading platforms and custodians, marking a significant evolution of the framework. Provisions relating to public issuances and the sandbox regime are expected to be brought into force in due course.

The VASP Act defines a “virtual asset” broadly as a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes, but does not include a digital representation of fiat currencies.

A “virtual asset service” includes the issuance of virtual assets, or the business of providing one or more of the following services or operations for or on behalf of a natural person or legal arrangement:

• exchange between virtual assets and fiat currencies;
• exchange between one or more forms of convertible virtual assets;
• transfer of virtual assets;
• virtual asset custody services; or
• participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset.

The VASP Act applies to Cayman entities (including registered foreign companies) providing a virtual asset service as a business, or in the course of business, in or from within the Cayman Islands. Natural persons are prohibited from providing, or holding themselves out as providing, virtual asset services.

Issuances of virtual assets to the public from Cayman require prior registration and CIMA approval, subject to thresholds and conditions. Unadvertised private sales to pre-selected investors (for example, a limited private funding round) may fall outside the scope of an issuance “to the public”, easing the burden for closed, pre-negotiated offerings.

Operators of virtual asset trading platforms and providers of virtual asset custody services (including wallet providers that hold or can exercise control over clients’ private keys) must now hold a VASP licence before commencing business. OTC brokers and other intermediaries that facilitate exchanges or transfers but do not take custody may, subject to an analysis of the exact nature of the relevant control and funds flow mechanics, be able to operate on a registration-only basis.

Outlook

Cayman’s FinTech and virtual assets ecosystem has evolved significantly in recent years. The implementation of the VASP Act licensing regime, enhanced CIMA guidance, the Travel Rule and CARF reflect Cayman’s commitment to remaining an innovation-friendly, institution-ready jurisdiction that meets the expectations of global standard setters on market integrity, financial crime and tax transparency.

Against this backdrop, Cayman is expected to remain a leading jurisdiction for high-quality digital asset, Web3 and FinTech projects, particularly where founders and investors seek legal certainty, regulatory sophistication, tax neutrality and access to first-class professional support.