Cryptolicense in the Cayman Islands: Navigating Regulatory Waters

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DISCLAIMER: The term “cryptolicense” is also used in this text to mean registration/licensing of a virtual asset service provider (VASP). The use of the term “cryptolicense” is intended solely to simplify the text for the customers and visitors of the website.

The Cayman Islands has a relatively light cryptocurrency regime for any person offering virtual asset services when conducting business using a Cayman Islands entity or from its territory. Virtual asset service providers are currently regulated and subject to the Virtual Assets (Service Providers) Law 2020 (Revision 2024) (the VASP Law) and other issued acts in the area.

Certain provisions of the previously mentioned law came into force in October 2020 and January 2021. The commencement of their operation meant the implementation of Phase 1, which was a registration regime focused on anti-money laundering, counter-terrorist financing and cybersecurity. Phase 2 includes a licensing regime for virtual asset trading platforms and custodians, an issuance approval regime for virtual asset issuers, and a sandbox regime for innovative financial technologies.

The Cayman Islands Monetary Authority (CIMA) is responsible for regulating the financial and cryptocurrency sectors in the country.

The registry for VASPs in this jurisdiction is now publicly available. It displays the names of companies that have obtained a cryptolicense in these islands, their registration number, the reason for being on the register (registration/licensing), their status, and the date of entry in the register. CIMA also publishes statistics on the number of such persons and the types of their activities.

The Caymans has cryptoregulation in the form of the VASP Law of 2020 (2024 revision)

Key Numbers about Cryptolicense in the Cayman Islands

10-12 weeks

average term of obtaining cryptolicense

no

minimum share capital

0%

capital gains tax (CGT) rate

0%

corporate income tax (CIT) rate

0%

personal income tax (PIT) rate

0%

value added tax (VAT) rate

Legal Opinion about Cryptolicense in the Cayman Islands

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Ganna Voievodina

Manimama

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CEO

“I recommend that you obtain a cryptolicense in such a jurisdiction as it can provide a number of benefits including regulatory clarity, increased trust and access to the jurisdiction's favorable tax and legal environment. Overall, getting a cryptolicense is an important step for those individuals looking to establish a legitimate presence in the cryptocurrency industry while operating in a well-regulated and globally respected jurisdiction. The Manimama team is ready to help you get the cryptolicense".

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Types of Activities with a License in the Cayman Islands

Issuance of virtual assets

there is the right to sell newly created virtual assets to the public in or from the Caymans in exchange for fiat currency, other virtual assets or other consideration, but this does not include the sale of virtual service tokens.

Exchange between one or more other forms of convertible virtual assets

cryptolicense holders can provide a process for exchanging different types of convertible virtual assets for each other.

Virtual asset custody service

licensees are able to offer safekeeping or administration of virtual assets or instruments that allow the owner to exercise control over virtual assets.

Exchange between virtual assets and fiat currencies

it is possible to offer conversion between virtual assets and fiat currencies, giving customers the ability to transact in different currencies.

Transfer of virtual assets

cryptolicense holders have the right to conduct any transaction that is carried out on behalf of the originator to provide the virtual asset to the beneficiary.

Participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset

it is allowed for licensees to participate in and offer various financial transactions related to the issuance and sale of virtual assets.

Benefits of Obtaining a Cryptolicense in the Cayman Islands

High Reputation:

  • These islands are highly reputable in the international financial and cryptocurrency environment.
  • Licensing in this jurisdiction generates trust among potential partners and clients.

Low cost:

  • The absence of direct income taxes allows for a significant reduction in operating costs.
  • The cost of obtaining and maintaining a cryptolicense in the Caymans is relatively low.

Favorable jurisdiction:

  • These islands are known for their robust regulatory environment, making them an ideal location for cryptocurrency businesses.
  • Companies can expect transparent and clear legal regulations governing cryptocurrency activities.

Resiliency to political risks:

  • The country has a stable political environment, which reduces risks for business.
  • Government policy is aimed at protecting the interests of foreign investors.

Capital attraction:

  • Attracting investment in a legal entity licensed in the state is easier due to the high level of trust.
  • Investors prefer to invest in companies registered in a reliable and stable jurisdiction.

Support for innovation:

  • The country actively supports innovative cryptocurrency startups.
  • Regular initiatives and programs to support technology projects stimulate business development.
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Our Services

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Popular package

Premium

Full list of necessary services to set up of the VASP with connection to KYC providers, C2B account for the crypto transactions

  • Company formation in the Cayman Islands
  • Individual AML/KYC policies
  • Company secretary for 1 year
  • Registered agent and local registered office for 1 year
  • Applying for VASP status
  • Policies for obtaining a license
  • Opening C2B account for crypto activities
  • AML Compliance Officer for 1 year
  • KYC/KYT integration and provider principle adaptation
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Advanced

Set up of company ready to start cryptocurrency operational activity

  • Company formation in the Cayman Islands
  • Individual AML/KYC policies
  • Company secretary for 1 year
  • Registered agent and local registered office for 1 year
  • Applying for VASP status
  • Policies for obtaining a license
  • Opening C2B account for crypto activities
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Basic

Creating the company and registration of VASP

  • Company formation in the Cayman Islands
  • Standard AML/KYC policies
  • Company secretary for 1 year
  • Registered agent and local registered office for 1 year
  • Applying for VASP status
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Our Experts in this Area

Yevheniia Ukolova

Yevheniia Ukolova

BizDev-lawyer
LinkedIn y.ukolova@manimama.eu
Valeriia Ukolova

Valeriia Ukolova

BizDev-lawyer
LinkedIn v.ukolova@manimama.eu
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Step by Step Description

  1. Step 1. Initial setup

      We need such preliminary documents from the client for a company incorporation:

    • Preferred company name
    • Business plan
    • Passport copies from all directors and shareholders
    • Utility bills from all directors and shareholders
    • CVs of shareholders and directors
    • Source of funds confirmation
    • Confirmation letter of business activity

  2. Step 2. Registration of the company

    • Preparation of corporate documents
    • Filing with the General Registry a registration statement
    • Company registration
    • Obtaining a stamped documents and Certificate of Registration
    • Set up of accounting services

  3. Step 3. Applying for a cryptolicense

    • Completing the application and AML/CFT form for the CIMA (can be done through the Regulatory Enhanced Electronic Forms Submission (REEFS) - regulator's online platform)
    • Obtaining CIMA registration after paying an application fee of KYD 1,000 (~ € 1,108)
    • Communication with the CIMA

  4. Step 4. Opening C2B account for crypto activities (performed together with Step 3)

    • Review the most appropriate banks/EMIs, comparing the bank's risk appetite with the client's risk appetite based on previously prepared AML policies
    • Gather the required documents from the client to start the process (utility bill, source of wealth, fund flow, description of the purpose of account opening, key partners, company website etc.)
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Understanding Requirements in the Cayman Islands

To run a cryptocurrency business, you need to be registered or licensed with the regulator

To operate a cryptocurrency business in the Caymans, a legal entity must be registered or licensed with CIMA. To do so, it completes the relevant application form with all the information required by law. The regulator may request additional information from applicants to ascertain the suitability of applicants.

Please note that in order to carry out activities related to the provision of a virtual asset custody service or the management of a trading platform for virtual assets, a legal entity must apply for a license.

Applications for registration/licensing are submitted to the Management Committee, which usually meets weekly. Once the applicant has met all requirements, a notification letter will be sent to the applicant within 2-3 working days.

CIMA evaluates applications for, inter alia, compliance and integrity of shareholders, proposed directors, senior officers, business plan, transparency, risk management, internal controls, cybersecurity measures including IT or blockchain infrastructure, and AML/CFT/PF systems and sanctions monitoring.

Below we outline the basic requirements for registration with CIMA:

  • Completed REEFS application form
  • List of applicant's blockchain addresses (per coin)
  • Chief Information Officer/Chief Information Security Officer information, including their CVs
  • Copies of cybersecurity policies
  • Copies of AML/CFT policies
  • A detailed business plan, which must include such information (not limited to):
    • a detailed description of the business being conducted or to be conducted
    • details of the products and services and details of the process for providing those services
    • the reasons why you wish to establish a business on or within the Islands
    • background information: company history, management team, number of proposed employees, corporate structure, names and percentage of all shareholders, etc.
    • two years of financial statements and financial projections
    • physical location of operations
    • customer base
    • service delivery channels and marketing plan/strategy
    • corporate governance, e.g. composition of the board of directors
    • information on contracts with affiliates and outsourcing arrangements, if applicable, and details of whether these are regulated in any jurisdiction
    • an explanation of the risk management and internal control strategy within the business
    • confirmation that the legal entity will comply with all relevant laws, rules, regulations and statutes
  • Schemes of operations
  • Details of outsourcing and related agreements

    • The information to be provided when applying for major shareholders (10% and above), directors and officers is as follows:

  • Certified copies of educational and professional certificates
  • Certificate of police clearance or proof of no criminal record
  • A fully completed personal questionnaire form
  • Two character references
  • One financial reference
  • Updated and complete CV
  • Notarized or similarly certified color copy of a photo identification card
  • Completed source of funds/source of wealth declaration form with supporting evidence for major shareholders

    • Requirements for Obtaining a Cryptolicense in the Cayman Islands

    The legal entity must have a physical presence in the country and comply with AML/CTF regulations

    Before receiving a cryptolicense in the Cayman Islands, a crypto project must get ready to fulfill a number of requirements. Thus, they include (not limited to this list):

  • registered office in the Caymans
  • having proper senior officers, trustees, beneficial owners and appointing such persons only with the approval of the CIMA
  • complying with AML legislation that deal with ML, TF and PF as well as the implementation of AML systems and procedures and the appointment of an officer responsible for procedures to combat ML, TF and PF
  • when performing a transfer of virtual assets a person must collect and maintain information on the beneficiary and originator of the transfer in accordance with the AML law and any additional information for all transfers performed and comply with any other requirements outlined therein - the Travel Rule Return must be completed and submitted through the STRIX system to the Anti-Money Laundering Unit within 10 days of receipt from CIMA
  • it is required to ensure the accuracy of communications relating to virtual asset services
  • no shares totalling 10 % or more of the total shares in a company shall be issued, and no issued shares or interests shall be voluntarily transferred or disposed of, without the prior approval of the CIMA
  • can't engage in securities investment business unless the person is registered or is a licensee under the Securities Investment Business Act (2020 Revision) (SIBA) or has been exempted from registration or licensing by the CIMA
  • it must secure the personal data and virtual assets of clients
  • there is an obligation to provide an audit report, prepared by an independent auditor, on AML systems and procedures for compliance with the AML regulations
  • annual preparation of accounts and making them available for audit at CIMA's request at its registered office
  • annual preparation of accounts and making them available for audit at CIMA's request at its registered office
  • notification to the regulator of:
    • any license or registration in another jurisdiction
    • the opening of an office or the establishment of a physical presence in another jurisdiction
    • any fines or enforcement action taken against the entity in the other jurisdiction
    • the ownership or acquisition of a controlling interest in another person or legal entity engaged in servicing virtual assets

    In addition, there are specific requirements for virtual asset trading platforms and custody services.

    Taxes in the Cayman Islands

    There is no specific tax legislation related to cryptocurrencies in this jurisdiction

    The Caymans do not levy any taxes and are often featured as a tax haven. Thus, the following taxes are not imposed here:

  • corporate income tax
  • personal income tax
  • capital gains tax
  • withholding tax on dividends or interest payments
  • value added tax
  • payroll tax
  • property tax
  • inheritance tax
  • gift tax

    • Notwithstanding its reputation as an offshore haven, the Caymans are reasonably compliant with international tax standards. The jurisdiction has signed numerous Tax Information Exchange Agreements (TIEAs) with other countries.

    There is currently no tax legislation on cryptocurrencies, making the islands one of the best places to avoid cryptocurrency taxes entirely.

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    Frequently Asked Questions

    • Is cryptocurrency activity legal in the Cayman Islands?
      Yes, cryptocurrency related activities are legal here. It is authorized by CIMA, which has the power to regulate crypto-business in this country.
    • Which entities are covered by the VASP Act?
      The law applies to all entities that intend to or currently provide virtual asset services in or from the Caymans.
    • What is meant by virtual asset services?

      It includes:

      • issuance of virtual assets
      • exchange between virtual assets and fiat currencies / between one or more other forms of convertible virtual assets
      • transfer of virtual assets
      • custody services
      • participation and provision of financial services related to the issuance or sale of virtual assets
    • Do I need to be physically present in the Caymans to launch my cryptocurrency business?
      No. The whole process of registering, operating and reporting to the authorities can be carried out 100% remotely.
    • What is the timeframe for receiving a cryptolicense in the Cayman Islands?
      The process of applying for a cryptolicense usually takes between 3 and 6 months. The timeframe can vary depending on the specific type of license, the preparation of documents and the speed at which the company can meet all the requirements of the regulator.
    • Is there a minimum capital requirement for a VASP?
      No, such a requirement does not exist.
    • Is it mandatory to have a registered office in Caymans?
      Yes, this is a compulsory condition.
    • What are the registration fee requirements and how can it be paid?
      All applications for registration must be accompanied by a fee of KYD 1,000 (~ € 1,108). The fee can be paid through the REEFS portal at the time of application.
    • Are cryptocurrencies subject to taxation in the Caymans?
      There is currently no specific tax legislation related to cryptocurrencies here.
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