The Cayman Islands has announced plans to create a new legislative framework for the digital currency sector, in a bid to attract more digital currency and blockchain companies to set up in the jurisdiction.
The British Overseas Territory, which is located in the Caribbean, recently announced the new regime for virtual asset service providers (VASPs), with the Ministry of Financial Services publishing a preliminary set of rules with immediate effect.
This is described by the Ministry as “Phase One” of the process, introducing measures related to anti-money laundering and counter terrorist financing.
As part of the new rules, operators already in the Cayman Islands, along with those setting up in the jurisdiction, will be required to notify and register with the Cayman Islands Monetary Authority, which oversees the implementation of CFT/AML rules.
Phase Two of the implementation process is set to begin in June 2021, which will detail the requirements for licensing and “prudential supervision” for firms registered as VASPs.
The measures are outlined in the new virtual assets bill, which is set to be presented to lawmakers of the Cayman Islands Legislative Assembly at the next sitting. According to the government, the new measures will help attract blockchain and digital currency businesses to choose the Cayman Islands as their primary jurisdiction.
The roll-out of Phase One coincides with the Cayman Islands being assessed by international agencies including the Financial Action Task Force (FATF) and its regional counterpart, the Caribbean Financial Action Task Force, to ensure adequate protections against proliferation financing—the financing of weapons of mass destruction.
The new regulations will bring companies into line with requirements for combating proliferation financing, as well as counter terrorism financing and anti-money laundering measures.
The move comes at a time of tightening regulation for digital currency companies across the world, as jurisdictional competition between different countries continues to heat up. In June, Antigua & Barbuda introduced a comprehensive regulatory framework for digital asset businesses, clients and customers. The Digital Assets Business Act 2020 has been welcomed by businesses in the sector, with Antigua fast emerging as a global hub for Bitcoin BSV and other digital assets tokenized on top of the massively scaling original Bitcoin protocol.