The Cayman Islands has introduced new licensing requirements for cryptocurrency custody and trading platforms, set to take effect on April 1, 2025. The updated Virtual Asset (Service Providers) (Amendment) Regulations mandate that all firms offering digital asset custody and trading services must obtain a license from the Cayman Islands Monetary Authority (CIMA), marking a significant shift in the territory’s regulatory framework.
Stricter Compliance for Crypto Service Providers
Under the new regulations, existing virtual asset service providers (VASPs) must apply for a license within 90 days. Applications must include detailed information on cybersecurity protocols, risk management strategies, and safeguards to protect user assets. Crypto custodians will also be required to disclose the types and amounts of virtual assets they intend to hold, along with their rationale for custody. Meanwhile, trading platforms must outline their expected revenue and provide details on the location of the hardware supporting their operations.
A Shift in Cayman’s Regulatory Approach
Historically, the Cayman Islands has maintained an open regulatory environment for crypto firms. The initial VASP Act, introduced in 2020, required crypto businesses to register with CIMA but primarily focused on anti-money laundering (AML) and counter-terrorism financing (CTF) measures rather than direct oversight of the industry.
With the latest amendments, crypto service providers will now be subject to more stringent oversight, bringing them in line with global regulatory trends. The move signals a broader effort to enhance investor protection and prevent illicit financial activities while maintaining the Cayman Islands’ reputation as a leading financial hub for digital assets.
Impact on the Crypto Industry
Currently, 17 companies are registered as VASPs in the Cayman Islands, including major industry players such as Crypto.com and Blockchain.com. The new licensing requirements could influence how these firms operate within the jurisdiction and may attract further scrutiny from regulators worldwide.
As the global regulatory landscape for cryptocurrencies continues to evolve, the Cayman Islands’ latest initiative demonstrates a growing trend toward stricter compliance standards. Crypto firms operating within the territory will need to adapt to these changes to continue their business activities within the regulated framework.
