The Cayman Islands government is trying to build a regulatory framework for Virtual Asset Service Providers (VASPs), the Caymans’ Ministry of Financial Services said in a press release on 31 October.
According to the announcement, the ministry is already looking into ways to regulate and enforce Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) rules, which is Phase One of their plan. Prior to the announcement, the Ministry of Financial Services and Home Affairs (FSHA) published a new virtual assets bill, which seeks to amend the law to facilitate the phased rollout of the new rules. The ministry also pointed out that the new framework would attract more digital asset businesses to the Cayman Islands, saying:
“The Cayman Islands’ ability to regulate and attract persons and entities that deal with virtual assets as a business is now strengthened, with the commencement of legislation for virtual asset service providers (VASPs).”
The new AML/CFT rules, that try to incorporate the updated recommendations from the Financial Action Task Force (FATF), are currently under review by the FATF and its Caribbean counterpart, following a recent Mutual Evaluation Report. VASPs already working in the Caymans, and newcomers to the market, will need to notify and register with the Cayman Islands Monetary Authority, and demonstrate their AML/CFT compliance.
Phase One focuses on compliance and enforcement of AML/CFT rules, Phase Two will be looking at licensing requirements and “prudential supervision” for VASPs. While Phase One is already underway, Phase Two is expected to come into force sometime in June 2021.