Cayman Islands Crypto License

Cayman Islands Crypto Regulations On May 25, 2020, the Cayman Islands government’s legislative branch enacted the Virtual Asset (Service Providers) Law, 2020 (“VASP Law”). This legislation delineates the processes governing virtual asset business activities in the Cayman Islands, specifying criteria for licensing and registration for individuals providing virtual asset services. The primary goal of the VASP Law is to bring the Cayman Islands in line with global regulatory norms, ensuring consumer protection and compliance with the Financial Action Task Force recommendations on virtual assets. This initiative is aimed at establishing a comprehensive and contemporary framework to regulate virtual asset business operations in the Cayman Islands.

Cayman Islands crypto license

PACKAGE «COMPANY & CRYPTO License IN THE CAYMAN ISLANDS»

25,900 EUR
PACKAGE «COMPANY & CRYPTO LICENSE IN THE CAYMAN ISLANDS» INCLUDES:
  • Full turnkey company formation
  • Name Availability Check,
  • Document Preparation and Filing,
  • Company incorporation process,
  • Government fee for incorporation
  • Company Secretarial service for 1 year,
  • Registered Agent
  • Legal Address for 1 year
  • Set of the corporate documents
  • VASP License application assistance
  • Set of policies for license application

Advantages

Situated in the Caribbean Sea, the Cayman Islands, a British Overseas Territory, has emerged as a sought-after choice for those interested in cryptocurrency-related endeavors. The following are notable advantages:

  1. Favorable Regulatory Atmosphere
  2. Stable Political and Economic Climate
  3. Accessibility to Banking Services
  4. International Reputation
  5. Tax Neutrality
  6. Full Foreign Ownership
  7. Minimal Requirements for Incorporation and Corporate Management

Requirements

In order to engage in cryptocurrency-related activities in the Cayman Islands, companies are required to secure crypto permission from the CIMA. This permission serves as an assurance of adherence to anti-money laundering (AML) and counter-terrorism financing (CTF) regulations, offering regulatory oversight to the industry. This section will outline the fundamental prerequisites for obtaining a cryptocurrency license in the Cayman Islands.

  1. Notarized copies of passports for all members
  2. Notarized copies of address proof for all members
  3. Business plan
  4. Source of Funds: Details such as current job, position, company name, business activities, working countries, and years of employment—where a CV suffices
  5. Confirmation Letter of Business Activity
  6. AML Manual of KYC/AML delineating AML compliance policies and procedures
  7. Policies including Information Security, Private Key Storage, and Cybersecurity Program
  8. Appointment of a Local AML Officer
  9. Local Registered Office

Cayman Islands

capital

Capital

population

Population

currency

Currency

gdp

GDP

George Town 68,136 The Cayman Islands Dollar 86,568.77 KYD

Establishing a Cryptocurrency Company in the Cayman Islands

The regulatory environment in the Cayman Islands provides stability and predictability, coupled with a well-established banking sector and advantageous tax policies. The following outlines the primary steps involved in launching a cryptocurrency business in the Cayman Islands.

Incorporation:

The initial step is incorporating the business, which can take the form of a limited liability company (LLC) or an exempted company. A crucial requirement is maintaining a physical presence by having a registered office within the jurisdiction.

Banking Services:

Once a cryptocurrency license from the Cayman Islands has been secured, the business gains access to the well-developed banking sector. With numerous international banks operating in the jurisdiction, businesses in the crypto industry can choose from a variety of banking services to support their operations.

Obtaining a Cryptocurrency License:

Companies aspiring to operate in the cryptocurrency space in the Cayman Islands must obtain a crypto license from the CIMA. Meeting specific conditions is imperative, such as presenting a comprehensive business plan, establishing robust systems and controls to prevent tax avoidance and terrorism financing, and satisfying fit and proper criteria. Additionally, companies must adhere to minimum capital requirements set by CIMA.

Compliance:

Strict adherence to anti-money laundering (AML) and counter-terrorism financing (CTF) regulations is mandatory for crypto businesses in the Cayman Islands. This involves implementing policies and procedures for customer identification and verification, transaction monitoring, and reporting any suspicious activity to the relevant authorities.

Process and Timeline for Obtaining a Crypto License in Cayman

Stage 1

Collection of Preliminary Documents

Documents Required:

  • Preferred company name
  • Passport copies from all shareholders and directors
  • Utility bills from all shareholders and directors
  • CVs of shareholders and directors
  • Business model of the company/Business plan
  • Source of Funds confirmation
  • Confirmation Letter of Business Activity

 

Stage 2

Company Registration

  • Company registration
  • Preparation of corporate documents
  • Set up of accounting services

Stage 3

Licensing

  • Determination of suitable license type
  • Collection of all related documentation
  • Submission of the license application to the Regulator (Cayman Islands Monetary Authority – CIMA)
  • Communication with the regulator

Stage 4

Corporate Account Opening

  • Analysis of the most suitable Banks/EMIs, comparing the risk appetite of the Bank with that of the Client based on previously prepared AML policies
  • Collection of necessary documents from the Client’s side to initiate the process (flow of funds, source of wealth, description of the purpose of opening an account, key partners, company website, utility bill, etc.)
  • Guiding the Client’s company through the entire process of opening an account

The Licensing Process: Characteristics and Phases

CIMA assumes responsibility for overseeing crypto assets, classified as “virtual assets” under Cayman Islands legislation. Concurrently, the licensing framework for any legal entity is notably straightforward. Entities within the Cayman Islands crypto sector are identified as Virtual Asset Service Providers (VASPs), governed by the VASPA Act of 2020 (with amendments in 2022). To secure a crypto license, several sequential steps are involved.

Document Preparation

The Regulator evaluates a crypto license request upon submission of the following documents:

Constituent Papers:

Charter, registration certificate, and other relevant duplicates.

Duplicate Financial Statements:

Financial documentation for a specific reporting period, validating economic reliability and fulfillment capability.

Business Plan:

Comprehensive document outlining company structure, activities, business strategy, potential risks, and forecasts.

Technological Documentation:

Details on the platform used and security measures employed for crypto operations.

Competence and Professionalism Evidence:

Credentials demonstrating the proficiency of management personnel and key figures.

Additionally, CIMA necessitates a police clearance certificate from the applicant’s country of residence, a letter of recommendation from a previous banking association in the applicant’s home country, and other relevant documents.

License Application Submission

Prospective licensees can submit an application through the dedicated online platform REEFS. Individuals must also complete the AML/CFT form available on the REEFS website. A license is granted following the payment of the registration fee.

During the application review, the Regulator conducts a comprehensive examination of the submitted documents. This involves scrutinizing the security system, assessing the presented business strategy, and evaluating the professionalism and criminal record of the management team. The final decision from CIMA is only issued after this thorough assessment.

Legal Entity Structures for Obtaining a Crypto License

Entrepreneurs seeking to engage in cryptocurrency activities in the Cayman Islands can opt for various legal forms when registering their companies. The choice of a specific legal structure depends on factors such as the business goal, number of participants, and their level of responsibility. To determine the most suitable option, we recommend consulting with our law firm specialists, who consider all relevant factors, including the client’s preferences.

Choosing a Limited Liability Company (LLC)

Limited liability companies are commonly favored by non-resident entrepreneurs, offering the following key features:

  • Limited liability for owners, safeguarding personal property and finances in case of financial issues within the company.
  • Easier management due to effective distribution of power and control among participants based on their share of the authorized capital, ensuring transparency and efficiency.
  • Enhanced confidentiality, as information about owners and directors remains in the private domain.

Considerations for a Joint-Stock Company

Considered a lucrative alternative to an LLC, a joint-stock company presents distinctive internal structuring and control aspects:

  • A more complex management structure involving shareholders and a board of directors elected to directly oversee the company.
  • The ability to raise capital from external investors through the issuance of shares, creating favorable conditions for expansion.
  • Increased financial transparency, although information about individual owners is not publicly disclosed. Emphasis is placed on disclosing the company’s financial information.

Special Characteristics of Partnerships and Other Entities

Depending on the specific objectives for obtaining a crypto license in the Cayman Islands, other business entities may be preferred:

  1. Partnerships: Created by at least two individuals, partnerships are established on the basis of an agreement for joint management and ownership. Particularly convenient for asset management in the cryptocurrency sphere.
  2. Joint Ventures: Involving collaborative contributions from two or more companies, joint ventures are suitable for specific projects such as startups.
  3. Funds and Variable Capital Structures: Choosing a specific Special Purpose Vehicle (SPV) can precisely meet the specific needs of the firm.

Challenges During the Licensing Process

While the licensing process is generally straightforward, certain factors can complicate it:

  • Inability to prove financial stability, often leading to license refusal.
  • Complexity of legal documentation, which may include numerous papers, and errors in any of them can result in a license denial.
  • Lengthy verification procedures by regulatory authorities, especially if documents are insufficient or questions arise about the company’s technological equipment.
  • Evolving legislation in the cryptocurrency sphere necessitates timely updates to policies and corporate processes.
  • Antitrust measures imposed by the government to prevent market monopolization, posing challenges for cryptocurrency businesses.
  • Our attorneys specialize in cryptocurrency licenses and are well-equipped to navigate these challenges and mitigate associated risks.

Regulation of Cryptocurrency Entities

Companies operating in the digital or virtual asset sector must adhere to various regulations, including obtaining a cryptocurrency exchange license in the Cayman Islands. Cryptocurrency activities in this jurisdiction are governed by the following laws:

“On Virtual Assets” (On Service Providers): A cryptocurrency exchange license is mandatory for those offering virtual asset storage services or operating a crypto trading platform.

The Foreign Account Tax Compliance Act (FATCA): Applicable to the licensing of US citizens, it obliges companies owned by US residents to transfer information about financial accounts to the US Internal Revenue Service (IRS).

AML (Anti-Money Laundering): Companies involved in relevant cryptocurrency activities are required to comply with anti-money laundering rules.

Additionally, when registering a legal entity, compliance with the requirements outlined in the Companies Act is essential. For example, a crypto firm must have a registered office in the Cayman Islands and a registered agent.

About CIMA (Cayman Islands Monetary Authority)

The Cayman Islands Monetary Authority (CIMA) oversees the financial and cryptocurrency sectors in the country. This regulatory body has relatively lenient licensing requirements for individuals providing services using virtual assets in the Cayman Islands. Such individuals are considered virtual asset service providers (VASPs), and their activities are regulated by the Virtual Assets Law of 2020.

CIMA is involved in licensing various entities, including:

  • Crypto exchanges.
  • Platforms for the storage and exchange of crypto assets.
  • Crypto-brokerage companies providing intermediary services.
  • Crypto funds.
  • DeFi (Decentralized Finance) and ICO (Initial Coin Offering) projects.

Why Choose Regulated United Europe

Despite the relative ease of obtaining a cryptocurrency license in the Cayman Islands, seeking the assistance of experienced, highly qualified lawyers is crucial. RUE Law Firm specializes in providing such services. With our support, you can initiate a cryptocurrency business on a legal basis promptly. Our experts assess all factors, including legal risks, helping you make informed decisions. Subsequently, our team works efficiently to obtain a crypto license, providing comprehensive support at every stage of the licensing process and increasing the likelihood of successful application approval.

FREQUENTLY ASKED QUESTIONS

Cryptocurrency is indeed regulated in the Cayman Islands. Businesses looking to partake in crypto-related activities are required to secure a Crypto License from the CIMA and adhere to anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

To register as a cryptocurrency business, the company must be incorporated as a limited liability company (LLC) or an exempted company. It must maintain a physical presence within the jurisdiction, obtain cryptocurrency permission from the CIMA, and comply with AML and CTF rules. Additionally, businesses need to meet minimum capital conditions and establish adequate systems and controls.

Currently, there is no specific tax legislation in the Cayman Islands related to cryptocurrency. However, businesses engaged in crypto activities may be subject to other forms of taxation, such as corporate income tax or stamp duty on property transactions. Consultation with a tax professional is recommended for guidance on crypto-related taxation in the Cayman Islands.

The introduction of new laws, including the digital resource (Service Providers) Law (VASP Law) and the Companies (Amendment) Law, 2020, will enhance the regulatory framework for cryptocurrencies. The VASP Law mandates registration for digital resource service providers and introduces a regulatory sandbox for testing new products and services.

Yes, companies operating in the crypto industry in the Cayman Islands can open a bank account within the jurisdiction. The Cayman Islands boasts a well-established banking sector with numerous international banks. However, businesses must obtain crypto permission from the CIMA and comply with AML and CTF rules.

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