Cayman Islands Tightens Crypto Rules, 17 Firms Affected

The Cayman Islands has introduced new licensing requirements for cryptocurrency firms, effective from April 1, 2025. The updated Virtual Asset (Service Providers) (Amendment) Regulations, 2025 mandate that all entities providing custody and trading services for digital assets must obtain a license from the Cayman Islands Monetary Authority (CIMA). This regulatory shift marks a significant change for the jurisdiction, which has historically maintained an open regulatory environment for crypto firms.

Existing providers of virtual asset services must apply for the license within 90 days of the new rules coming into effect. The application process requires detailed information on cybersecurity, risk management, and safeguarding protocols. Crypto custodians must specify the types and amounts of virtual assets they will hold, as well as the reasons for their custody. Trading platform operators, on the other hand, must disclose their expected revenue and the location of the hardware supporting their operations.

This regulatory update builds upon the Virtual Asset Service Providers (VASP) Act implemented in 2020, which initially required VASPs to be licensed or registered with CIMA. The primary goal of the 2020 legislation was to prevent money laundering and the financing of terrorism. The new regulations extend these requirements to crypto service providers, aiming to enhance oversight and compliance within the industry.

As of now, there are 17 companies registered as VASPs in the Cayman Islands, including prominent names in the crypto industry. The new licensing requirements are expected to bring greater transparency and accountability to the crypto sector, aligning the Cayman Islands with international standards for financial regulation. This move is part of a broader effort to ensure that the jurisdiction remains a competitive and secure destination for cryptocurrency activities.

The implementation of these licensing rules reflects a growing trend among global financial centers to tighten regulations around cryptocurrencies. By requiring licenses for virtual asset services, the Cayman Islands aims to protect investors and prevent illicit activities within the crypto space. This regulatory update is likely to have a significant impact on the operations of crypto firms in the region, as they will need to comply with the new licensing requirements to continue offering their services.

The new regulations also underscore the Cayman Islands' commitment to maintaining its status as a leading financial hub. By introducing these licensing rules, the jurisdiction is taking proactive steps to address the risks associated with cryptocurrencies while fostering innovation and growth in the sector