Blockchain 2025

Last Updated June 12, 2025

Cayman Islands

Law and Practice

Authors

Peter Colegate
Dean Bennett
Marsha Williamson
Ross McLeod

Appleby is a full-service offshore law firm providing expert advice across the corporate, finance, dispute resolution, technology and innovation, property, regulatory, and private client and trusts practice areas. Appleby led the way among offshore firms by establishing the first dedicated, multidisciplinary global technology and innovation group comprised of experts from each of its ten offices and spanning all practice areas. The practice group advises clients across a broad range of emerging technologies, including digital assets, blockchain, fintech, artificial intelligence, software-as-a-service, gaming and esports. It is the leading offshore fintech firm having the most Band 1 and Band 2 rankings in Chambers FinTech legal rankings, with several team members also awarded individual rankings. Members of the global group sit on various legislative and industry working groups relating to digital assets and broader technology.

As one of the foremost offshore financial centres, home to approximately 70% of the world’s offshore investment funds, the Cayman Islands is an attractive destination for technology investors and entrepreneurs. The jurisdiction is known for its sound legal framework, tax neutrality, experienced professional service providers, modern infrastructure and a stable political climate.

Cayman has built on its foundations as a global financial centre to become a leading web3 hub with a broad range of blockchain, web3, cryptocurrency and broader fintech businesses and crypto-native funds. While, a few years ago, Cayman was a popular jurisdiction for launching NFT projects and other offerings, there is now a rich mix of blockchain and fintech-related structures and ventures spanning tokenisation of real-world assets (RWAs), decentralised finance (DeFi), crypto investments, crypto lending, blockchain protocols, decentralised autonomous organisations (DAOs) and more. There is also a growing number of businesses offering specialised web3 services, such as accounting, marketing and token launch support.

Recent years have seen Cayman’s foundation company becoming a hugely popular choice for projects looking for a flexible governance entity and legal “wrapper” (ie, separate legal personality) for DAOs and other community-led projects. This trend has increased following recent US case law (eg, Samuels v Lido DAO and Houghton vs Leshner) establishing that tokenholders may be liable for the actions and failures of a DAO.

Framework legislation regulating virtual asset service providers (VASPs) came into force in 2020 and was updated in 2024 (see 4.1.1 Regulatory Overview), which has attracted a number of regulated entrants to the Cayman market offering primarily exchange, custody and trading platform services. Since the VASP phase 2 licensing regime commenced in April 2025, there has been an increase in applicants for “virtual asset service licences” wishing to offer custody and/or trading platform services in and from the Cayman Islands.

Cayman has also developed successful incentives for tech businesses to set up in the jurisdiction. Cayman Enterprise City’s (CEC) special economic zones offer ventures zero-taxes, fast-tracked work permit applications, import duty exemptions and other benefits. Of the hundreds of special economic zone companies in CEC, a large proportion are web3, blockchain, crypto and web3-adjacent businesses operating within CEC’s specialist technology and commodities parks. Private initiative Tech Cayman offers similar incentives.

The sector is fast moving, and we expect increased pressure from proposed EU tax and regulatory reforms, as well as competition from other jurisdictions developing fintech-friendly regulation and incentives, to impact Cayman’s fintech and blockchain landscape. In particular, a reduction in regulatory and tax barriers to market entry or expansion in onshore jurisdictions (namely the United States) could lead to less demand for offshore structures generally.

There is a wide array of blockchain and web3-related business models based in or having some nexus to the Cayman Islands. These include:

  • virtual assets exchanges;
  • virtual assets trading platforms;
  • virtual assets custodians;
  • virtual assets issuers (including stablecoin issuers);
  • cryptocurrency lending (secured and unsecured);
  • DAOs and other community and DeFi projects;
  • layer 1 and layer 2 blockchains and networks;
  • crypto-native funds and other funds;
  • tokenised funds;
  • exchange-traded funds (ETFs);
  • video gaming and esports projects;
  • NFTs and memecoin projects;
  • holding entities for web3 companies/overseas operations; and
  • personal holdings of digital assets.

Increasing interest has been evident among incumbent financial institutions accelerating the use of blockchain technology and virtual assets within their existing business models, particularly in respect to stablecoins, tokenisation and lending.

While many business models focus on the application to financial services, wider blockchain applications include gaming, esports, art, real estate, digital identity and supply chain management.

There is still no Cayman Islands case squarely deciding whether cryptocurrencies, tokens or other digital assets constitute “property”, but the Cayman Islands’ Grand Court is expected to adopt the common-law consensus (eg, Re Gatecoin Ltd (HK, 2023)) that digital assets are choses in action capable of ownership and proprietary remedies.

Practical ownership continues to follow control of the private cryptographic key – ie, the person able to sign transactions can deal with the asset and is ordinarily treated as its owner. Where a custodian controls the keys, contractual or trust terms determine whether the customer holds a beneficial interest.

Various aspects of the Cayman virtual assets regulatory framework (see 4.1.1 Regulatory Overview) govern custody, control and protection of client assets – including requirements for client-asset segregation, detailed custody contracts and robust cyber-security for custodians and platforms. These measures reinforce the link between legal and practical control by ensuring clients’ digital assets remain separately identifiable and outside a custodian’s insolvency estate.

Conventional security interests may still be taken: a lender will typically have rights to control the collateral wallet and, where tokens represent shares in a Cayman company, also take an equitable share mortgage over the underlying equity.

Transfers are generally regarded as final once the transaction is irreversibly appended to the relevant blockchain (per its consensus rules).

The Virtual Assets (Service Providers) Act (as amended) (“the VASP Act”) and related regulations and guidance provide a flexible framework for the licensing and supervision of entities conducting virtual asset services as a business.

Under the VASP Act, a “virtual asset” is defined as “a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes but does not include a digital representation of fiat currencies”. This wide definition captures all cryptocurrencies, security tokens, utility tokens and other digital assets that are tradeable or transferable, with the exception of digital fiat currencies. The VASP Act does not differentiate between utility tokens, governance tokens, security tokens and other forms of token or crypto-assets.

However, not all virtual asset-related services require registration or licensing under the VASP Act. The VASP Act provides for various exceptions including in respect to virtual service tokens which are not transferable or exchangeable, including tokens whose sole function is to provide access to an application or service.

While virtual assets are not characterised as securities in their own right, virtual assets may be characterised as securities under the Securities Investment Business Act (as revised) (SIBA). Broadly, under SIBA, securities mean shares, instruments creating or acknowledging indebtedness, instruments giving entitlements to securities, certificates representing certain securities, options, futures and contracts for differences (as set out in full in Schedule 1 to SIBA). Amendments made to SIBA in 2020 specifically added that, subject to some limited exceptions, securities include virtual assets which can be sold, traded or exchanged immediately or at any time in the future that either represent or can be converted into any of the securities, or represent a derivative of any of the securities, set out in paragraphs 1 to 13 of Schedule 1 to SIBA. An assessment of whether a virtual asset may be caught by SIBA is based on substance rather than form.

A tokenised security would be characterised as a “security” for the purposes of SIBA if it falls within the definition set out in Schedule 1 to SIBA, as summarised in 2.2 Categorisation above.

There is no standalone definition of stablecoins under the Cayman regulatory framework and an analysis of the coin’s characteristics would be required on a case-by-case basis to determine its regulatory categorisation. Where a stablecoin is simply pegged to a fiat currency, it is generally regarded as a “virtual asset” under the VASP Act. However, where a stablecoin is pegged to the value of an underlying security and/or offers the holder certain rights or benefits (eg, conversion or profit-participation rights), it is more likely to be characterised as a security.

The definition of virtual assets under the VASP Act (see 2.2 Categorisation, above) is based on the Financial Action Task Force (FATF) standards and guidance. FATF guidance makes clear that NFTs are generally not considered to be virtual assets under the FATF definition. This is on the basis that NFTs are unique (not interchangeable) and are not used for payment or investment purposes, and therefore would not meet the definition of a “virtual asset” under the VASP Act. However, the FATF emphasises that this is dependent on the characteristics of each NFT. As with all tokens, each project will turn on its own facts and so consideration should be given to the qualities of each NFT before a determination is made.

The VASP Act does not restrict the use of use of digital assets for payment for services in the Cayman Islands. For example, many corporate and financial services providers now accept payments in a range of digital assets and some M&A transactions and investments are settled in stablecoins or other digital assets. There is also a growing trend in the Cayman Islands for real estate to be purchased using bitcoin (BTC) and other digital assets. However, where a business facilitates payments in digital currencies between parties, such activity is likely to be a virtual asset service under the VASP Act requiring registration.

The use of digital assets as collateral or security in financial transactions involving Cayman entities is increasingly common, though, in our experience, the relevant security agreements are typically governed by another law (often English or New York law) given that the relevant wallets and custodial arrangements are typically located outside of the Cayman Islands.

The use of digital assets as collateral is not addressed in the VASP Act or SIBA, and there is a very limited body of digital assets-related case law in the Cayman Islands. The practical implementation of collateral arrangements would require clear legal agreements that address issues such as the custody, control, and valuation of digital assets, as well as the rights of parties in the event of default.

There are no laws, regulations or Cayman judicial decisions addressing the enforceability of smart contracts.

Provided that the defining features of a contract are present – offer, acceptance, the intention to be legally bound and consideration – the authors’ view is that smart contracts are capable of satisfying the requirements for a binding contract and are enforceable by the Cayman courts.

Arguably, the role of contractual interpretation for smart contracts written wholly in computer code may be limited as the language (in this case code) will typically be clear and unambiguous, although issues may arise where the code is ill-defined.

The Electronic Transactions Act (ETA) puts electronic signatures on an equal footing with “wet ink” signatures in the Cayman Islands.

Technologically neutral, the ETA was established to promote public confidence in the validity, integrity and reliability of conducting transactions electronically and recognises electronic records as records created, stored, generated, received or communicated by electronic means.

The ETA is not prescriptive as to the method of authentication protocol used. An electronic signature will be considered to be reliable where:

  • the means of creating the electronic signature is linked to the signatory and to no other person;
  • the means of creating the electronic signature was, at the time of signing, under the control of the signatory and of no other person; and
  • any alteration to the electronic signature, made after the time of signing, is detectable.

VASP Act

As set out above, the VASP Act and related regulations and guidance provide a flexible and clear framework for the licensing and supervision of entities conducting virtual asset services as a business. The framework is derived from FATF international standards and guidance.

Entities are required to be registered or licensed by the Cayman Islands Monetary Authority (CIMA) in order to carry out virtual asset services in or from within the Cayman Islands. Since the introduction of the phase 2 licensing regime on 1 April 2025, entities providing virtual asset custody services and/or operating a virtual asset trading platform require a “virtual assets service licence” (as opposed to a mere registration).

“Virtual asset services” are businesses providing one or more of the following services or operations:

  • issuing (ie, selling) virtual assets;
  • exchanges between virtual assets and fiat currencies;
  • exchanges between one or more other forms of convertible virtual assets;
  • transfers of virtual assets;
  • virtual asset custody services;
  • the participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset; or
  • the operation of a virtual assets trading platform.

Under the VASP Act, VASPs are subject to a number of general regulatory obligations including:

  • extensive anti-money laundering (AML) including know-your-customer (KYC) obligations;
  • data protection, cybersecurity and outsourcing requirements;
  • the filing of annual accounts with CIMA (to be audited accounts, where required by CIMA);
  • maintaining at least three directors, including one independent director;
  • appointing appropriately qualified compliance officers;
  • the prior approval of senior officer appointments by CIMA;
  • obtaining the prior approval of CIMA for any virtual asset issuance;
  • obtaining the prior approval of CIMA before the issuance or transfer of any shareholding (or equivalent) in a VASP entity above 10%; and
  • notifying CIMA of certain matters, including the commencement of any litigation proceedings against the VASP, within a 30-day deadline.

Custodians and trading platform operators are subject to greater obligations as set out in the VASP Act and the 2024 CIMA Rule and Statement of Guidance for Virtual Asset Custodians and Trading Platforms, including with respect to customer disclosures, risk assessments, regulatory capital and stress testing, controls and the segregation of virtual assets.

SIBA

The primary piece of legislation regulating securities and investment business in the Cayman Islands is SIBA. It provides for the licensing and control of persons engaged in securities investment business in or from the Cayman Islands and is designed to protect the investing public.

Please refer to 2.2 Categorisation, above, with respect to the meaning of securities under SIBA. Any persons or entities engaging in “securities investment business” as defined in the SIBA require a “securities investment business licence” unless exempt.

Please refer to 4.1.1 Regulatory Overview.

Any entity proposing to undertake virtual asset services must seek a registration or licence from CIMA. The application involves submitting to CIMA a detailed application form, individual fitness and propriety documents for all senior officers, and a full suite of accompanying documents (including a detailed business, transaction flow charts and various compliance and operational policies). Licence applications require more extensive documentation to be submitted. Registrations or licences may be approved by CIMA subject to any conditions or requirements specified by CIMA.

There is no prescribed statutory deadline by which CIMA must provide a decision, but applications typically take between six and 12 months, depending on the preparedness of the applicant and complexity of the application. Applicants are required to pay an application fee, a fee upon grant of the registration or licence and an annual renewal fee – with amounts varying depending on the type of activities and business volumes/revenues.

Applications for a securities investment business licence follow a similar format. 

Existing VASP registrants providing virtual asset custody and/or trading platform services prior to 1 April 2025 have until 30 June 2025 to submit an application for a virtual asset service licence.

Out-of-Scope Activities

Crypto mining

There are currently no regulatory restrictions on crypto mining. However, given the high utility costs on the Islands, large-scale mining from within the Cayman Islands would likely not be viable. Cayman does however remain an attractive jurisdiction for mining groups to base their headquarters (including within the CEC’s technology park), with their substantive mining operations based overseas. Cayman has also featured in the trend of large mining groups going public through IPOs, with several miners opting to establish a Cayman parent entity as the listing vehicle on global stock exchanges.

Staking

There are currently no regulatory restrictions on the staking of tokens.

DAOs and private issuances

There are no regulatory restrictions on the establishment or operation of DAOs.

As the VASP Act is concerned with “sales” of virtual assets in return for a cash or other crypto payment, private sales which are not advertised and are made available to a limited number of persons (who are each selected prior to the sale by way of a private agreement) are outside of scope. Projects that wish to decentralise immediately by carrying out an airdrop of tokens can also utilise a Cayman foundation company structure.

NFTs

As noted above, NFT projects generally fall outside of the scope of the VASP Act.

There are no specific marketing, advertising or financial promotion rules applicable to virtual assets under the VASP Act. However, the Virtual Asset (Service Providers) (Amendment) Act, 2024 bolstered various obligations on VASPs to ensure the accuracy of all disclosures, advertising materials and communications relating to its virtual asset services with clients and members of the public. Knowingly making, issuing or permitting any misleading representation to the public about the VASP’s activities in any way will amount to an offence under the Act.

The Cayman Islands has long been committed to implementing best international practices and is compliant with the anti-money laundering and anti-terrorist financing requirements of the OECD and FATF. As a member of the Caribbean FATF, the Cayman Islands implements recommendations promulgated by the FATF.

All Cayman Islands-incorporated entities are subject to the Proceeds of Crime Act, which sets out the principal money laundering offences.

Certain “relevant” businesses (which would include, for instance, entities caught within Cayman financial services regulations (including those registered or licensed under the VASP Act or SIBA) and other entities thought to be at a higher risk of money laundering) are further subject to the Anti-Money Laundering Regulations which prescribe certain identification and verification, record keeping, internal control procedures and other obligations for such businesses.

Relevant VASPs are also required to comply with the “Travel Rule” (known as FATF Recommendation 16), requiring VASPs to share and hold certain customer information with recipient institutions when performing transactions involving virtual assets.

Importantly, businesses in the Cayman Islands need to adopt a risk-based approach to the collection of KYC information. Under the risk-based approach, the latest guidelines from the FATF permit the digital verification of identities and receipt of electronic copies of documents instead of traditional “wet ink” paper-based processes.

As part of any application for registration or licensing under the VASP Act (or SIBA), all applicants must submit details of their business and controllers/ultimate beneficial owners.

Once registered or licensed, a VASP must notify CIMA within fifteen days of any changes to the information provided as part of its registration or licence, including all changes of control and ownership of that entity.

In addition to the above, no shares or equivalent ownership interests totalling 10% or more of the total shares or equivalent ownership interests in a VASP shall be issued, and no issued shares or interests shall be voluntarily transferred or disposed of in a VASP, without the prior approval of CIMA.

Specific resolution or insolvency regimes for digital asset firms do not exist separately in the Cayman Islands. Firms dealing with digital assets are subject to the same resolution and insolvency frameworks that apply to other commercial entities under the Companies Act and the Companies Winding Up Rules.

However, the nature of digital assets poses challenges in insolvency scenarios, particularly concerning the identification, valuation, and distribution of digital assets. This is not unique to the Cayman Islands, and the benefit of its common law system is that it can draw on jurisprudence from a range of other jurisdictions as required. See further discussion at 5.1 Judicial Decisions and Litigation.

VASPs are subject to a number of rules and regulatory requirements including enforceable CIMA Rules and other Statements of Guidance in respect of: (i) consolidated supervision; (ii) outsourcing; (iii) business conduct; (iv) corporate governance (including the fitness and propriety of controllers and owners); (v) record retention; (vi) cybersecurity; (vii) internal controls and (viii) reporting to CIMA. As mentioned above, virtual asset custodians and trading platform operators holding a virtual assets service licence are additionally subject to the extensive CIMA Rule and Statement of Guidance on Virtual Asset Custodians and Trading Platforms.

There are no restrictions on the types of assets in which a Cayman Islands fund may invest, including digital assets. As a result, and tied to its long history as the leading domicile for offshore investment funds, Cayman has proved a popular place for the establishment of tokenised and crypto-focused funds.

However, it is important that the VASP Act be considered when structuring a Cayman Islands fund in order to ensure compliance in all respects. A fund could potentially trigger the VASP Act requiring registration or licensing under such Act if it provides virtual asset services which fall outside traditional fund activities. “Virtual asset services” include the issuance of virtual assets, custody of virtual assets or the transfer/exchange of virtual assets for or on behalf of others. Please refer to 2.2 Categorisation for further discussion.

There is currently no virtual asset regulatory sandbox in the Cayman Islands. The VASP Act provides a framework for CIMA to grant sandbox licences to VASPs and other fintech service providers for up to one year in certain circumstances (including where the proposed service presents higher supervision, AML or systemic risks). However, the formal introduction of such a sandbox is still awaited. While there is no sandbox, CIMA is open to discussion with fintechs and new entrants regarding potential applications for licensing or registration, new business models, and the application of the regulatory framework.

Please refer to 4.1.4 Anti-money Laundering and Counter-Terrorism Financing (AML/CTF) Requirements. As mentioned above, the VASP regulatory framework is largely derived from FATF international standards and guidance.

CIMA is the primary regulator of the Cayman Island’s financial services industry responsible for the supervision of regulated entities operating in and from the jurisdiction. There is a dedicated VASP & Fintech Innovation Unit within CIMA responsible for the registration, licensing, monitoring and enforcement of VASPs. CIMA also provides oversight for investment funds and entities caught by SIBA.

The membership organisation Blockchain Association of the Cayman Islands promotes the use of blockchain-based solutions in the Cayman Islands, facilitates collaboration in the space and lobbies the government and regulators on matters relating to blockchain and digital assets. There are various other blockchain and digital assets-related interest groups, including the Cayman Islands Virtual Assets Society based at CEC.

Cayman Finance, a non-profit membership organisation that represents Cayman’s financial services sector, has established a fintech committee to engage with the financial services industry, regulators, the government and the media to promote the development and growth of the fintech and virtual assets industry in the Islands and the use of blockchain, artificial intelligence and financial technologies.

Cayman jurisprudence on blockchain and digital assets remains thin, but the courts are now actively involved in crypto insolvencies. On 3 April 2025, the Grand Court ordered the voluntary liquidations of AXIA Network Foundation and ANF MergeCo Ltd to continue under official supervision for “efficacy, expedition and economy”, and authorised an application for Chapter 15 recognition in the US. The decision confirms the court’s willingness to treat token issuers like any other company and to coordinate cross-border crypto-asset recovery.

Although no local judgment has yet ruled on fiduciary or tortious duties of software developers, the English Court of Appeal’s landmark reasoning in Tulip Trading Ltd v Van der Laan (2023) – that such duties are at least “seriously arguable” – will be persuasive when the point arises in Cayman.

The Grand Court has, in unreported matters, granted proprietary/freeze injunctions and Norwich Pharmaceutical disclosure orders over misappropriated digital assets, and indicated readiness to permit novel service (eg, by e-mail or on-chain notice) where defendants are anonymous or overseas.

Pending authoritative guidance on the proprietary nature of crypto-assets, it remains prudent for secured creditors to take control of private keys and, in the case of tokenised equity, parallel security over the underlying shares.

No other publicly reported Cayman litigation presently raises novel blockchain points, but practitioners report a steady flow of confidential fraud-recovery, shareholder, and fund-insolvency disputes involving digital assets.

CIMA has broad enforcement powers under the VASP Act which were expanded by the Virtual Asset (Service Providers) (Amendment) Act, 2024 representing a shift towards fuller prudential oversight for VASPs.

Enforcement powers allow CIMA to:

  • apply to the court for injunctions or licence revocation or otherwise for an order to protect customers or creditors;
  • revoke a licence or waiver;
  • cancel a registration; and
  • impose conditions on a licence, registration or waiver;

in each case, where it is aware or reasonably believes that a VASP (i) is, or appears likely to become, unable to meet its obligations as they fall due; (ii) is carrying on business fraudulently or otherwise in a manner detrimental to the public interest or the interest of its clients or creditors; (iii) is in breach of the VASP Act or Anti-Money Laundering Regulations; (iv) has failed to comply with a condition of its registration or licence; (v) its controlling senior officers or trustees are not fit and proper persons; or (vi) has failed to comply with a lawful direction from CIMA. CIMA may also levy administrative fines for regulatory breaches.

The VASP Act contains a number of offences (including for carrying out virtual asset services without the requisite registration or licence) and vicarious liability provisions relating to acts of senior officers.

No published penalties have yet been imposed on a VASP by CIMA, but similar powers have been used against traditional securities firms, underscoring real enforcement risk.

In a recent example of soft enforcement, on 11 April 2025 CIMA issued a public notice naming Gate.io/Gate Global Corp as not registered or licensed in Cayman, cautioning the public against mis-representations of regulatory status.

The courts complement CIMA by granting freezing and disclosure relief (and, as Axia shows, cross-border recognition) to secure and realise digital assets.

The Cayman Islands is a tax-neutral jurisdiction. There is no income tax, wealth tax, profits tax, capital gains tax, payroll tax, social security contribution (aside from mandatory pension contributions for employers and their employees) or corporate tax. A registered Cayman Islands entity is not subject to any direct taxes. There may, however, be tax implications for beneficial owners of digital assets in their home or resident jurisdiction and for web3 entities owned by overseas entities or individuals.

CIMA has not produced any specific guidance in respect of ESG/sustainable finance requirements, but has recognised the importance of ESG considerations as part of its supervisory mandate.

In a statement issued on 13 April 2023, CIMA indicated that it will continue to undertake reviews, including assessing available information, such as best practices undertaken in other key financial jurisdictions, with the aim of developing a suitable regulatory and supervisory approach for climate related risks and other ESG-related risks. To date, no formal consultations have been launched and no draft legislation has been proposed. Some funds and investors have voluntarily implemented ESG reporting and disclosures.

The Data Protection Act (2021 revision) (DPA) is drafted around a set of EU-style data protection principles to which data controllers must adhere, including (i) the requirement for a lawful basis for data processing; (ii) data minimisation; (iii) compliance with international data transfer restrictions and safeguards; and (iv) implementation of data protection policies and procedures. Compliance with the DPA is overseen by the Office of the Ombudsman – the Cayman Islands’ supervisory authority for data protection.

The DPA introduced globally recognised principles about the use of personal data to the Cayman Islands. The DPA aligns the Cayman Islands with other major jurisdictions around the world, notably the EU, and thereby facilitates the free flow of data – a prerequisite for the Cayman Islands being an equal and competitive participant in today’s globalised economy.

Generally, blockchain and web3 entities should ensure that technical architectures are built for compliance with the data privacy laws and good industry practice – which could include, for example, hashing, encryption, cryptographic techniques/masking, shielded transactions, use of private or permission chains, and off-chain storage for sensitive personal information. Entities should also have in place clear data handling and security procedures and conduct regular audits (including of their smart contracts).

The very nature of immutable blockchains poses challenges to compliance with data privacy laws (for example, data erasure requirements) and, like in many jurisdictions, the DPA has not kept pace with technological advancements. Data privacy requirements and privacy-first blockchain principles may also conflict with transparency or reporting requirements under financial services laws and international standards. We expect to see further innovation and regulatory developments in this area.

Appleby

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Trends and Developments


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Jason Ta

Travers Thorp Alberga is a boutique Cayman Islands and British Virgin Islands law firm comprised of more than 50 of the most experienced offshore lawyers in both jurisdictions. The company provides the highest-quality advice on technical structuring involving complex securities, fintech and regulatory issues. The firm’s partners are incisive and highly effective to the highest standard on all types of offshore entities, including hedge funds, private equity, corporate and partnership vehicles, asset and structured finance, cryptocurrencies, ICOs/IEOs/STOs, capital markets, general corporate and commercial matters and private clients, including HNW matrimonial. Its fintech-focused attorneys advise from the firm’s main office in Grand Cayman and its offices in London, Hong Kong and New Zealand.

The Return of the DeFi: Smarter, Safer, and Institutional-Grade

Introduction

DeFi is back – and this time, it’s institutional. In 2025, a political reset in Washington sparked renewed momentum in digital-asset markets. With both the SEC’s apparent shift in focus and US policymakers backing innovation over enforcement, the regulatory fog that once hung over the industry is beginning to lift. At the same time, tokenisation of real-world assets – long promised, now delivered – is moving from concept to execution. And at scale. We are seeing that such developments are not just reshaping market sentiment; they’re changing where and how financial products are built. The Cayman Islands, long established as a premier jurisdiction for institutional TradFi fund formation and structured finance, is now emerging as the preferred domicile for DeFi strategies and the establishment of ecosystems with tangible, real-world applications.

This article explores how the Cayman Islands is capitalising on global shifts including – supporting the rise of institutional DeFi, enabling tokenised finance, and positioning itself at the forefront of the next evolution in financial infrastructure.

Policy Reversal: President Trump Ushers in a New Era for Crypto

President Donald Trump’s return to office marked a significant inflection point for the digital asset industry. On the President’s inauguration day – 20 January 2025 – SEC Chair Gary Gensler announced his resignation, fulfilling Trump’s campaign pledge to overhaul crypto policy leadership. Gensler’s tenure was defined by a high-profile enforcement agenda focused on DeFi, including, specifically, lawsuits against major DeFi exchanges for alleged unregistered securities activity and a notably sceptical stance toward DeFi and token offerings generally. With Gensler’s departure and a new, more industry-friendly SEC leadership taking shape, the regulatory pendulum in Washington has swung from crackdown to constructive engagement.

There were early signs of a coming shift in focus and policy. The SEC has now finally approved spot Bitcoin and Ether exchange-traded funds – products Gensler long resisted – opening the floodgates for mainstream investment. By 2025, the Trump administration moved swiftly to reinforce a pro-crypto trajectory. President Trump issued an executive order in January committing to “strengthening US leadership in the digital-asset space” and pushing US governmental agencies to provide regulatory clarity to market participants. In practical terms, the effect has been a move away from the “regulate by enforcement” approach and instead to engage industry on rulemaking. Notably, the administration even rolled back certain onerous rules: in April 2025, President Trump signed a joint resolution repealing the so-called “DeFi broker” tax-reporting regulations that would have saddled decentralised platform participants with burdensome IRS reporting requirements. Likewise, the SEC is reported to have rescinded Staff Accounting Bulletin No.121 (”SAB 121”) – a behind-the-scenes change with a big impact, as SAB 121 had discouraged banks from offering crypto custody by imposing punitive accounting treatment. Removing that barrier signals that US banks can more freely enter the crypto custody and services arena, a development almost unimaginable even a couple of years ago. Finally, and most recently, the SEC has published long-awaited guidance and clarity on staking, confirming that protocol staking does not involve the offer and sale of securities within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934. The industry expects, and hopes, based on such recent developments for a new era of US crypto policy. The SEC’s stance is expected to be far more supportive of digital assets with real utility. A crypto working group has been formed in Washington to guide coherent digital-asset policy.

The Institutions Are Coming, and the Cayman Islands Stands Ready

In short, the climate in the US has thawed considerably. And with regulatory clouds parting, institutional investors have wasted no time in moving into the DeFi markets as investors in existing ecosystems, as well as structuring and launching their own. As market analysts have noted, institutional adoption is accelerating on the back of these shifts (see Coinbase Institutional – “The State of Crypto: 2024 Institutional Outlook”, January 2024; and Bloomberg News – “BlackRock’s Spot Bitcoin ETF Breaks Inflow Records", January 2024). BlackRock’s spot Bitcoin ETF, for example, became one of the fastest-growing ETFs ever launched, signalling pent-up investor demand now finally being met within a US regulatory compliant framework. Major fintech players, such as Robinhood and PayPal, sensing the changing tides, have expanded their crypto offerings to focus on stablecoins and broader trading services.

For the Cayman Islands – where US regulatory trends are closely tracked – these developments carry significant weight. A more accommodating US policy environment has been a catalyst for increased institutional engagement and accelerated the convergence of traditional finance with DeFi.

The Cayman Islands has long been the jurisdiction of choice for offshore investment funds, with over 30,000 mutual and private funds registered in the Cayman Islands as of Q1 2025. In recent years, that expertise has extended to crypto hedge funds and digital-asset vehicles. Now, the shifts in the US are poised to have a cascading impact on such structures established in the Cayman Islands.

On one hand, greater institutional participation in crypto means more investor demand for sophisticated fund vehicles to deploy capital – and many vehicles are Cayman Islands-domiciled. Cayman Islands fund professionals report increased inquiries from asset managers looking to set up digital-asset funds or expand their strategies, anticipating an influx of allocators newly comfortable with crypto exposure. The logic is simple: a New York-domiciled pension fund might be more willing to invest in a DeFi yield strategy if the regulatory coast is clear in the US, but it will still likely do so via a Cayman Islands-established master fund feeding into onshore feeder funds (a tried-and-tested model in the alternative funds world). In this way, the softening SEC stance is indirectly boosting the appeal of Cayman Islands-domiciled structures as on-ramps for global crypto investment.

On the other hand, could a US crypto renaissance lead some fund activity back onshore at the expense of the Cayman Islands? In a word, unlikely. The Cayman Island’s dominance for crypto hedge funds is grounded in fundamentals that no US administration would be either willing, or able, to replicate. In addition to an already more accommodating as well as stable regulatory regime, the Cayman Islands also offers tax neutrality and relative ease of cross-border capital movement. Moreover, many US-linked crypto funds struggle to access global trading platforms due to continuing US regulatory constraints, another factor that increases offshore establishment. A US revival doesn’t dim the Cayman Island’s star; if anything, it highlights how massive the overall opportunity is – and the Cayman Islands are already steps ahead in catering to it.

With the changes in the US, Cayman Islands-domiciled firms can interact more freely with US institutions now entering the crypto market. For example, if US banks begin offering crypto custody (thanks to the SAB 121 reversal), a Cayman Islands fund administrator or trust company could integrate those services or partner with those banks to safeguard client assets in the US. Likewise, Cayman Islands-based exchanges and brokers may find US counterparties more willing to do business now that engaging in crypto doesn’t feel like skating on thin ice. In short, the legitimacy conferred by the US policy shift is a rising tide that validates the business models of Cayman Island’s crypto service sector.

Naturally, optimism is tempered by pragmatism. Cayman Islands-domiciled professionals understand that a more permissive global climate does not mean the absence of regulation but calls for smarter, more adaptive oversight. Cayman has long struck this balance well: both rigorous and adaptive over time enough to satisfy international standards, yet flexible enough to support genuine innovation and growth. Compliance – particularly with both Cayman domestic and international anti-money laundering (AML) and securities laws – remains non-negotiable, particularly for businesses operating across jurisdictions. The key differentiator is that the regulatory framework of the Cayman Islands was purpose-built to evolve alongside the market offering clarity without rigidity, enabling entrepreneurs to build ambitiously within a structure that regulators, institutional investors, and counterparties can trust.

DeFi Goes Institutional: Tokenising Treasuries, Funds, and Financial Infrastructure

If one trend has defined the past 12 months in crypto, it is the tokenisation of real-world assets, or RWAs. What was once a buzzword has materialised into tangible, real-world investments, projects and products – and the Cayman Islands has been right in the thick of it. In 2024, major financial institutions from JPMorgan to Citibank, UBS, HSBC, and BlackRock started actively pursuing tangible execution of RWA tokenisation initiatives. RWA financing through crypto technology and structures is no longer confined to being a talking point at conferences, or restricted to the subject of online articles, now, the market is seeing live deals and offerings being launched on a regular basis. Tokenised investment funds, tokenised real estate portfolios, and tokenised debt issuances have all been structured, marketed and launched through Cayman Islands-domiciled structures. A recent analysis projected the market for tokenised assets could reach a staggering USD10 trillion by 2030 as traditional finance increasingly adopts blockchain technology. The Cayman Islands, with its history of innovative financial engineering, is naturally a favoured launch pad for many such ventures.

Investment funds have begun issuing tokenised shares or units – replacing paper-based registers with cryptographic tokens that represent ownership. This evolution offers tangible advantages: automated registry management, seamless transferability, and real-time cap table updates. Cayman Islands-based administrators are increasingly integrating these efficiencies into their operations, supported by regulatory clarity from the Cayman Islands Monetary Authority (CIMA). CIMA has confirmed that tokenised subscriptions and redemptions are compatible with FATF-aligned AML/KYC frameworks – so long as standard compliance measures are embedded. In other words, funds can go fully digital without cutting corners on governance or risk management.

But tokenisation is not limited to fund units. Even the most traditional of instruments – government bonds – are being re-imagined for the DeFi age. In 2024, we saw crypto protocols and fintech firms wrap US Treasury bills and other low-volatility debt into tokenised products. MakerDAO, via its Spark Protocol, committed over USD1 billion of reserves to tokenised Treasury strategies, bringing stablecoin collateral into direct alignment with real-world yield. BlackRock, meanwhile, declared its ambition to tokenise trillions in client assets. These are not hypothetical exercises – they signal a paradigm shift in how financial assets are issued, held, and traded.

Tokenisation transforms these instruments from passive holdings into programmable collateral. A tokenised bond or fund unit can now serve as margin for a DeFi loan, be posted in real time to an exchange, or traded 24/7 with atomic settlement – unlocking capital efficiency that traditional markets simply cannot match. In many cases, the underlying legal structure facilitating this innovation is domiciled in the Cayman Islands. Cayman Islands trusts, funds, and special-purpose vehicles are already powering tokenised treasury offerings, securitisations, and structured finance solutions that are being integrated into on-chain liquidity protocols.

Likewise, tokenised credit products are gaining traction. On-chain lending marketplaces are packaging real-world loans into tokens that can be traded or used as collateral in DeFi. For instance, platforms such as Maple Finance (advised by Travers Thorp Alberga) facilitate on-chain private credit by issuing tokens tied to pools of corporate loans, blurring the line between traditional debt markets and DeFi liquidity (poolstopco.medium.com). These RWA tokens provide new financing avenues for borrowers and new fixed-income opportunities for crypto investors, albeit with careful whitelisting of participants to satisfy securities laws.

DeFi and Tokenisation Innovation: SpaceX, Real Estate and Reinsurance (and Everything Else)

As real-world asset tokenisation gathers momentum, the Cayman Islands has solidified its position as a leading jurisdiction for structuring the next generation of blockchain-enabled financial products. Recent developments show that Cayman’s legal and regulatory frameworks are not merely compatible with digital-asset innovation – they are actively facilitating it. From venture capital and real estate to insurance and structured credit, Cayman structures are increasingly at the heart of institutional-grade tokenisation initiatives. The following examples – each advised by Travers Thorp Alberga – demonstrate how these frameworks are being leveraged to unlock new pathways for access, liquidity, and yield in the evolving digital finance ecosystem.

  • Fission - (expected to go live later in 2025) democratises global access to liquid venture capital investments through its innovative Venture Capital Tokens (VCTs). Historically reserved for select private investors, these tokens enable a transparent and liquid market for stakes in groundbreaking ventures backed by elite firms such as a16z, Sequoia, and Tiger Global. Fission’s inaugural offering, Token X (TOKX), notably provides investors unprecedented access to Elon Musk’s high-profile ventures – SpaceX, xAI, Neuralink, X (formerly Twitter), and the Boring Company – alongside renowned companies such as Stripe, Discord, and Epic Games. Investors benefit further by earning Fission’s governance token (FISN) through liquidity provisioning and trading activities. This pioneering approach, underpinned by blockchain technology, delivers secure, efficient, and accessible venture investing, attracting significant backing from investors including SALT, New Form, Apollo, and Manhattan Venture Partners.¬
  • Manifest- similarly harnesses blockchain to unlock institutional-grade US private credit and equity investments for a global investor base, initially focusing on American residential real estate. Its flagship product, the ERC-20 token $USH, targets stable returns (~13% annually) from Home Equity Investments (HEIs). Manifest distinguishes itself from others with dramatically lower fees, enhanced liquidity, tax efficiency, and swift investment capabilities – allowing transactions in less than 30 seconds. This innovative DeFi platform addresses robust international demand, making historically exclusive, high-quality US real estate assets broadly accessible, transparent, and efficient.¬
  • Finally, the Re Protocol - represents a sophisticated integration of blockchain technology with traditional reinsurance mechanisms, providing stable, uncorrelated yields to investors. Users deposit stablecoins that are strategically off-ramped and collateralise diversified reinsurance contracts. Tailored tokens enable risk tranching, optimising yield and preserving staking rewards for depositors. With stringent compliance frameworks, rigorous risk management, and liquidity options through forthcoming decentralised exchange integrations, such as Curve, the Re Protocol emerges as a compelling financial innovation within the Cayman Islands’ robust blockchain ecosystem.

Collectively, these innovative ventures, guided by Travers Thorp Alberga’s Web3 Group, underscore the Cayman Islands’ leadership as a sophisticated, reliable, and cutting-edge jurisdiction, shaping the future of global digital-asset and tokenisation markets.

Regulatory Evolution: Cayman’s Response and Competitive Edge

For Cayman, being a central component with respect to industry and market developments is both a point of pride and, importantly, a long-term strategic priority. The jurisdiction’s financial services sector is leveraging its expertise to facilitate tokenisation deals while ensuring they are structured lawfully and in full regulatory compliance. This is a delicate balance of innovation and compliance with regulation.

Amid these global changes, the Cayman Islands is not content to sit idle as the innovations (and capital) flow through. The jurisdiction has been proactively updating its legal and regulatory regime to both accommodate new business and safeguard its reputation. The cornerstone is the Virtual Asset (Service Providers) Act (VASPA or VASP Act), which came into force in 2020 and established a framework for regulating crypto businesses in Cayman. Initially, this regime focused on registration and AML/CTF oversight (Phase 1), ensuring that anyone offering virtual asset services as a business in or from Cayman at least met basic compliance standards. As of October 2020, all VASPs had to register with CIMA, bringing exchanges, custodians, dealers, and similar outfits onto the regulator’s radar. This early move gave Cayman a head-start in attracting legitimate players who valued a clear regulatory home.

Fast-forward to 2024-2025 and the VASP framework is maturing in sync with the industry. Legislative updates via the Virtual Asset (Service Providers) (Amendment) Bill 2024 paved the way for Phase 2 of the regime, which took effect in April 2025. Phase 2 introduces a stricter licensing requirement for certain virtual-asset businesses, particularly trading platform operators and custodians, along with new prudential measures. In plain English, running a crypto trading platform or wallet custody service out of Cayman now requires a full licence from CIMA, not just a registration – just as a bank or securities broker needs a licence to provide its services. Applicants must demonstrate robust risk management, cybersecurity, solvency, and other safeguards. The goal is to separate the wheat from the chaff: serious, well-capitalised firms are welcome under supervision, whereas fly-by-night operators will find it harder to hang a shingle. A Phase 3 is also envisioned, targeting areas such as a regulatory sandbox for fintech experiments, rules for tokenised investment funds, and possibly a regime for public coin offerings.

Importantly, Cayman’s regulators are focused on enabling innovation rather than hindering it. The upcoming regulatory sandbox exemplifies this approach, providing start-ups with a supervised environment to test novel business models and receive constructive feedback, rather than facing immediate enforcement. And Cayman’s legal toolkit has expanded to accommodate blockchain projects: the foundation company (a unique Cayman hybrid of a company and a trust) has become a popular vehicle for decentralised autonomous organisations (DAOs) and other Web3 ventures. Foundation companies allow governance by members or token-holders without requiring shareholders, which fits the ethos of decentralisation while still offering legal personality and limited liability. Many DAO projects have chosen to “wrap” their operations in a Cayman foundation to benefit from these legal protections – a smart move, particularly after some unincorporated DAOs elsewhere were deemed general partnerships (making participants personally liable). By providing this purpose-built vehicle, Cayman signalled to the crypto world that it is open for DAO business in a safe, lawsuit-minimising way.

One of the Cayman Islands’ most strategic assets for the technology sector is TechCayman — a government-backed service provider that simplifies the process for innovative technology companies, including blockchain ventures, to establish a physical presence and operate from the jurisdiction. Created to support Cayman’s growing tech ecosystem, TechCayman offers tailored, end-to-end immigration support for businesses looking to relocate or expand, including expedited work permits, fast-tracked business licensing, no restrictions on office location, and direct access to local regulators, investors and service providers.

In an era where global talent is increasingly mobile and investors value operational substance, TechCayman provides a compelling platform for Web3 and fintech businesses seeking to demonstrate long-term commitment, regulatory alignment and commercial credibility. By removing common barriers to entry and enabling real operational presence, TechCayman offers the pathway needed to scale with confidence in a tax-neutral, world-class setting.

From a competitive standpoint, Cayman’s positioning remains strong. Its regulatory approach is often described as “balanced” – neither the free-for-all of an unregulated jurisdiction nor as unduly restrictive as some onshore regimes. CIMA and the government frequently engage with industry through bodies such as the Blockchain Association of the Cayman Islands and Cayman Finance’s innovation lab. This collaborative dialogue has helped Cayman strike a careful balance, providing regulatory clarity without stifling innovation. Notably, Cayman’s authorities have clarified that strictly peer-to-peer platforms – where protocols match buyers and sellers without intermediary custody – will fall outside the scope of VASP licensing. Similarly, private token sales to pre-selected investors are not treated as public offerings, avoiding unnecessary regulatory burdens. Looking ahead, the Cayman Islands Government has published the Virtual Asset (Service Providers) (Amendment) Bill, 2025 which includes explicit carve-outs for tokenised investment funds that are already registered under Cayman’s Mutual Funds Act or Private Funds Act, allowing such vehicles to issue tokenised interests without requiring a separate VASP registration. Once passed into law, these changes will streamline fund tokenisation while preserving robust investor protection – further reinforcing the Cayman Island’s appeal as the jurisdiction of choice for institutional DeFi and digital-asset funds.

Nuances like these give fintech entrepreneurs flexibility to structure their innovative projects lawfully. At the same time, the Cayman Islands maintains rigorous AML enforcement and cooperation with global standards (FATF, OECD) at both a national and international level.

It is worth noting that external factors also play a role in the Cayman Island’s appeal. In a world of “escalating tariffs, trade disagreements and tax disputes”, a neutral, tax-efficient hub for capital is more valuable than ever. The Cayman Islands provide a platform that eliminates double taxation and navigates protectionist barriers, which is increasingly important for cross-border investment flows. This is not new – it has been the Cayman Island’s value proposition for decades – but in the current geopolitical climate (one might recall a certain US President’s affection for tariffs), it stands out. As global markets grapple with uncertainty, Cayman’s stability and predictability become a competitive edge in themselves.

Conclusion: Light Breezes, Building Windmills

As 2025 unfolds, a powerful alignment of political shift, institutional momentum, and technological breakthrough is helping to create the perfect environment for the crypto and DeFi industry to continue to flourish exponentially. The Cayman Islands finds itself at the centre of this environment, a testament to the jurisdiction’s adaptability. With the regulatory gales from Washington turning favourable, Cayman is trimming its sails to capture the momentum. Real-world asset tokenisation, unseen in the markets even a few years ago, is now both a deployed funding source and a tangible component of global (particularly US) investment strategies. Cayman Islands-domiciled structures are at the heart of many of these developments – from tokenised real estate funds to digital insurance-linked securities. The jurisdiction’s agile and responsive legal and regulatory regime ensures that, as the sector matures, Cayman will remain central to the network, bringing together Silicon Valley’s visionaries, Wall Street’s capital and global assets and investors within a robust yet flexible framework.

Challenges remain. DeFi’s growth will continue to test regulators worldwide on issues such as consumer protection, smart contract risks and systemic implications and even basic education. A challenge for all jurisdictions is the need to stay vigilant to guard its hard-earned reputation for sound oversight. But if the past year is any indication, the jurisdiction is leaning into these challenges with eyes wide open. In the ever-evolving symphony of finance, Cayman is ensuring that it plays a resonant part – hitting the high notes of innovation while keeping a steady rhythm of professionalism. The rise of DeFi in 2025, under sunnier US skies, presents vast opportunities. And the Cayman Islands, with its unique blend of regulatory rigour and market savvy, is poised to remain a leading orchestrator in this new financial movement.

Travers Thorp Alberga

Harbour Place, 2nd Floor
PO Box 472
103 South Church Street
Grand Cayman
KY1-1106
Cayman Islands

+1 345 949 0699

+1 345 949 8171

jta@traversthorpalberga.com www.traversthorpalberga.com
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Law and Practice

Authors

Peter Colegate
Dean Bennett
Marsha Williamson
Ross McLeod

Appleby is a full-service offshore law firm providing expert advice across the corporate, finance, dispute resolution, technology and innovation, property, regulatory, and private client and trusts practice areas. Appleby led the way among offshore firms by establishing the first dedicated, multidisciplinary global technology and innovation group comprised of experts from each of its ten offices and spanning all practice areas. The practice group advises clients across a broad range of emerging technologies, including digital assets, blockchain, fintech, artificial intelligence, software-as-a-service, gaming and esports. It is the leading offshore fintech firm having the most Band 1 and Band 2 rankings in Chambers FinTech legal rankings, with several team members also awarded individual rankings. Members of the global group sit on various legislative and industry working groups relating to digital assets and broader technology.

Trends and Developments

Author

Jason Ta

Travers Thorp Alberga is a boutique Cayman Islands and British Virgin Islands law firm comprised of more than 50 of the most experienced offshore lawyers in both jurisdictions. The company provides the highest-quality advice on technical structuring involving complex securities, fintech and regulatory issues. The firm’s partners are incisive and highly effective to the highest standard on all types of offshore entities, including hedge funds, private equity, corporate and partnership vehicles, asset and structured finance, cryptocurrencies, ICOs/IEOs/STOs, capital markets, general corporate and commercial matters and private clients, including HNW matrimonial. Its fintech-focused attorneys advise from the firm’s main office in Grand Cayman and its offices in London, Hong Kong and New Zealand.

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