Blockchain 2025 Comparisons

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.

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.