Cayman Islands digital assets - October 2026 update

Tokenised Funds

Since our previous update, the Cayman Islands has implemented amendments to the Mutual Funds Act, Private Funds Act and Virtual Asset (Service Providers) Act to provide a dedicated regulatory framework for tokenised funds. The amendments clarify that the issuance of tokenised fund interests by CIMA-regulated funds does not constitute a "virtual asset issuance" for the purposes of the VASP regime and therefore does not require separate approval under the VASP Act. The new framework also introduces specific requirements relating to registration, disclosures, transfer restrictions, record-keeping and ongoing regulatory oversight. These developments provide welcome certainty for fund sponsors seeking to utilise tokenisation technologies while operating within Cayman's established investment funds framework. See our article Cayman Islands: Regulatory Clarification for Tokenised Funds | Carey Olsen for more details.

New AML and Sanctions Rules

On 20 July 2026, CIMA gazetted two new rules which came into force on 18 September 2026: (i) the Rule on Effective Compliance Programme for the Prevention and Detection of Money Laundering, Terrorist Financing and Proliferation Financing for Financial Services Providers; and (ii) the Rule on Compliance with Financial Sanctions and Targeted Financial Sanctions. These rules largely codify and make directly enforceable a number of requirements that were previously contained in CIMA's Guidance Notes.

While the substantive obligations will be familiar to most regulated entities, firms should review their compliance frameworks to ensure alignment with the new rules, particularly in relation to governance, documentation, outsourcing oversight, independent testing of AML programmes and sanctions screening procedures. We are also seeing increased focus from CIMA on ensuring appropriate independence between internal audit functions and AML compliance personnel, with firms expected to demonstrate robust oversight and challenge mechanisms.

Rule and Statement of Guidance on Market Conduct for VASPs

CIMA's Rule and Statement of Guidance on Market Conduct for Virtual Asset Service Providers, which came into force in February 2026, consolidates and enhances market conduct expectations applicable to virtual asset trading platforms and virtual asset custodians. The framework expands upon existing requirements relating to client asset protection, conflicts of interest, disclosures and governance. Of particular note are the enhanced expectations regarding the segregation and safeguarding of client assets, as well as greater clarity around the circumstances in which proprietary trading activities may be conducted and the controls that must be in place to manage associated conflicts and risks.

Regulatory Capital and Insurance Coverage

We continue to see increased regulatory focus on the financial resilience of VASPs during the licensing and registration process. In particular, CIMA has been scrutinising applicants' regulatory capital calculations and requiring firms to clearly demonstrate the basis upon which regulatory capital requirements have been satisfied, including evidence of available financial resources and ongoing financial support where applicable. CIMA has also placed increased emphasis on the adequacy of insurance arrangements, expecting VASPs to maintain insurance coverage that is proportionate to the nature, scale and complexity of their operations and the risks associated with their business model. Applicants should be prepared to provide detailed analysis supporting both their capital and insurance positions.