The Cayman Islands Monetary Authority (“CIMA”) issued a public advisory on virtual currencies on 23 April 2018 (the “Advisory”) -View CIMA Public Advisory.
This first official communication from CIMA on the burgeoning crypto market in the Cayman Islands had been long-awaited and was expected to clarify CIMA’s views as to the applicability of existing laws of ICOs but also to set out CIMA’s regulatory intentions. However, the Advisory was virtually silent on those topics and instead served to warn the public of the potential risks of investing in ICOs and other forms of virtual currency. A statement which confirms that there are risks with investing in ICOs is hardly newsworthy, although there were some elements of the Advisory which are of interest for those looking to conduct ICOs from the Cayman Islands.
Firstly, the Advisory sets out various risk factors associated with investing in ICOs which can be usefully replicated in the risk factors section of a white paper and/or token sale terms. Secondly, CIMA confirms that virtual currencies are not legal tender in the Cayman Islands which assists with interpretation of the existing Cayman Islands laws and their potential applicability to ICOs. Thirdly, CIMA states that ICOs “are often unregulated” which assists in confirming that the developing industry practice in the Cayman Islands in relation to ICOs (and treating them as substantially unregulated) is in compliance with CIMA’s views.
We await details of CIMA’s proposals for a governance framework for cryptocurrencies and ICOs but, in our view, the delay in releasing details of the proposed framework is encouraging. There is a real desire to encourage legitimate cryptocurrency and fintech business in the Cayman Islands and so the regulation needs to be sensible and proportionate. It will take time to achieve the correct balance and so, from our perspective, well-considered regulation delivered later is a far better alternative to seeking to legislate an industry which has not yet been properly understood or considered.
If you would like further information please contact:
 Chris Humphries |