The Cayman Islands government has published three legislative bills to create a framework for tokenised investment fund structures in the territory. The Mutual Funds (Amendment) Bill, Private Funds (Amendment) Bill, and Virtual Asset (Service Providers) (Amendment) Bill will be presented in the parliament meeting next month.
Some statutory provisions the bills will introduce to tokenised funds include:
• Definitions of digital equity tokens and digital investment tokens
• Enhanced recordkeeping obligations
• Clarifications on transferability
• Disclosure of technology-specific risks
• Express supervisory and inspection powers for the Cayman Islands Monetary Authority (CIMA) over token transactions and underlying technology
Providing clarity
Although tokenised funds are not new to the Cayman Islands, the government acknowledges that “the absence of express statutory provisions led to uncertainty, particularly regarding whether the issuance of digital tokens representing an ownership interest in a fund could fall within the scope of the Virtual Asset (Service Providers) Act (VASP Act)”. It was only after a consultation with industry stakeholders and CIMA that the territory’s Ministry of Financial Services and Commerce decided that tokenised funds should remain within the existing funds framework.
Tokenised funds that provide virtual asset services to third parties including exchange, custody, and transfer services will remain under the VASP Act.
Cayman Islands’ premier and minister for Financial Services and Commerce, André Ebanks says, “By providing clear statutory frameworks for tokenised funds, we are ensuring that technological advancements can occur within a predictable, transparent and internationally credible regime.”
