January 15, 2021

Cayman Islands preparing governance framework for cryptocurrencies

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FromAnti-Corruption Digest

The Government is working on a framework of governance for cryptocurrencies and digital coin projects taking place in the jurisdiction while it considers how to implement a legislative framework for the sector, which has grown to over $400 billion in a few short years. Responding to questions from , the Ministry of said it was “working to ensure that Cayman’s framework is in place as soon as possible, in order to maintain and enhance our reputation as a jurisdiction that attracts sound business. We want to make sure that any new business meets global regulatory standards, including AML/CFT standards, as does business that already exists here.”

The statement from the ministry comes just under a week after the Cayman Islands Monetary Authority (CIMA) moved to warn the public of the potential risks in investing in cryptocurrencies like Bitcoin or initial coin offering () projects, representing its first meaningful comments on the industry, which has grown dramatically in the Cayman Islands in the past six months.

CIMA said in its statement that investors should thoroughly research any investment in virtual currencies, digital coins or tokens and the companies behind them to “separate fact from fiction”.

First quarter ICO funding globally has already reached $6.3 billion, surpassing the total for 2017, according to figures from industry publication Coin Desk. A great number of these ICOs are taking place in Cayman as digital entrepreneurs take advantage of Cayman’s flexible corporate framework and zero tax model.

The concern in the financial sector is that while this new type of business has presented a new revenue stream for financial services providers in Cayman, it can be extremely difficult for investors to understand if they are putting their funds into a legitimate project. Furthermore, many ICOs have not yet launched products and investors are essentially betting on a future outcome which may or may not materialise, which has created a grey area of the law amidst the rapid industry growth.

“In most cases, including outside of financial services, new products are created before the regulatory structure,” the Ministry of Financial Services told CNS. “In relation to fintech, government is analysing available data and perspectives, both commercial and regulatory, and subsequently determining the best legislative framework for our jurisdiction.

“The Ministry of Financial Services is therefore now considering the recommendations of a CIMA-convened working group regarding standards for the governance of the operations of digital assets that are marketed, traded, sold or otherwise transferred in or from the Cayman Islands.”

For more on this story go to: https://anticorruptiondigest.com/anti-corruption-news/2018/05/01/cayman-preparing-governance-framework-for-cryptocurrencies/

IMAGE: bitcoin.org

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