DeFi protocol frontend in Cayman Islands

Exchanges/Trading Platforms: Full VASP license required if operating a virtual asset trading platform under the VASP Act; grant fee of 100,000 KYD (~120,000 USD).

Custody Providers: Full VASP license mandatory; grant fee of 30,000 KYD (~36,000 USD).

Payment Processors: Registration suffices for basic services without custody or trading (e.g., transfers); license needed if involving custody or platforms. Fees start at 1,500–15,000 KYD for registration, up to 200,000 KYD for licenses based on scale.

AML/KYC: Mandatory local AML compliance officer; annual AML audits; fit-and-proper checks on owners/directors/shareholders (KYC docs, non-criminal records, references).

Local Presence: Registered office in Cayman Islands required; no physical office, local staff, or residency mandates; at least one CIMA-approved director (especially for custody).

Incorporate Cayman entity (e.g., exempted company) with registered office.

Virtual Asset (Service Providers) Act (VASP Act): https://www.cima.ky/upimages/regulatorymeasures/RegulatoryPolicy-RegistrationorLicensingofVASPs_1716492494.pdf

Capital: No fixed minimum share capital generally required, though CIMA may demand proof of adequate net assets; one source notes 100,000 USD minimum paid-up capital.

Other: Client asset protection, risk/cybersecurity management, insurance; business plan, financial projections (2 years), org chart; annual audited statements if requested.

Prepare package: Business description, products/services, financials/projections, customer info, KYC on directors/shareholders (passports, CVs, references), compliance plans (AML, risk, cybersecurity), org chart.

Pay application fee (5,000 KYD); submit to CIMA.

CIMA review by Management Committee (weekly meetings); respond to queries.

Pay grant fee upon approval; demonstrate ongoing compliance (e.g., AML officer, CISO).

Receive authorization; annual fees/filings follow.

Threshold Amounts: USD 0; applies to all virtual asset transfers, defined as any transaction on behalf of an originator to make virtual assets available to a beneficiary.

Technical Implementation Requirements: VASPs must exchange specific originator and beneficiary data (e.g., identification, verification info) during transfers, maintain records for at least 5 years, and implement policies, procedures, and technological tools. Registrants submit compliance details to CIMA via email (vaspinfo@cima.ky) or REEFS portal (APP 101-84 Schedule E). Aligns with FATF Recommendation 16 and 2021 FATF guidance on private wallets, NFTs, and DeFi.

Penalties for Non-Compliance: Not explicitly detailed in available sources; general AMLR penalties apply for breaches, with CIMA supervisory enforcement. Registration is mandatory for VASPs.

CIMA Guidance: Travel Rule Requirements notice (Feb 22, 2022); Sector Specific Guidance on VASPs (Sept 2023 revision); Guidance Notes on Prevention of Money Laundering/ Terrorist Financing (amendments).

Primary Legislation: Anti-Money Laundering Regulations (as revised), Part XA; Anti-Money Laundering (Amendment No. 2) Regulations, 2020.

Court-supervised liquidations (April 3, 2025): Cayman Grand Court ordered supervised liquidations of AXIA Network Foundation (ANF) and ANF MergeCo Ltd (crypto entities in the failed Axia Group) for efficacy in stakeholder interests; no regulatory penalty specified.

General CIMA fines trend: Increase in administrative fines post-2022 amendments, e.g., September 2025 fines on Blacktower entities for AMLR breaches (non-crypto), and a prior KYD4M+ fine in 2021 (pre-2023).

Freezing assets and reporting relationships or transactions involving designated persons/entities to the Cayman Islands Financial Reporting Authority (FRA), per the Terrorism Act (2018 Revision) and Proliferation Financing (Prohibition) Act (2017 Revision).

Implementing sanctions screening policies under the Anti-Money Laundering Regulations (2020 Revision) for entities conducting "relevant financial business," including checks against UK/Cayman lists (not just EU/UN/OFAC).

All Cayman persons/entities (including VASPs) must screen customers, counterparties, and transactions against applicable lists: UK sanctions (mirroring pre-Brexit EU/standalone UK regimes + UN), plus Cayman autonomous terrorist lists under Terrorism Law (2018 Revision), Proliferation Financing (Prohibition) Law (2017 Revision), and Proceeds of Crime Law (2020 Revision).

CIMA advises FSPs (including VASPs) to note OFAC's extraterritorial reach due to global USD/crypto transaction risks, though not legally binding locally; no crypto-specific exemptions apply under international regimes.