Amendments to the Virtual Asset (Service Providers) Act in Effect 1 April 2025

Introduction

The Cayman Islands Monetary Authority (the “Authority”) wishes to advise that, starting 1 April 2025, Phase Two of the Virtual Asset Service Providers (VASPs) legislative framework will come into effect in the Cayman Islands. This brings additional obligations for all VASPs providing virtual asset custody and virtual asset trading platform services in or from the Cayman Islands, who now must obtain a license.

Additionally, there are amendments to the VASP Act which will impact all VASPs. These include updated definitions, enhanced prudential requirements, requirement for at least three directors, non-refundable fees and for incidental and connected purposes.

The amendments to the VASP Act, relevant commencement orders and regulations have been gazetted and published on the Cayman Islands Government website and are available here.

This supervisory circular provides practical information to VASPs with respect to their obligations upon commencement, process for licence, registration or waiver application and future expectations.

Virtual Asset Services Requiring a License

The Authority reminds entities that persons conducting or intending to conduct the following virtual asset services, as defined under the VASP Act, will require a licence:

1. “Virtual asset custody service” means the business of safekeeping or administration of virtual assets or the instruments that enable the holder to exercise control over virtual assets
2. “Virtual asset trading platform” means a digital platform —

(a) which provides a virtual asset service and facilitates the exchange of virtual assets for fiat currency or other virtual assets on behalf of third parties for a fee, commission, spread or other benefit, and
(b) which –

1. holds custody of or controls virtual assets on behalf of its clients to facilitate an exchange; or
2. purchases virtual assets from a seller when transactions or bids and offers are matched in order to sell them to a buyer and includes its owner or operator, but does not include a platform that only provides a forum where sellers and buyers may post bids and offers and a forum where the parties trade in a separate platform or in a peer-to-peer manner.

All other VASP activities as defined under the VASP Act will still require VASP registration (unless they are a supervised person granted a waiver under the VASP Act).

An entity performing both the activities that require a registration and a license under the VASP Act will only require a license.  

Existing Registered Persons Transitioning to Licensing

The following applies to current VASPs who are registered under the VASP Act but who are performing virtual asset services that require a licence, i.e., virtual asset custody and virtual asset trading platform services. The following also applies to applications submitted to the Authority prior to 1 April 2025, who intend to provide licensable activities, but where no final approval decision has yet been made.

Section 6(6A) of the VASP Act requires that “A registered person who at the commencement of the Virtual Asset (Service Providers) (Amendment) Act, 2024 is engaged in an activity for which a licence is required shall apply for a licence within ninety days of the commencement.”

The following should be submitted to the Authority as part of the application for a license:

1. Documents requested as part of Schedule 1A of the  Virtual Asset (Service Providers) (Amendment) Regulations 2025 (the “Regulations”). Note: The VASP Licencing Transition Checklist for existing Registered Persons has been created for ease of reference which outlines the documents required in Schedule 1A of the Regulations as well as any other documents so the applicant can verify the completeness of the submission.
2. Further, the Authority may request additional supporting documents. Where the documents requested have been previously provided by the Registered Person to the Authority and these documents meet the licensing requirements and there has been no change since initial submission, no duplicate submission is required. The Registered Person can indicate this in the VASP Licencing Transition Checklist for existing Registered Person. The Checklist should be submitted together with all the supporting documents.

Note: The Authority will communicate directly with the affected Registered Persons to provide the VASP Licencing Transition Checklist for existing Registered Person and the process for securely submitting the documents.

While the licensing application is under review, the Registered Person can continue to operate and will be informed of the final decision.

In accordance with section 6(6) of the VASP Act, upon approval of the application for the licence, the Authority will issue written notification to the licensee of such approval and cancel the registration.

If an application for a license from an existing VASP Registered Person is not approved, a written notification will be issued to the Registered Person which may include the specific reasons that formed the basis for the Authority’s decision.

New Licensing Applicants

As of 1 April 2025, all new VASP applicants wishing to provide virtual asset custody and trading platform services in or from the Cayman Islands must apply for a license through the Authority’s Regulatory Enhanced Electronic Forms Submission (“REEFS”) online platform.

The following should be submitted to the Authority as part of the REEFs application:

1. The documents listed in Schedule 1A of the Virtual Asset (Service Providers) (Amendment) Regulations 2025.
2. The  VASP Licencing and Waiver Application Checklist has been created for ease of reference which outlines the documents required in Schedule 1A of the Regulations as well as other relevant additional documents so the applicant can verify the completeness of the submission. Note: The completed and signed VASP Licensing and Waiver Application Checklist should also be submitted with the application.
3. The AML/CFT form linked in REEFs or alternatively, separately provided by the Authority.
4. Further, the Authority may request additional support documents where applicable.

Waiver

A supervised person, which is a person that is licensed or registered by the Authority under any of the regulatory laws but is not licensed or registered under the VASP Act, may apply for a waiver under section 16 of the VASP Act.

The Authority may waive the requirement for registration or licence under the VASP Act for a supervised person if the Authority determines that:

1. the virtual asset service does not materially change the nature of the activity for which the supervised person is licensed; and
2. the supervision and oversight carried out in relation to the business of the supervised person is sufficient to include the virtual asset service.

Supervised persons wishing to apply for a waiver under the VASP Act will be required to submit an application through the Authority’s REEFS online platform for approval by the Authority.

Required submissions:

1. A formal written independent legal opinion that supports the basis on which the waiver is being requested. This should clearly substantiate that the virtual asset service does not materially change the nature of the activity for which the supervised person is already regulated to carry out.
2. Documents detailed in the VASP Licencing and Waiver Application Checklist as relevant.

Note: The completed and signed VASP Licensing and Waiver Application Checklist should also be submitted with the application.

Supervised Persons considering a waiver under the VASP Act are strongly encouraged to schedule a meeting with the Authority prior to submitting the waiver application.

All New Applications

Applicants are encouraged to:

1. Schedule a meeting with the Authority prior to applying
2. Review the Regulatory Policy - Registration or Licensing of Virtual Asset Service Providers which includes guidance to VASPs on the application process
3. Review the following Rule and Statement of Guidance (SoG) which set out the additional ongoing obligations for entities providing the licensable virtual asset custody and trading platform services:

• Rule - Virtual Asset Custodians and Virtual Asset Trading Platforms
• SoG - Virtual Asset Custodians and Virtual Asset Trading Platforms

Upon approval of the application, the Authority will issue written notification of such approval.

If the Authority refuses the application, a written notification will be issued of such refusal. The notification may include the specific reasons that formed the basis for the Authority’s refusal to grant such approval under the VASP Act.

The application process regarding virtual asset services that require registration only remains the same.

Fees

Two (2) fee payments are required as defined in Schedule 2 of the Virtual Asset (Service Providers) (Amendment) Regulations 2025:

1. Application fees for registration/licensing, and
2. Fees for the grant of a VASP registration/license upon approval.

Fees for the grant of VASP license for local companies (as defined in Section 2 of the Local Companies (Control) Act (2025) Revision are included in Schedule 2 of the Virtual Asset (Service Providers) (Amendment) Regulations 2025. 

Conclusion

Entities can also refer to the Authority’s VASP FAQs page for additional information or clarification as applicable.

Importantly, entities engaging in virtual asset services in or from within the Cayman Islands, that are not registered or licenced or granted a waiver, will be in breach of the VASP Act. Such entities may be subject to penalties and other enforcement measures from the Authority, including to cease and desist providing virtual asset services. 

Over the coming months, the Authority will issue additional guidance regarding the licensing and waiver regimes.