The Cayman Islands, long known as an attractive destination for cryptocurrency companies due to its favorable tax policies and flexible legal framework, has just issued new regulations to enhance transparency and protect investors. Accordingly, companies providing cryptocurrency custody and trading services in the region are now required to register and hold valid operating licenses.
Starting from April 1, 2025, all cryptocurrency-related companies operating in the Cayman Islands will have to meet more stringent standards, specifically:
- Digital asset custody service providers
- Must declare the types and quantities of cryptocurrencies they intend to hold on behalf of clients.
- Provide detailed reports on asset protection measures, including storage strategies, security systems, and risk management plans.
- Cryptocurrency exchanges
- Need to disclose their projected revenues and main sources of income.
- Report on their hardware infrastructure, including server locations and operating systems.
- Outline their customer asset protection plans, including risk management processes and compensation policies in the event of security breaches.
Existing companies in the Cayman Islands have a 90-day deadline, until July 1, 2025, to complete the licensing process. Firms that fail to meet the requirements within the time frame may face the risk of suspension or severe penalties.
The tightening of regulations is seen as a significant step in managing the cryptocurrency market in the Cayman Islands. Previously, many major companies such as dYdX, Coinbase, Bitwise, Binance, and Sui had chosen this region for their operations due to its favorable legal environment. However, with the new requirements, many businesses may need to adjust their business models or reconsider their legal strategies.
This decision reflects the global trend of stricter oversight by regulatory authorities to mitigate risks and protect the interests of investors in the digital asset market.
