Noted Tax Haven Cayman Islands Sees New Bills to Bring Local Crypto to FATF’s Heel
In new legislation, the Cayman Islands is looking to clarify rules on crypto exchanges, including registration and sandbox licensing.
On April 28, the legislative assembly of the Cayman Islands gazetted five new pieces of legislation governing crypto businesses — especially exchanges.
How the new legislation would change the Cayman Islands’ crypto industry
The Virtual Asset Service Provider Bill would establish definitions and registration requirements for companies providing crypto services including exchanges, custodians and decentralized financial operators. Accompanying this bill are amendments to other reigning pieces of finance legislation for securities and stock exchanges.
A provision included in the VASP Bill is the sandbox license. Such licenses would allow companies working on technologies that run risks, including to anti-money laundering requirements, to register for one-year licenses to test out their models.
The press announcement accompanying the legislation describes the proposed system as “a flexible foundation which promotes the use of new technology and innovative enterprise.” Continuing:
“The proposed framework incorporates relevant anti-money laundering, countering the financing of terrorism and counter proliferation financing (AML/CFT/CPF) recommendations adopted in 2019 by the Financial Action Task Force (FATF).”
FATF travel rule and tax haven islands
The Cayman Islands are known for their lenience in business registration. The European Union has placed the country on its blacklist of tax havens. Indeed, the islands are one of the names that crops up as the potential home of Binance’s migrating registration.
The current legislation has only been gazetted and will have to wait for the next meeting of the legislative assembly. Given the global transition to FATF’s travel rule and its establishment of traditional banking requirements for crypto businesses, the Cayman Islands will likely need to change something about their current system.