“It’s more of a journey than a destination. Locations that are able
to balance the speed of industry demands with the requirements of
legislation that will maintain a long-term edge.”
While the Cayman Islands does not yet have blockchain or
cryptocurrency-specific regulations, it is actively engaged with
blockchain, cryptocurrencies and digital assets.
Initiatives such as Tech City Cayman, a technology-centric special
economic zone by Cayman Enterprise City, help to attract companies to
establish a physical presence in the jurisdiction. So far it has helped to
attract more than 40 blockchain and cryptocurrency-related companies.
Concurrently, Cayman Finance, which represents the jurisdiction’s
financial services industry, is working on a certified digital ID (CDID)
platform that chief executive officer Jude Scott believes will act as a
catalyst to creating digital industries in the Cayman Islands.
These include fully anti-money laundering-know your customer (AMLKYC)
compliant digital exchanges trading cryptocurrencies, smart
contracts and other financial products; high quality ICOs; initial token
offerings (ITOs); and security token offerings (STOs) with robust AMLKYC
“When this comes to fruition, Cayman Islands funds will be able to
issue digital tokens in addition to shares, units, or partnership interests.
These tokens can be listed and traded on digital exchanges, investment
managers will be excited to have stickier capital, and investors will be
excited to have a more liquid investment.”
Cayman Finance has been particularly active in this space, having
formed a working group tasked with developing ways in which fintech
can be embraced by the financial services industry while aligning with
regulation and creating transparency.
Scott adds: “All domiciles are fighting to gain dominance, and while
some jurisdictions are getting recognition, the Cayman Islands has been
a silent leader in this space and is poised for continued development.”
Progress with captives
Blockchain is increasingly being embraced by many parts of the
30 cayman captive 2019
insurance industry, although it still faces a somewhat uphill battle
against insurers’ scepticism.
The 2018 PwC Global Blockchain Survey of 600 executives noted
that the major drawbacks to blockchain adoption relate to regulatory
uncertainty (48 percent); lack of trust among users (45 percent); and the
ability to network together (44 percent).
Cryptocurrencies—which are possible only because of blockchain
technology—perhaps face more a challenge as there are concerns
over their volatility and how they are regulated.
Isabel Gumeyi, senior manager–technology, risk assurance and
advisory services at PwC Cayman Islands, says there have not been
any captives within Cayman directly holding cryptocurrency to date.
She believes it is unclear from a regulatory perspective whether an
investment in cryptocurrency would be a permitted asset of a licensed
insurance company in the Cayman Islands.
“Licensed insurers are required to have their investment policies
approved by the regulator and any risky/illiquid assets, which could
jeopardise the payment of claims on timely basis, would generally not
be permitted, unless the insurer can clearly demonstrate that it has
more than sufficient funds to pay out its insurance liabilities and these
assets are effectively backing shareholder funds only,” says Gumeyi.
“In the event the captive elects to invest in cryptocurrencies via a
regulated exchange, this would have to be evaluated in light of existing
The overall lack of consensus globally as to the classification of
cryptocurrency investments—for example, as cash, equity securities
or commodities—from an accounting, tax and regulatory perspective
creates challenges when captives are owned by entities or individuals
in different jurisdictions, Gumeyi notes.
Cayman Islands law has yet to recognise digital currencies as legal
tender, and this remains one of the key hurdles for cryptocurrencies.
Scott says that when this happens, any entity will be enabled to
transact with a digital currency in lieu of a fiat currency such as dollars,
sterling or euros. Until that happens, however, the uses are limited
mostly as an investment play within captives or commercial insurance
“As this is still a new area, there remain concerns about the volatility
of the currencies and further, due to the rapid pace of innovation, not all
currencies will ultimately survive as the market gravitates toward those
that serve it best,” he says.
“Any invested in will have a much higher likelihood of losing the
majority of its value. There is also difficulty in performing AML-KYC on
the incoming funds. This will be reduced with the coming to fruition of
the previously mentioned CDID platform.”
Scott believes the Cayman Islands is in a unique position to establish
itself as a leader in digital transactions—as long as Cayman’s lawmakers
are able to react fast enough.
“For example, new cryptocurrencies (stable coins) are being developed