THE RISE OF
DIGITAL ASSET FUNDS
The Cayman Islands has not
passed bespoke regulation covering
investments in cryptocurrencies,
but the sector is steadily growing
using existing laws. Sean Inggs of
International Management Services
explains to Cayman Funds why this
is just the start.
Unlike some other offshore jurisdictions, the Cayman
Islands has been conservative with regard to passing
regulations designed to monitor the way cryptocurrencies
are used by investors and funds. However, this may be
a good thing for the sector, according to Sean Inggs, a professional
independent director at International Management Services (IMS) and
an expert in this sector.
Inggs explains that the number of alternative investment funds
entering the cryptocurrency and digital asset class in the Cayman
Islands is increasing and that, so far, the country’s existing regulatory
standards have proved more than adequate for managing this fastgrowing
While other countries may have rushed in legislation designed to
either encourage the growth of this sector or regulate it (for better or
for worse), Cayman remains the leading jurisdiction in the Caribbean for
investment funds participating in the digital asset class.
“Cayman is definitely the leading domicile for both blockchain-related
companies offshore and for funds investing in cryptocurrencies,”he says.
“If you dig into the statistics for new funds being formed, something
like 20 percent of them over the past 12 months are participating in
52 CAYMAN FUNDS | 2019
this space in some way. That is a lot of new formations in this relatively
new asset class.
“We think that the rise of funds that invest in cryptocurrencies
or digital assets in some form is continuing—we have not seen a
slowdown at all. If Cayman is at the centre of that offshore it can only
be a good thing, but the service providers in this industry need to keep
pace with what is required by this fast-growing sector.”
As such, there is a growing core of local experts with an understanding
particular to these funds and how they operate and the best ways to
structure them. Inggs says that most fund managers understand the
need for appropriate expertise.
“They know they need individuals with appropriate experience in
cryptocurrencies who understand the unique risks involved, which are
very different from those of other types of asset classes. From director
level to the fund administrators, this is important.
“Not every fund administrator has the tools and reporting capabilities
right now to provide these services; not every audit firm is geared up to
take on an audit of a digital asset investment fund,” he says.