CIMA Exempts Cryptocurrency Service Providers from Registration and Licensing
The Cayman Islands Monetary Authority (CIMA) has taken a significant step by exempting cryptocurrency service providers from registration and licensing requirements. This move aims to promote the growth of the virtual assets industry while ensuring the security and integrity of clients’ personal data and virtual assets.
Key Obligations
While exempt from registration, cryptocurrency service providers must adhere to certain obligations:
- Provide an audit report, prepared by an independent auditor, on Anti-Money Laundering (AML) systems and procedures for compliance with AML regulations.
- Prepare annual accounts and make them available for audit at CIMA’s request at their registered office.
- Notify the regulator of any changes in their business operations, including the opening of new offices or establishment of a physical presence in another jurisdiction.
Tax Exemption
The Cayman Islands is renowned for its tax-friendly environment, with no: + Corporate income tax + Personal income tax + Capital gains tax + Withholding tax on dividends or interest payments + Value-added tax + Payroll tax + Property tax + Inheritance tax + Gift tax
This makes it an attractive destination for cryptocurrency service providers looking to minimize their tax liability.
Cryptocurrency Trading and Custody Services
The exemption applies to all entities providing virtual asset services in the Cayman Islands, including:
- Issuance of virtual assets
- Exchange between virtual assets and fiat currencies
- Transfer of virtual assets
- Custody services
- Participation in financial services related to the issuance or sale of virtual assets
The entire process can be carried out remotely, without any requirement for physical presence.
Application Process
The application process typically takes: + 3-6 months, depending on the type of license + Preparation of documents + Speed at which the company can meet CIMA’s requirements
There is no specific requirement for a minimum paid-up capital or net worth.
Fees and Reporting Requirements
A fee of KYD 1,000 (~ €1,108) is required to accompany all applications for registration. Cryptocurrency service providers are also required to submit annual accounts and make them available for audit at CIMA’s request.
Conclusion
The exemption from registration and licensing requirements by CIMA provides a significant opportunity for cryptocurrency service providers to establish themselves in the Cayman Islands while minimizing their regulatory burden. With no specific tax legislation on cryptocurrencies, the jurisdiction offers an attractive environment for companies looking to minimize their tax liability.