Regulating virtual asset service providers in the offshore world: the Cayman Islands example

Abstract

ABSTRACT This article will seek to firstly, outline the reasons why virtual asset service providers have embraced trading offshore. Secondly, it will evaluate the Cayman Islands legislative regime under the Virtual Asset Service Providers Act and its associated regulations to test compliance with international regulatory standards. Thirdly, it will consider the international focus that the Cayman Islands attracts on issues of global taxation and the prevention of money laundering, and will evaluate how Cayman has approached the new challenges presented by cryptocurrencies whilst demonstrating compliance with international standards. This article will reach conclusions as to how offshore regulators and their legal frameworks are going to need to adapt and keep pace with the evolution of cryptocurrencies so that they can protect the integrity of their valuable financial services industries. Offshore jurisdictions should not be seen as selling the crypto industry the shovels with which to mine, if that would involve undermining compliance with regulatory, anti-money laundering and tax transparency standards.