What does the Cayman Islands' VASP Act require, and who needs a licence?

The law and the regulator

The Cayman Islands' law for crypto service providers is the Virtual Asset (Service Providers) Act, often shortened to the VASP Act.^2,3 This lesson quotes the 2024 Revision, which shows the Act as it stood on 31 December 2023, and the separate 2024 amending Act (Act 22 of 2024), which made later changes.^2,4

The regulator is the Cayman Islands Monetary Authority, CIMA. The Act calls it "the Authority".²

What counts as a virtual asset

The Act defines a virtual asset as "a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes".² Like FATF's definition, it leaves out digital representations of fiat currencies.^2,6

Some tokens are not virtual assets at all. A "virtual service token" cannot be transferred or exchanged with a third party at any time. It includes tokens whose only job is to give access to an app or service.² Under section 3(2), services that involve only virtual service tokens need no licence or registration under the Act.¹

What counts as a virtual asset service

Section 2 says a "virtual asset service" means issuing virtual assets, or the business of providing any of these services for others:²

• exchange between virtual assets and fiat currencies;²
• exchange between one or more other forms of convertible virtual assets;²
• transfer of virtual assets;²
• virtual asset custody service, meaning safekeeping or administering virtual assets, or the instruments that give control over them;²
• taking part in, and providing, financial services related to a virtual asset issuance or sale.²

The list closely follows FATF's five VASP activities, with issuance added.^2,6 "Issuance of virtual assets" means selling newly created virtual assets to the public in or from within the Islands, for money, other virtual assets or other consideration.² Since March 2026, it leaves out some tokens issued by tokenised funds, as the end of this lesson explains.⁵

Registration or licence?

Section 4 says a person may not carry on, or claim to carry on, virtual asset service in or from within the Islands unless it is registered, licensed, granted a waiver, or holds a sandbox licence.^1,4

Issuing virtual assets also needs CIMA's approval of the issuance. Under section 7, a registered person must send CIMA an issuance request and get its approval before the issuance.^1,7

A firm that already holds a licence from CIMA under another law can ask for a waiver instead.^1,3 Firms that are not registered, licensed or waived must not claim that CIMA regulates them.⁴

A trading platform, in short, is a platform that provides a virtual asset service and helps others exchange virtual assets for a fee or spread. It must also either hold or control clients' assets to make the exchange, or buy from sellers to sell to buyers.³ A forum where people only post bids and offers, and then trade elsewhere, is not a trading platform.³

Only companies and similar bodies

An individual cannot do this. Section 4(2) says a natural person, meaning a human being, "shall not carry on" virtual asset service as a business.¹ Since the 2024 amendment, CIMA may not grant registration, a licence or a waiver to a natural person.⁴ A VASP must be one of the Cayman legal forms the Act lists, such as a company or a partnership.¹

Two phases

Registered firms already doing licensable work when phase two began had to apply for a licence "within ninety days of the commencement".^4,3 While CIMA reviews the application, the firm may keep operating.³

The sandbox licence

The Act also has a sandbox licence. It is "a temporary licence granted for a period of up to one year", reviewed when CIMA decides.¹ CIMA can require a firm to apply for one, for example when a service uses technology in a new way that needs closer oversight than an ordinary licence gives.¹

CIMA can set limits on a sandbox licensee. These can include the number or type of clients it may serve, the value of its services, its advertising and its reporting.¹ Sandbox licensees must follow principles including honesty, integrity, fair treatment of customers and protection of customer data and assets.¹

The Act keeps changing

The Act has been changed several times, including by amending Acts in 2024, 2025 and 2026.^4,8,5 The 2025 amending Act would have changed the definition of "virtual asset issuance" for some tokenised fund interests. It was to come into force on a date the Cabinet appointed by order, and the Cayman legislation website lists it as not in force.^8,9 In February 2026, a bill was published to replace it.¹⁰

The Parliament passed that bill on 5 March 2026, and it became the Virtual Asset (Service Providers) (Amendment) Act, 2026 (Act 4 of 2026). It was published in the Gazette on 24 March 2026.^11,5 It says that "virtual asset issuance" does not include a tokenised mutual fund issuing digital equity tokens under the Mutual Funds Act, or a tokenised private fund issuing digital investment tokens under the Private Funds Act. It also repeals the 2025 amending Act.⁵ The law firm Ogier wrote on 26 March 2026 that the 2026 Act "is now in force".¹²

Always check the latest revision on the Cayman Islands legislation website before relying on any section number.^2,9