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Cayman Islands Tokenization: VASP Licensing, Fund Structures, and Phase 2 Rules

Cayman Islands tokenization guide: VASP Act registration vs licensing (from April 2025), where SIBA and funds laws apply, and fund vehicles for tokens.

By Asset Haus ResearchPublished Updated 10 min read

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The Cayman Islands has a dual role in tokenization. It is one of the world's leading fund domiciles, with structures that institutional investors already know, and it has a virtual asset regime under the Virtual Asset (Service Providers) Act (the VASP Act), administered by the Cayman Islands Monetary Authority (CIMA).

For tokenization deals, Cayman's value is mainly its fund and SPV infrastructure: exempted limited partnerships, segregated portfolio companies and exempted companies used by the alternatives industry for decades. The tokenization layer sits on top of that framework, not beside it.

This guide covers the VASP regime, how to think about the VASP Act versus the Securities Investment Business Act (SIBA) and the funds laws for security-like tokens, how exempted fund structures work with tokenization, and what the April 2025 licensing phase means for custody and trading platforms.

Why Cayman Is Relevant for Tokenized Funds

Institutional familiarity. Cayman fund structures are a default choice for the global alternatives industry. Endowments, pension funds and sovereign wealth funds have legal, tax and operational processes built around Cayman vehicles. Tokenized interests in a Cayman exempted fund keep that familiarity.

No direct taxation. The Cayman Islands imposes no corporate income tax, capital gains tax or withholding tax on distributions, which makes it a common issuing jurisdiction for cross-border deals.

CRS reporting without domestic tax. Cayman applies the Common Reporting Standard for automatic exchange of information, which meets institutional investors' tax-transparency expectations.

Established legal system. The Grand Court of the Cayman Islands has a deep body of fund and financial law, so disputes involving Cayman structures are resolved under familiar principles.

Bankruptcy-remote structures. Cayman exempted structures provide well-understood legal isolation, which matters when investors need confidence that an issuer's insolvency does not reach their rights to the underlying assets.

VASP Act, SIBA or the Funds Laws: Which Regime Applies?

This is the first legal question for any tokenization project using Cayman. The answer depends on what the token represents and what each party does, so the classification has to be done by Cayman counsel on the actual facts.

VASP Act (Virtual Asset (Service Providers) Act): Regulates persons providing virtual asset services in or from the Cayman Islands. A virtual asset is defined broadly as a digital representation of value that can be digitally traded or transferred and used for payment or investment purposes; digital representations of fiat currency are excluded.

SIBA (Securities Investment Business Act, formerly the Securities Investment Business Law): Regulates securities investment business: dealing in, arranging deals in, managing and advising on securities. Carrying on securities investment business without the required licence or registration is an offence.

Mutual Funds Act and Private Funds Act: Regulate investment funds, open-ended and closed-ended respectively, whatever form their interests take.

The practical implication:

Your tokenWhere the analysis usually starts
Pure cryptocurrency or transferable utility tokenVASP Act
Tokenized fund interestsMutual Funds Act or Private Funds Act, plus SIBA for managers and arrangers
Tokenized debt or equity in an SPVSIBA for anyone dealing, arranging or advising; corporate law for the issuer
Services around any of the above (custody, trading venue)VASP Act and/or SIBA, depending on the asset and activity

Most real-world-asset structures — tokenized fund units, notes or SPV shares — start from the funds laws and SIBA. Do not assume, though, that a token is outside the VASP Act merely because it has investment features: the VASP Act definition also covers assets used "for investment purposes". Confirm the classification with Cayman counsel before choosing service providers. Our legal setup and licensing coordination prepares that fact pattern and works through it with qualified Cayman counsel.

VASP Registration: What It Covers

Persons providing virtual asset services must register with CIMA, or hold a licence for the services that now require one (see below).

Virtual asset services under the VASP Act include:

  1. Issuance of virtual assets
  2. Exchange between virtual assets and fiat currencies
  3. Exchange between virtual assets
  4. Transfer of virtual assets
  5. Custody and administration of virtual assets (licence required since 1 April 2025)
  6. Participation in and provision of financial services related to virtual asset offerings
  7. Operating a virtual asset trading platform (licence required since 1 April 2025)

Registration process:

  • Application to CIMA with fit-and-proper documentation on directors, officers and shareholders holding 10% or more
  • AML/CFT policies and procedures
  • Business plan and risk assessment
  • CIMA lists a registration application fee of CI$1,000 plus an assessment fee set at approval (CIMA VASP FAQ, checked 14 October 2026). Licence fees are set in the 2025 amendment regulations.

Ongoing obligations:

  • Annual fees, due by 15 January
  • Regulatory reports on CIMA's reporting schedule
  • AML/CFT compliance programme
  • Cooperation with CIMA examinations

The Licensing Phase: 1 April 2025

The most significant recent change: the VASP Act licensing regime commenced on 1 April 2025, as CIMA confirms.

Since then, a person that provides virtual asset custody services or operates a virtual asset trading platform needs a virtual asset service licence, not only registration. Existing registered persons offering those services had 90 days from 1 April 2025 to apply; CIMA cancels the registration when it grants the licence. The licensing phase came with CIMA rules and guidance on governance and conduct for custodians and trading platforms, including board composition.

What this means for tokenization structures:

If your Cayman entity holds private keys or virtual assets for clients, or runs a venue where virtual assets are traded, it needs a licence. A fund that holds tokenized assets for its own account, without providing custody to external clients, is not providing custody services merely by holding its own assets. The fund itself is still regulated under the funds laws.

Exempted Fund Structures and Tokenization Compatibility

Exempted Limited Partnership (ELP)

The dominant structure for private equity and venture funds. A general partner manages and limited partners invest passively. LP interests can be tokenized to represent their economic and governance rights.

Registration: the partnership is registered under the Exempted Limited Partnership Act. If it operates as a fund, it is also regulated by CIMA, and investor numbers do not create a general exemption:

  • Closed-ended funds fall under the Private Funds Act. A private fund must apply to CIMA within 21 days after accepting capital commitments and cannot accept capital contributions until it is registered (Private Funds Act, section 5). CIMA treats a fund that has, and is only ever intended to have, a single investor of record as outside registration.
  • Open-ended funds fall under the Mutual Funds Act. Since February 2020, funds with 15 or fewer investors under section 4(4), the former exemption, must also register as "limited investor funds".

Tokenized LP or fund interests are also analysed under SIBA for anyone dealing, arranging, managing or advising.

Segregated Portfolio Company (SPC)

An SPC can create multiple segregated portfolios, each legally isolated from the others. Assets and liabilities of one portfolio cannot be reached by creditors of another.

Use case: a platform running several deal-specific portfolios inside one corporate vehicle. Each portfolio issues its own tokens, and investors in Portfolio A have no exposure to Portfolio B.

Standalone Exempted Company

A simple Cayman company used as a single-asset SPV holding a property, loan or commodity. It issues shares or notes that can be tokenized. Formation and maintenance costs depend on the registered office provider, director arrangements and audit scope; we keep illustrative cost ranges in one place, our tokenization cost breakdown, rather than repeating them here.

Costs, Timeline, and Capital

Regulator fees are published by CIMA: the VASP registration application fee above, licence fees under the 2025 amendment regulations, and Private Funds Act application and annual fees. Professional fees, directors, audit and administration usually exceed the regulator fees and depend on the structure.

CIMA does not publish a guaranteed processing time for VASP registration or licensing, and the 2025 licensing regime adds governance and capital-adequacy assessment for licensees. Budget for the professional work, not only the regulator fees.

For a comparison of Cayman with other issuer domiciles — Luxembourg, Switzerland, Singapore, ADGM and others — see our best jurisdiction for tokenized asset issuance guide. For feeder-fund patterns that use Cayman above an issuance vehicle elsewhere, see the tokenized feeder funds guide.

Frequently Asked Questions

Do tokenized securities in a Cayman fund need VASP registration?

Usually the starting point is the funds laws and SIBA, not the VASP Act: the fund registers under the Mutual Funds Act or Private Funds Act, and managers and arrangers look to SIBA. Whether any party also provides a virtual asset service, for example custody of virtual assets for clients, has to be checked separately. Confirm the classification with Cayman counsel, because the VASP Act defines virtual assets broadly.

What is the April 2025 VASP licensing phase in Cayman?

From 1 April 2025, persons providing virtual asset custody services or operating a virtual asset trading platform need a CIMA licence rather than registration alone. Existing registered providers of those services had 90 days to apply.

Does an ELP with fewer than 15 investors avoid CIMA registration?

No. A closed-ended ELP fund generally registers under the Private Funds Act before accepting capital contributions, whatever its investor count, with a narrow single-investor exception. An open-ended fund with 15 or fewer investors has had to register as a limited investor fund under the Mutual Funds Act since February 2020.

Is Cayman a good jurisdiction for tokenization deals?

Often, for the fund or SPV wrapper. Cayman's strengths are institutional familiarity, established fund law, no direct taxation and bankruptcy-remote structures. Its limitations are the cost of maintaining the compliance infrastructure and the separate VASP analysis for any virtual asset services layered on top.

What is SIBA and when does it apply?

SIBA (the Securities Investment Business Act, formerly a "Law") is Cayman's securities business statute. It applies to persons carrying on securities investment business — dealing, arranging, managing or advising in relation to securities — including where the securities are represented by tokens.

Sources

This article is informational and does not constitute legal, tax or investment advice. Asset Haus provides tokenization infrastructure and structuring support, including for structures that use Cayman SPV and fund vehicles as part of work across 9+ jurisdictions; legal setup is coordinated with qualified Cayman and onshore counsel. See our legal setup workflow, client case studies, or start with the legal perimeter memo.

Tags

  • cayman-islands
  • tokenization
  • vasp
  • fund-structures
  • sibl
  • cima

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