According to a press release, the Cayman Islands government wishes to build a legal framework for crypto service providers with the aim of attracting them to the island.
An attractive regulatory framework for crypto
On Saturday, it was announced by the Cayman Islands Ministry of Financial Services that they are working on creating a regulatory framework for “virtual asset service providers” (VASP).
And, in addition, it offered an initial preview of a set of rules that went into effect on October 28. In this way, this begins a process that consists of two phases.
Phase one of the framework will determine how the Cayman Islands will regulate and enforce anti-money laundering (AML) and financing of terrorism (CFT) measures.
Accordingly, phase one focuses on anti-money laundering compliance, supervision and enforcement, and therefore crypto companies, or VASPs, must register with the Cayman Islands Monetary Authority to demonstrate compliance with the international standards.
In fact, previously the Ministry published a bill of crypto assets. It seeks to create ground for the gradual implementation of the new rules.
«The Cayman Islands’ ability to regulate and attract individuals and entities dealing with virtual assets… is strengthened, with the initiation of the legislation for virtual asset service providers (VASP) », explained the ministry.
In this way, despite already being underway, phase two is expected to come into effect sometime in June 2021. During this phase, it will analyze the licensing requirements and “prudential supervision” for crypto companies.
Proper regulation is excellent
A negative connotation has generally been given to the possible regulation of the crypto market. In general, due to the fear that regulations that are too restrictive and that they affect growth.
However, let’s keep in mind that the lack of regulation is also a major disincentive in the crypto market. The reason is very simple: Crypto companies run a significant risk associated with regulatory uncertainty.
Consequently, if proper regulation is put in place that incentivizes the healthy growth of the crypto sector, it will be beneficial for mass adoption.
In this regard, the latest Cayman Islands effort in crypto regulation seeks to comply with the FATF recommendations to combat illicit activities.
In fact, the Cayman Islands are being evaluated by FATF and its Caribbean counterpart; this after a Mutual Evaluation Report. Accordingly, the ministry assured that it will inform CFATF about the launch of phase one.