Public Advisory - Virtual Currencies (2018-11-14)

Summary

This is a public consumer-protection advisory issued by the Cayman Islands Monetary Authority (CIMA) in November 2018 warning members of the public about the risks of investing in Initial Coin Offerings (ICOs) and virtual currencies such as Bitcoin and Ripple. It is not a rule or regulatory requirement directed at licensees; rather it is informational guidance aimed at potential investors and the general public.

The advisory explains what ICOs are and notes that they are often unregulated and highly technical.

• Risks of ICOs and virtual currencies: Fraud, hacking, price volatility, illiquidity, lack of regulatory protection, and potential misuse of funds for terrorist financing.
• Red flags of fraudulent ICOs: False claims of CIMA endorsement, vague technical information, aggressive marketing, and anonymous developers.
• Protective advice: Independently verify any claimed regulatory endorsements and be skeptical of guaranteed returns.

CIMA clarifies that virtual currencies are not legal tender in the Cayman Islands, that it does not endorse any investment product or company, and that virtual currencies cannot be redeemed by the Authority. The advisory directs anyone who believes they are a victim of virtual-currency-related fraud to contact the Financial Crimes Unit of the Royal Cayman Islands Police Service. It does not create any new compliance obligations for regulated entities.