Amendments to the Virtual Asset (Service Providers) Act in Effect 1 April 2025 (2025-04-01)

Summary

This is a CIMA supervisory circular announcing that, effective 1 April 2025, Phase Two of the Virtual Asset Service Providers (VASP) legislative framework has come into force in the Cayman Islands. From that date, entities providing virtual asset custody services or operating virtual asset trading platforms in or from the Cayman Islands must hold a VASP licence rather than merely being registered. The circular also notes broader amendments to the VASP Act affecting all VASPs, including updated definitions, enhanced prudential requirements, a minimum of three directors, and non-refundable fees.

Licensing Pathways

• Existing registered persons: Firms already registered and conducting custody or trading platform activities must apply to convert their registration into a licence.
• New applicants: Firms seeking to provide these licensable activities for the first time must apply for a licence via CIMA's REEFS platform.
• Supervised persons under other regulatory laws: Persons already licensed or registered under other regulatory laws may instead apply for a waiver under section 16 of the VASP Act if their virtual asset activity does not materially change the nature of their existing regulated business.

The circular sets out the documents required for each pathway, including Schedule 1A documentation, licensing/waiver checklists, and AML/CFT forms, and describes the approval/refusal notification process. It confirms that two separate fees, an application fee and a grant fee, apply under Schedule 2 of the amending regulations.

The circular warns that entities conducting virtual asset services without being registered, licensed, or granted a waiver will be in breach of the VASP Act and may face penalties or enforcement action, including cease-and-desist measures. It states CIMA will issue further guidance in coming months.

Key obligations

• VASPs providing virtual asset custody or virtual asset trading platform services in or from the Cayman Islands must obtain a licence from CIMA.
• Existing registered persons already engaged in custody or trading platform activities at commencement of the amendment must apply for a licence within ninety days of commencement, per section 6(6A) of the VASP Act.
• Licence applicants (existing registrants transitioning and new applicants) must submit the documents listed in Schedule 1A of the Virtual Asset (Service Providers) (Amendment) Regulations 2025, along with the relevant VASP Licencing Transition Checklist or VASP Licencing and Waiver Application Checklist, signed and completed.
• New applicants must apply for a licence through CIMA's REEFS online platform and submit the AML/CFT form.
• Supervised persons seeking a waiver under section 16 of the VASP Act must apply through REEFS and submit a formal written independent legal opinion substantiating that the virtual asset service does not materially change the nature of their regulated activity, plus relevant checklist documents.
• Applicants must pay two separate fees under Schedule 2 of the amending Regulations: an application fee and a fee for grant of registration/licence upon approval.
• Entities conducting virtual asset services without being registered, licensed, or granted a waiver must cease doing so or come into compliance, as unlicensed/unregistered activity constitutes a breach of the VASP Act.
• Licensees providing custody or trading platform services must comply with the ongoing obligations set out in the applicable Rule and Statement of Guidance on Virtual Asset Custodians and Virtual Asset Trading Platforms.

Applies to

Virtual Asset Service Providers (VASPs), virtual asset custodians, virtual asset trading platforms, registered persons under the VASP Act, supervised persons (licensed/registered under other regulatory laws) seeking a waiver, new VASP licence applicants

Deadlines

• 1 April 2025: Commencement of Phase Two of the VASP legislative framework; licensing requirement for virtual asset custody and trading platform services takes effect; new applicants must apply via REEFS from this date.
• within ninety days of the commencement: Existing registered persons already engaged in an activity requiring a licence (custody or trading platform services) must apply for a licence, per section 6(6A) of the VASP Act.