As one of the foremost offshore financial centres, home to approximately 70% of the world’s offshore investment funds and with an absence of any direct taxation on companies or individuals, the Cayman Islands has become an attractive destination for technology entrepreneurs. While much of Cayman’s financial services legislation was written before the recent blockchain revolution began, the last few years have seen the Cayman Islands take a number of legal and regulatory steps to make the Islands a jurisdiction that will allow such innovation to thrive. Cayman’s ambition to become a global technology hub is also supported by a sound legal framework, a wealth of experienced professional service providers, modern infrastructure, state-of-the-art communication systems and a stable political climate.
Cayman’s flexible business-oriented legislation, multitude of potential issuer vehicle types, political stability and internationally recognised securities regulatory regime has enabled the Islands to pivot away from crowdfunded platforms towards security tokens and stablecoins which provide greater value stability and more predictable investment returns. This same flexibility means that Cayman has been able to take advantage of the shift towards securitising common assets and decentralised finance (DeFi) products, with Cayman already being the offshore centre of choice for other securitisation issuers. Recent years have also seen Cayman’s foundation company becoming a popular choice for projects looking for a flexible governance entity to provide a legal wrapper for their DAO or other community-led initiatives.
Framework legislation regulating virtual asset service providers came into force on 31 October 2020 and has already attracted a number of new entrants to the Cayman market. A technology-neutral regulatory sandbox is awaited and it is hoped this will further attract companies operating in this fast-moving sector to establish themselves in Cayman.
First amongst the leading offshore jurisdictions, Cayman established a technology park within its existing special economic zone (SEZ) to allow technology companies to benefit from specific advantages, including zero-taxes and fast-tracked work permit applications for relocating employees.
The pressures created by the COVID-19 outbreak on global trade systems highlighted the urgent need to maintain and strengthen the resilience of international supply chains. This resilience depends on trust, transparency and integrity, which can be improved through the responsible deployment of blockchain technologies. With applications to join the technology park within the SEZ at an all-time high, it is anticipated that Cayman will continue to benefit from technology companies looking to respond to this shift and establish themselves in a tax neutral jurisdiction.
- Technology & Innovation
- Virtual Assets
- Virtual Asset Service Providers (VASPS)
- Tokenised Funds
- Economic Substance
- Intellectual Property
- Doing Business in the Cayman Islands
For further information, please contact:
Peter Colegate, Partner, Appleby