Lucy Frew
Partner
Cayman Islands
The below is an except from the Fund Domicile Report 2024, published by The Drawdown. You can read the full report here.
Digitalisation - trends in digital assets
Jersey
Jersey is well-known as a private equity, real estate and venture capital funds jurisdiction. The island is increasingly being seen as a major fintech and digital assets hub; with a track record of successful launches and a forward thinking regulator adopting a positive approach.
The publication in August of the Jersey Financial Services Commission’s guidance notes on the tokenisation of real world assets (RWAs) reflects Jersey's ability to move quickly and adapt to new opportunities. This also shows the strong governmental, industrial and regulatory support that provides a clear pathway for tokenised funds.
These guidance notes clearly set out requirements and provide increased execution certainty for applicants looking to tokenise RWAs, including for real estate, units in a fund or a real-estate investment trust.
Cayman
The Cayman Islands have continually been at the forefront of innovation in blockchain and virtual assets, with many of the world’s biggest names in the Web3 space choosing the jurisdiction for their projects.
The following legal and regulatory changes have been key. First, introduced in 2020 was the Virtual Asset (Service Providers) Act – known as the VASP Act – providing legal certainty and a clear regulatory perimeter. Secondly, since the Foundation Companies Act was introduced in 2017, foundation companies have become highly popular as legal wrappers for decentralised autonomous organisations, generally in conjunction with token issuances. Third, in 2023, the financial regulator updated its guidance to confirm that it is possible for any business required to comply with the Anti-Money Laundering Regulations to rely on virtual means of verification, including e-KYC technology and digital identification.
Ireland
With an established global financial services and technology ecosystem, Ireland has become a key destination for fintech firms seeking a gateway to the EU single market.
The Irish government actively supports the growth of the financial services sector in Ireland and its ‘Ireland for Finance’ strategy incorporates initiatives to promote fintech and blockchain technologies in the next two to three years.
The Central Bank of Ireland (CBI), as the regulatory authority for financial services firms, established an Innovation Hub in 2018 to provide firms engaged in fintech and innovation with a point of contact, outside of the existing formal engagement processes. The CBI recently launched its Innovation Sandbox Programme to provide regulatory guidance and support for innovative initiatives, with combatting financial crime being the theme of the first programme.
In addition, virtual asset service providers established in Ireland are currently required to register with the CBI for anti-money laundering supervision purposes; many of these firms will be hoping to apply in early 2025 for authorisation as crypto-asset service providers under the Markets in Crypto-Asset Regulation (MiCAR) legislation. MiCAR also imposes regulatory requirements on issuers of asset-referenced and e-money tokens.
