As the digital assets sector matures, regulatory clarity has improved but complexity remains a cornerstone of the market, especially given its cross-border nature.
Across jurisdictions, institutional clients remain laser-focused on compliance, seeking clarification on licensing triggers, AML obligations and product classification. But the need for clear guidance is important, as regulatory frameworks continue to change while business models grow more sophisticated.
At the heart of these conversations is the regulatory perimeter: clients want to know whether their planned activities will trigger licensing requirements. Whether issuing a token, launching a stablecoin or operating a decentralised exchange, the starting point is the same: “Do I need a licence?”
If you’re planning on launching a digital assets product, we’ve unpacked the main factors which can impact compliance and regulation below.
Jurisdictional differences
This question plays out differently depending on which jurisdiction you’re considering. The British Virgin Islands (BVI) is a popular destination for a variety of fintech business models, from token issuers and liquidity providers to DeFi platforms and exchanges, due to its flexible and commercial licensing regime. The VASP application backlog, due to the bottleneck caused by submission of a significant number of applications by incumbent operators, including major players, is now also clearing.
As a result of the early adoption of its fintech strategy in 2018, Bermuda has been at the forefront of regulating the fintech industry for many years and is now home to a number of the largest digital asset exchanges in the world. Bermuda has focused on establishing a proportional, risk-based regime, that is flexible in nature. The flexibility built into the law has allowed it and the related rules and guidance to be continuously iterated upon to allow for an increasing variety of business models and products, with recent trends in derivative exchange, digital asset lending and digital asset payment service provider models.
In the Cayman Islands, there is an ongoing stream of clients becoming regulated as virtual asset services providers and the jurisdiction is also consulting on new rules around the OECD’s crypto-asset reporting framework, where it will be in the first cohort of compliant jurisdictions. Clients are setting up tokenised funds and debt investment vehicles, with incoming legislation helpfully confirming tokenised funds are not subject to dual registration. The jurisdiction remains highly attractive due to its tax neutrality and fund structuring options, and confirmation of how tokenised products are classified has provided a further positive boost.
Similarly, in Jersey, regulatory approvals can be robust and time-consuming but provide institutional investors with confidence. Clients focused on long-term growth often see that credibility as worth the early effort.
Each jurisdiction has pros and cons, depending on what your goals are for your digital assets product and the speed to market required.
Product classification
Product classification is another common challenge. In Jersey, clients grapple with whether a tokenised product counts as a security under long-standing rules like the 1958 Control of Borrowing Order or whether it falls under the island’s Financial Services Law or virtual asset framework.
The answers determine what approvals, licences or disclosures are required. Fortunately, in 2024 Jersey’s regulator proactively published detailed guidance clarifying expectations for tokenised real-world assets, stablecoins and ICOs, helping map new products against existing legal frameworks.
Similar questions are playing out elsewhere. In the Cayman Islands, recent welcome clarifications to the VASP Act now mean that from April 2025, tokenised investment funds and securities are excluded from the licencing regime.
In Bermuda, the regulatory framework expressly accommodates tokenised securities through legislation, including provisions for blockchain-based share registers, as well as stablecoins and ICOs. A safe harbour built into the laws also allows for licensed digital assets businesses to conduct traditional (fiat backed) investment business, where ancillary in nature, to be conducted without the need for an additional investment business licence.
The BVI has very clear guidance on the securities and virtual assets regulatory perimeters, which is invaluable when considering products such as derivatives with a crypto underlying. In addition, proprietary public token issuance is not captured by the BVI VASP Act.
Across all jurisdictions, product classification is becoming a critical early-stage consideration for institutional clients aiming to launch at scale.
Anti-money laundering (AML)
AML compliance runs through every jurisdictional conversation. Clients are routinely after advice on how to apply AML and sanctions screening to digital assets, including the challenge of monitoring wallets and counterparties on decentralised exchanges where identities are harder to verify.
Bermuda has prescriptive sector-specific AML guidance, which provides clear compliance expectations that give clients confidence in how to meet their obligations.
Cayman Islands clients are similarly focused on AML, particularly following the April 2025 implementation of phase two of the Virtual Asset Service Providers Act. This legislative update prompted a wave of client enquiries, reflecting increased awareness and engagement with regulatory obligations.
Native issuances
A growing area of curiosity is whether fully digitally native issuances - without a parallel off-chain register - are possible under current law. Some jurisdictions, like in the Cayman Islands, may technically permit it, but achieving regulatory comfort is another matter.
For most clients, the risk of regulatory uncertainty is too high; they opt for a hybrid model that preserves a traditional off-chain register to guarantee settlement finality and avoid holdups.
Across all these issues, clients expect their advisors to deliver quick, actionable answers. They’re balancing ambition and compliance in an environment where product teams move fast and regulation is still catching up. Whether advising on perimeter licensing, AML frameworks or product classification, lawyers are expected to translate complexity into clarity without slowing clients down.
As compliance risks rise, so do opportunities for smart innovation. Our fintech white paper, ‘Digital assets in the post-boom world: Building infrastructure, not hype’, outlines the trends shaping the next phase of digital assets.
