Comparative Guides

Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.

Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.

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4. Results: Answers
FinTech
1.
Legal and enforcement framework
1.1
In broad terms, which legislative and regulatory provisions govern the fintech space in your jurisdiction?
Cayman Islands

Answer ... Fintech businesses in the Cayman Islands generally operate within and are governed by the existing financial services legislation and the corresponding regulatory regime of the Cayman Islands Monetary Authority (CIMA), and benefit from the inherent flexibility and adaptability of the Cayman Islands approach to business. The extent to which the regime is applicable to a given fintech business will depend on various factors – including primarily whether the business will be operating within a regulated sector and whether the business has elected to have a physical presence in the Cayman Islands.

The sectors which CIMA regulates are banking services, insurance, trust, securities, mutual funds, cooperative and building societies, corporate services, and money services business. CIMA is accordingly the regulatory body in the Cayman Islands most likely to regulate business that involves fintech.

Various government and industry initiatives are focused on ensuring that the existing legislative and regulatory framework appropriately encourages and supports fintech innovation in the financial services sector, including CIMA’s Digital Assets Working Group; and the fintech Legislative Development Sub-Committee under the auspices of the Financial Services Ministry and Digital Cayman, a dedicated industry body.

For more information about this answer please contact: Jonathan Turnham from Travers Thorp Alberga
1.2
Do any special regimes apply to specific areas of the fintech space?
Cayman Islands

Answer ... With few exceptions (eg, see question 3.6 with respect to virtual asset service providers), fintech participants in the Cayman Islands are generally governed by the existing financial services legislation in place in the Cayman Islands, which allows for significant flexibility in the scope and scale of their operations.

With that flexibility in mind, the government of the Cayman Islands has plans to implement an adaptable, technology-neutral regulatory sandbox to further nurture the growth of the fintech industry within the Cayman Islands. This idea is inspired by the approach taken by the United Kingdom’s Financial Conduct Authority when it introduced its own regulatory sandbox in 2015. CIMA may, for example, provide the appropriate regulatory support by relaxing specific legal and regulatory requirements prescribed by CIMA, to which the sandbox entity would otherwise be subject, for the duration of the sandbox. The approach is expected to enhance the Cayman Islands’ reputation as a flexible and business-friendly jurisdiction from which to do business.

While not generally required, those fintech businesses that do seek to establish a physical presence in the Cayman Islands can take advantage of the special economic zone (SEZ) regime, which is currently operated by Cayman Enterprise City. The SEZ allows certain types of technology companies to establish and operate seamlessly in a commercially conducive environment at a reduced cost and subject to less regulatory red tape. In September 2018 Cayman Enterprise City welcomed its 250th company to set up a physical presence in the Cayman Islands and become part of a growing community of knowledge-based companies, active predominantly in the fintech, commodities, maritime, aviation, digital marketing, media and health science industries. In contrast, a fintech participant seeking to establish a physical presence in the Cayman Islands outside the SEZ regime will be subject to:

  • the business licensing and local ownership requirements of the Trade and Business Licensing Law and the Local Companies (Control) Law, unless another exemption applies; and
  • the requirement to advertise job vacancies and hold valid work permits for most expatriate employees.

For more information about this answer please contact: Jonathan Turnham from Travers Thorp Alberga
1.3
Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?
Cayman Islands

Answer ... As noted above, CIMA is the regulatory body in the Cayman Islands for financial services and thus is most likely to cover business that involves fintech. CIMA has expansive enforcement and prudential supervisory powers conferred under the Monetary Authority Law and the various regulatory laws (including the power to impose an administrative fine on a person that breaches a provision prescribed in the Monetary Authority Law, a regulatory law or the money laundering regulations).

CIMA works closely with the Cayman Islands Tax Information Authority (TIA), which was established by the Tax Information Authority Law and is the Cayman Islands competent authority for the purposes of international assistance in tax matters. TIA will have regulatory authority where the fintech business operates as a financial institution (eg, a custodial institution, a depository institution, an investment entity or a specified insurance company). The relevant tax reporting legislation sets out various penalties for non-compliance.

As noted at question 1.2, a fintech participant seeking to establish a physical presence in the Cayman Islands outside the SEZ regime will be subject to the regulatory oversight of the Trade and Business Licensing Board which oversees both the Trade and Business Licensing Law and the Local Companies (Control) Law and the Cayman Islands Government Department of Immigration, which administers work permits. Both of these regulatory bodies have the ability to issue fines and commence regulatory action for non-compliance.

For more information about this answer please contact: Jonathan Turnham from Travers Thorp Alberga
1.4
What is the regulators’ general approach to fintech?
Cayman Islands

Answer ... Among CIMA’s obligations in carrying out its functions is the requirement to recognise the desirability of facilitating innovation in financial services business. This obligation is borne out in CIMA’s overall nurturing approach to the fintech industry and, for example, CIMA’s establishment of the Digital Assets Working Group.

For more information about this answer please contact: Jonathan Turnham from Travers Thorp Alberga
1.5
Are there any trade associations for the fintech sector?
Cayman Islands

Answer ... Cayman Finance, a group that represents the Cayman Islands’ financial services sector, is a key advocate and is engaging with the financial services industry, regulators, the government of the Cayman Islands and the media to promote the development of the fintech industry within the Cayman Islands. As noted above, there is also Digital Cayman, a dedicated industry body.

For more information about this answer please contact: Jonathan Turnham from Travers Thorp Alberga
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FinTech