Answer ... Do your research: Choosing the correct jurisdiction from which to launch a fintech business is critical. This decision will be dictated largely by the current jurisdiction of the founders, the jurisdiction of the proposed customers, the jurisdiction of the proposed employees and the jurisdiction of the proposed investors into the business. Given the global nature of most fintech operations, the Cayman Islands is the ideal neutral jurisdiction, which is desirable for all relevant stakeholders.
Plan ahead: Implementing the structure in the Cayman Islands early in the process can help to resolve certain taxation, capital gains and regulatory issues that could otherwise arise from a delayed commitment to an offshore model. We have seen from experience that:
- moving an existing fintech business from another jurisdiction to the Cayman Islands is possible, although it may result in a number of complications and further costs (eg, in relation to tax and regulatory matters), and does not provide the same ‘clean slate’ that would otherwise have been the case had it launched initially from the Cayman Islands; and
- those that rush to market in order to raise capital invariably increase their overall legal and compliance costs, increase the overall complexity of their business and attract additional regulatory and tax scrutiny from various regulatory agencies outside the Cayman Islands.
Consider your footprint: Take proper tax, regulatory and legal advice at the outset to confirm whether there is a need for a physical presence in the Cayman Islands. While this is the ideal option for some (and easily done though the special economic zone), many operators may be reluctant to relocate, given their roots in their existing community, or may find they can benefit from the Cayman Islands’ business-friendly regime without the additional time and effort (even if nominal) of setting up a physical presence in the Cayman Islands.
Build a team: Work with an experienced team of experts (across onshore legal, onshore tax and offshore legal) before investing any securities or digital assets or enter into any pre-sale agreements with respect to such investments.