Aug 2026
The Cayman Islands has taken a significant step in accommodating fund tokenisation within its established regulatory framework. Through the enactment of three complementary pieces of legislation, the Cayman Islands has enabled fund operators to issue tokenised fund interests within the familiar mutual fund and private fund architecture, whilst preserving the regulatory safeguards around disclosure, record-keeping, transfer approval and CIMA supervision that investors and managers expect.
For fund operators, the two fund-specific regimes are substantially aligned in their core obligations. The material differences lie in the terminology used for the tokenised interests, the regulatory gateway through which the record-keeping requirements are tested and the role (or absence) of a licensed mutual fund administrator. The concurrent amendment to the virtual asset services legislation provides certainty that the issue of tokenised fund interests does not attract regulation under the separate virtual asset issuance regime.
The Three-Part Legislative Package and the VASP Amendment Act
The tokenised fund amendments form part of a co-ordinated three-part legislative package enacted in March 2026:
- The Mutual Funds (Amendment) Act, 2026: inserts new provisions on tokenised mutual funds into the Mutual Funds Act and amends the licensed administrator framework;
- The Private Funds (Amendment) Act, 2026: inserts new provisions on tokenised private funds into the Private Funds Act and amends the registration application process; and
- The Virtual Asset (Service Providers) (Amendment) Act, 2026: expressly excludes the issuance of digital equity tokens and digital investment tokens by regulated funds from the virtual asset issuance regime under the Virtual Asset (Service Providers) Act.
The VASP Amendment Act is central to the regulatory certainty these reforms provide. Without it, the issue of a digital token representing a fund interest could, on its face, fall within the definition of a “virtual asset issuance” under the Virtual Asset (Service Providers) Act, potentially requiring a fund to obtain a separate licence or registration under that regime. The express exclusion removes this ambiguity: where a Cayman Islands mutual fund or private fund issues tokenised interests in compliance with the applicable Amendment Act, that is not a virtual asset issuance for the purposes of the virtual asset services legislation.
Fund operators should note that the carve-out applies specifically to the issuance of regulated tokenised fund interests. Where a fund proposes to engage in other activities that may constitute virtual asset services, for example, operating a secondary trading platform or providing custodial services for tokens that are not tokenised fund interests, a separate analysis under the Virtual Asset (Service Providers) Act will be necessary.
What are the Advantages of a Tokenised Fund?
In the fund context, tokenisation refers to representing an investor’s interest as a digital token on a distributed ledger or comparable platform, rather than as an entry on conventional registers maintained by administrators, transfer agents or registrars across separate systems. Tokenisation therefore enables these records to be created, maintained and updated on a technology platform that can support near-instantaneous settlement, transparent ownership records and automated compliance checks at the point of transfer; changing how fund interests are issued, held and transferred. It enables faster settlement, a single transparent ownership record, lower transaction costs for issuance and secondary transfers, reduced reconciliation burdens, the ability to issue smaller interests (subject to the offering document and applicable legal restrictions) potentially broadening investor access, enhanced auditability of ownership and transaction history and streamlined regulatory reporting for the data CIMA requires on an ongoing basis.
Both Amendment Acts preserve existing safeguards by requiring that transfers of tokenised interests remain subject to operator approval in accordance with the offering document.
Are Minimum Subscriptions Required?
Under the Mutual Funds Act, a mutual fund may be regulated as a “registered” fund provided that the minimum aggregate equity interest purchasable by an investor in the fund is not less than CI$80,000 (or its equivalent in any other currency). The Mutual Funds Amendment Act does not modify or disapply this minimum subscription requirement for tokenised mutual funds, meaning the CI$80,000 threshold continues to govern whether a tokenised mutual fund may qualify as a registered mutual fund.
The alternative “administered” fund category under the Mutual Funds Act does not impose a statutory minimum subscription threshold, making it a potential structuring option for tokenised mutual funds seeking to accept subscriptions below CI$80,000. However, the trade-off is significant: an administered fund must appoint a licensed mutual fund administrator in the Cayman Islands, which adds an ongoing cost layer and, following the Mutual Funds Amendment Act, an additional gatekeeping obligation specific to tokenised fund records requiring the administrator to be satisfied as to the secure maintenance and CIMA–availability of tokenisation records and the fund’s compliance with all applicable tokenised fund requirements.
For funds aiming to broaden access through smaller subscription sizes – a commonly cited objective of tokenisation – the administered fund route may be the more natural fit since it removes the CI$80,000 barrier whilst providing the additional regulatory comfort of licensed administrator oversight. Operators should weigh this benefit against the additional cost and accountability layer the administered fund route entails.
What do the Amendment Acts Introduce?
Under the Mutual Funds Amendment Act, it is a “digital equity token” which is a digital representation of the whole of an investor’s equity interest in a mutual fund, with a “tokenised mutual fund” being a mutual fund with any equity interests represented by digital equity tokens. Whereas under the Private Funds Amendment Act, a “digital investment token” is a digital representation of the whole of an investor’s investment interest in a private fund and a “tokenised private fund” is a private fund with any investment interests represented by digital investment tokens.
What are the Operational Requirements under the New Legislation?
- Records relating to the issuance, creation, sale, transfer and ownership of tokenised interests must be securely maintained, include any additional information required by CIMA, and be made available to CIMA within the period specified by CIMA.
- The operator of the fund (i.e. the directors, general partner or trustee) must confirm annually to CIMA that the relevant tokenisation records have been properly kept and maintained in compliance with the applicable Act.
- A tokenised interest is only transferable with the approval of the operator in accordance with the offering document.
- The offering document must disclose risks specific to the relevant digital token, including cybersecurity, transferability and any other potential risks identified by the Authority, and must explain how those risks are addressed or mitigated for investors.
- CIMA may impose restrictions on the characteristics of the relevant digital token, specify periodic reporting requirements, request additional information for applications and monitor ongoing compliance, including through inspections. Potential focus areas regarding the underlying technology and token transactions might include the reliability of ownership records, controls over token issuance and transfers, cybersecurity and transferability risk mitigations, compliance with any CIMA-imposed token characteristics.
What Impact do the Regimes have on Administrator and Registration Gateways?
The Mutual Funds Amendment Act amends the requirements for a tokenised mutual fund which has appointed a licensed mutual fund administrator so that such administrator must, additionally in respect of record-keeping and compliance matters, be satisfied that those records are securely maintained, available to CIMA and that all applicable tokenised mutual fund requirements under the Mutual Funds Amendment Act are met. Where no licensed mutual funds administrator is in place, the principal compliance and record-keeping obligations under the new tokenised fund provisions fall on the operator of the fund.
A licensed mutual fund administrator is not an appointed service provider within the current private funds’ framework and the Private Funds Amendment Act does not introduce an equivalent administrator requirement for tokenised private funds. Instead, a tokenised private fund applying for registration must apply to CIMA in the prescribed manner and satisfy the tokenisation record-keeping and compliance conditions as part of that application; recordkeeping obligations attach directly to the fund and its operator.
Practical Differences for Fund Operators
The following distinctions are likely to be most relevant for fund sponsors and operators:
- Regulatory entry point: For tokenised mutual funds, the amendments impose obligations on licensed mutual fund administrators, requiring them to be satisfied as to secure record maintenance and availability to CIMA. For tokenised private funds, the requirement is framed as a condition of the registration application; the fund itself must satisfy these matters as part of its application.
- Compliance gateway: the mutual fund amendments place the relevant record-keeping check within the licensed mutual fund administrator framework; the private fund amendments place it within the registration application process.
- Operational focus: tokenised mutual fund operators should expect the administrator framework to be relevant to evidencing secure records and compliance, while tokenised private fund operators should expect the registration application to be the key point at which those matters are demonstrated.
When is it Best to Engage with CIMA?
As both tokenisation regimes are new and CIMA retains broad powers to request additional information on applications, impose restrictions on token characteristics and specify periodic reporting requirements, early engagement with CIMA on the proposed technology platform and operational arrangements is advisable.
Conclusion
The three Amendment Acts establish a clear and co-ordinated regulatory framework for tokenised funds in the Cayman Islands, bringing digital token-based fund interests within the existing supervisory architecture, expressly excluding such issuance from the virtual asset services regime and imposing additional disclosure, record-keeping, transfer and technology oversight requirements designed to protect investors without impeding the practical benefits of tokenisation.
The two regimes are substantially parallel in their core obligations. The material differences for operators lie in: (a) the compliance gateway through which record-keeping and ongoing obligations are tested (the licensed mutual fund administrator framework for mutual funds; the registration application process for private funds); and (b) the additional cost and dual-accountability layer introduced by the administrator satisfaction requirement for tokenised mutual funds where an administrator is in place.
Importantly, neither Act modifies the existing fund categorisation requirements under the principal Acts. Fund operators considering tokenisation should assess at an early stage which regulatory category best accommodates their target investor base and subscription structure and should ensure that their chosen technology platform is capable of meeting the disclosure, record-keeping, transfer approval and CIMA access requirements from commencement.
Further Information
The new tokenised fund regimes are a significant development for Cayman Islands funds considering or implementing tokenised fund interests. Operators should take early steps to assess their structuring options, engage with CIMA and prepare the operational, documentary and technology infrastructure required for compliance. Please contact your usual Conyers contact for advice tailored to your fund’s structure, offering documents, transfer arrangements and operational record-keeping.