Cayman Islands getting ready to launch RWA and tokenised securities with law update

Real World Assets (RWA) and tokenised securities have been a growing and hot area of growth for blockchain and crypto, as businesses see the potential to move towards lower friction trading and interesting lending and other smart contract interactions, but using tokens which represent ownership in underlying assets. Total RWA's are reported to be US$23B at present (excluding Stablecoins) and growing:

Many challenges need to be overcome before RWA and tokenised securities become a reality at present some offerings, like the xStock being announced on Kraken, and Midas, rely on "Blockchain based certificates" issued under Swiss/Lichenstein laws which appear to restrict them to professional investors and rely heavily on exemptions to function, and other jurisdictions like the United Arab Emirates have recently announced plans to get real property on the blockchain (something which has been a holy grail for many).

Cayman Islands was early with a Virtual Asset Service Provider (VASP) regime and has long had a fit for purpose and well regarded fund regime, but uncertainties between when a token would fall under one regime or/and the other have been a point of concern, with most tokenised funds launching in the British Virgin Islands. That may be about to change, with the Cayman Ministry of Finance and Parliament releasing amendments to the Virtual Asset (Service Providers) Act making clear that tokenised funds and securities which meet certain requirements will not fall under the VASP Regime. The explanatory reasons for the amendment state the:

The ... new definition expands the meaning of the words “ “issuance of virtual assets” or “virtual asset issuance” ” to exclude, in accordance with a statement of guidance or rule that may be issued by [the Cayman Islands Monetary Authority], the issuance of an equity interest as defined under the Mutual Funds Act (2025 Revision) and the Securities Investment Business Act (2020 Revision) or an investment interest as defined under the Private Funds Act (2025 Revision).

Aaron Unterman, a professional director at IMS said:

This alignment ensures that tokenized instruments fall under the most appropriate and tailored oversight—enhancing legal clarity and investor confidence.

Importantly, the legislative changes have retrospective effect, which may give past RWA projects a way to migrate safely into the regulatory framework.

The Cayman Islands Monetary Authority (CIMA) will have the opportunity for formal rule-making and to issue guidance, further providing clarity for tokenised funds and securities. In the interim this amendment continues the Cayman Islands' lead as the preferred web3 jurisdiction for projects to reach the world. By Michael Bacina