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The Cayman Islands has proposed a suite of targeted amendments to the Mutual Funds Act and Private Funds Act to provide a clear, statutory framework for tokenised fund structures, alongside complementary changes to the Virtual Asset (Service Providers) Act (VASP). These changes codify how tokenised equity and investment interests are treated, enhance supervisory visibility for the Cayman Islands Monetary Authority (CIMA), and clarify the VASP exclusion for regulated funds.
Five Key Takeaways
- Definitions now recognise digital equity tokens and digital investment tokens as digital representations of the underlying fund interests.
- Tokenised interests are only transferable with operator approval as per the offering document.
- Annual confirmations to CIMA and secure, accessible records of token lifecycle events are required.
- Offering documents must disclose technology‑specific risks and explain mitigations.
- VASP scope clarified: regulated funds' issuance of tokenised interests is not a VASP "virtual asset issuance," though separate virtual asset services remain within VASP.
What Has Changed
The Mutual Funds (Amendment) Bill, 2026 and the Private Funds (Amendment) Bill, 2026 insert definitions and dedicate new provisions for "tokenised mutual funds" and "tokenised private funds," establishing specific requirements that sit alongside the existing regimes. A "digital equity token" is now defined as a digital representation of the whole of an investor's equity interest in a mutual fund, and a "tokenised mutual fund" is one that has any equity interests represented by such tokens.
Similarly, the Private Funds (Amendment) Bill introduces a "digital investment token," defined as a digital representation of the whole of an investor's investment interest in a private fund and recognises a "tokenised private fund" where any investment interest is so represented.
Both Bills embed enhanced recordkeeping obligations: operators must confirm annually to CIMA that all records relating to the issuance, creation, sale, transfer and ownership of tokenised interests have been properly kept and maintained, and administrators or funds must be able to provide these records to CIMA within specified timeframes.
Transferability is clarified: a tokenised equity or investment interest is only transferable with the operator's approval in accordance with the offering document, preserving existing gatekeeping controls within a tokenised environment.
Disclosure is strengthened: offering documents must disclose technology-specific risks (including cybersecurity and transferability considerations) and explain how those risks are addressed or mitigated for investors.
CIMA's toolkit is expressly extended to tokenised activity: CIMA may impose restrictions on token characteristics, request additional information, require periodic reporting, monitor ongoing compliance, and carry out inspections of both the underlying technology and token transactions.
Regulatory Context and Significance
The VASP (Amendment) Bill clarifies that the issuance, creation, sale, transfer or other disposition of tokenised equity or investment interests by regulated mutual and private funds is not a "virtual asset issuance" under VASP, aligning the VASP definitions to the funds legislation. This resolves perimeter uncertainty by keeping tokenised interests squarely within the existing funds framework, while preserving full VASP coverage where a tokenised fund conducts separate virtual asset services (such as exchange, custody or transfer services) for third parties.
Collectively, the proposed amendments confirm that tokenisation is a method of representing existing fund interests rather than creating a separate asset class for regulatory purposes, ensuring continuity of investor protection, prudential oversight and AML/CFT expectations within the established Cayman funds regime.
Practical Implications for Funds, Professionals and Investors
For operators and (as applicable) licensed mutual fund administrators, the new statutory recordkeeping and annual confirmation requirements will necessitate robust wallet analytics, token registry controls, and evidence of reliable access to token lifecycle data, with the ability to provide it promptly to CIMA.
For investors, the measures reinforce protections through enhanced transparency, governance of transfers and explicit supervisory access to token systems and transactions. For compliance teams, the clarified VASP scope reduces duplicative licensing risk while preserving VASP obligations where a fund provides virtual asset services to third parties.
Conclusion
These amendments modernise Cayman's funds framework by explicitly accommodating tokenised structures within familiar statutory architecture, strengthening disclosure, recordkeeping and supervisory access without re‑characterising fund interests as virtual asset issuances. The result is greater legal certainty for structuring, consistent investor safeguards, and clearer compliance demarcation with the VASP regime—further enhancing Cayman's position as a pragmatic, innovative jurisdiction for investment funds.
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