Digital Assets: Innovation vs Compliance – Fin Tech

key
takeaways

• Bermuda, the British Virgin Islands (BVI) and the Cayman
  Islands are leading the way in shaping the regulatory landscape for
  digital assets.

• DeFi presents important questions around control, business
  structure and the scope of appropriate regulation.

• Choosing the right jurisdiction depends on structuring
  considerations. Understanding the regulatory landscape,
  requirements and challenges is essential to choosing the best
  jurisdiction to establish fintech-related structures.

Emerging offshore jurisdictional trends and how legal
advisers’ roles will change.

As the digital assets industry continues to rapidly mature,
offshore jurisdictions like Bermuda, BVI and the Cayman Islands,
continue to adapt their regulatory landscapes to meet the evolving
market advancements.

Bermuda has established itself as a pro-active and collaborative
jurisdiction for digital assets, with the Bermuda Monetary
Authority (BMA) licensing some of the world’s largest
cryptocurrency exchanges.

The BVI remains a popular choice for token issuers and is seeing
increased interest from Decentralized finance (DeFi) businesses due
to its flexible structures and market familiarity.

The Cayman Islands as a leading offshore financial centre continues
to be a top jurisdiction for cryptocurrency projects alongside that
of the United States, largely due to its stable and established
legislation governing fintech and digital assets.

The regulation of DeFi continues to take
form

DeFi continues to raise important questions around governance,
control and regulatory oversight. As projects become more complex,
understanding when and how DeFi initiatives falls within regulatory
scope is critical. Legal structure, operational design, and token
utility all play a role in determining a business’ compliance
responsibilities.

Providing clients with innovative and compliant
solutions

With clients requiring more transparency around regulations and
compliance, offshore jurisdictions are expected to refine their
offerings. Regulatory bodies such as the BMA, the BVI Financial
Services Commission and the Cayman Islands Monetary Authority are
actively reviewing and enhancing their frameworks to ensure they
can accommodate innovation while protecting integrity for each
market.

As legal advisors, it is important for us to provide our clients
with the right guidance tailored to their business models. Each
jurisdiction offers distinct regulatory approaches and
understanding those differences is key to aligning with our
clients’ operational and compliance goals.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.