Last week, the Cayman Islands welcomed an influx of professionals in the digital assets space for its inaugural Cayman Crypto Week. As a jurisdiction at the forefront of innovative structuring for the digital assets space, this event was testament to the strength of the offering and experience of the professionals based here, and the increasing institutionalisation of crypto. Tokenised funds were the talk of the town, and unsurprisingly so, given the aptly timed draft legislative updates published in early February heralding a clear regulatory framework for tokenised funds set up in the Cayman Islands. What exactly is a tokenised fund? To add context, lets briefly summarise a traditional fund – an investment vehicle pooling capital from a number of investors. Investors typically will hold their interests in the fund by subscribing for shares in the fund vehicle (in the case of a company), limited partnership interests (in the case of a limited partnership), or membership interests (in the case of an LLC). The concept of a tokenised fund, fundamentally, is an investment fund which allows investors to subscribe for interests in the fund by acquiring tokens on a blockchain. The fund would mint and send tokens to an investor who has successfully subscribed for fund interests and sent capital to the fund (usually via a smart contract). Conceptually, in the ideal of a tokenised fund, the tokens issued by the fund vehicle would be the sole representation of fund interests (investors would not need to hold shares or other forms of interest), and the fund would operate entirely on-chain. In practice, due to other requirements and regulations applicable to operating an investment fund (as well as investor readiness), for now the most typical tokenised fund would issue tokens which represent or mirror the more traditional shares which are also issued. While investors in such a fund will likely consider the tokens to be the representation of their ownership interest in the fund, in reality there would be a conventional share register behind the scenes as well, which would reflect the ownership of those shares mirrored by the tokens. The Cayman Islands framework and proposed changes. Tokenised funds are not new in Cayman or the offshore world generally, and many prominent tokenised funds already operate in Cayman. That said, many such funds to date have been set up within the constraints of frameworks designed for traditional funds, with solutions to issues raised by tokenisation being developed to fit without a clear framework or certainty as to expectations of the regulator. The proposed legislative changes (once in force) will provide a definitive and clear framework allowing for certainty in setting up in Cayman, boosting confidence for both managers and investors. For reference, the proposed legislative changes mentioned relate to the Mutual Funds Amendment Bill 2026, the Private Funds Amendment Bill 2026 and the Virtual Asset Service Providers Amendment Bill 2026. Critically for offering certainty for tokenised fund launches in Cayman, the issuance; creation; sale; transfer or other disposition of tokenised equity or investment interests by regulated private and mutual funds will not constitute the issuance of virtual assets under the Virtual Assets (Service Providers) Act, and will therefore not be a regulated activity under that Act. The changes add clarifications and additional requirements specific to digital tokens to the existing funds regime. The key operational requirements and considerations to comply with the licensing regime as tokenised funds formed in the Cayman Islands are set out below: Comprehensive token records and availability to the Cayman Islands Monetary Authority. Tokenised funds must obtain and securely maintain all records of the issuance, creation, sale, transfer and ownership of tokenised interests (including any additional data the Cayman Islands Monetary Authority may require), and make them available ...
