The Cayman Islands: the Dream Jurisdiction for Crypto Startups

You’re watching a good action movie when $15 million needs to be transferred to rescue the ambassador’s daughter. Where’s the money going? The Cayman Islands, of course… it’s always the Cayman Islands.

Even if you’ve not been there in person and even if you don’t know where to place it on a map, you’ve definitely heard of the Cayman Islands.

This mysterious archipelago is the go-to jurisdiction for Hollywood scriptwriters whenever nefarious activity involves offshore banking. And for good reason. The Cayman Islands is one of the top places in the world to set up an offshore bank account.

Though the country is typically associated with movie villains, there’s nothing necessarily nefarious about having a structure in the Cayman Islands. In fact, 47 out of 50 of the world’s leading banks have some form of presence in the jurisdiction. In addition, the islands are home to over 10,000 fully regulated investment funds with a net asset value of over $3.5 trillion.

With this in mind, it’s no wonder that the Cayman Islands has quickly become a magnet for leading crypto investors and asset managers. With $4.2 billion raised by blockchain companies registered here, this jurisdiction has raised more funds from ICOs than any other in the world.

So if you haven’t had a look at the Cayman Islands yet, now’s the time. Read on to see why.

Low-taxes

To start, it only makes sense to highlight what the Cayman Islands is most famous for: being a zero tax regime. Or as their PR team puts it, ‘tax neutral’. This means that there is no tax on personal or corporate income, capital gains, dividends, wealth or inheritance.

Sound too good to be true?

Well, there are some costs involved in operating in the Cayman Islands. Like most countries, the government charges trade and business licensing fees which must be acquired and paid for on an annual basis. These licenses cost around $1,200 per year.

There are also government filing fees involved, but even when you add all of these fees up, the total cost is very minimal compared to the cost of taxes in many other jurisdictions.

Low taxes and fees are nice for every business, but they’re especially attractive for crypto startups where accurately calculating expected taxes is notoriously complex due to the price fluctuations between crypto and fiat.

A view of George Town capital of Grand Cayman, The Cayman Islands

Business-friendly

While the Cayman Islands has long been a highly attractive jurisdiction to incorporate a business, in recent years the local government has taken some significant steps to make the country much more than just an offshore structuring hub.

In order to attract more businesses physically to its shores, the government has established three special economic zones designed to promote businesses in technology, finance, and transport.

For crypto startups, you will find your home in the Cayman Tech City, which claims to offer everything that a tech project could ask for: high-speed internet, offshore intellectual property protection, offshore hosting and payment gateways, a community of like-minded entrepreneurs, and no government reporting or filing requirements.

Most impressively for any government, under this scheme, you can even receive a renewable 5-year work or residency visa in the space of just 5 days, a turnaround time unheard of anywhere else in the world. So if you wanted to move your base to the Cayman Islands next week, you could. And you could easily bring in your whole team with you.

Crypto-friendly

As things stand now, the Cayman Islands has a fairly flexible regulatory stance toward crypto. Though an explicit regulatory framework has not yet been established, as you can see from their implementation of Tech City, the government is clearly open to businesses in blockchain and crypto.

For the past year, regulators have hinted that they have been waiting for greater regulatory certainty to be established globally before making their own stance clear. So now that the SEC has spoken, it is likely that we will soon see greater regulatory clarity here in the Caymans as well.

Ideally, the Cayman Islands will follow the lead of neighboring countries like Bermuda, which recently established a regulatory framework for ICOs; and Barbados, which set up a regulatory sandbox for crypto projects.

Of course, until actual legislation is released, there will always be some uncertainty. However, considering the jurisdiction’s pro-business ideology, it seems highly unlikely that it would diverge significantly from this for crypto.

What Does This Mean for Crypto Law Insiders?

For crypto entrepreneurs, the Cayman Islands is one of the top jurisdictions to have on your radar.

Not only will you have everything you need to grow your business, but with no taxes, you will be able to reinvest far more in developing your project. And, when you’re ready to sell your business, you’ll be able to make your exit without paying a penny in capital gains tax. This could leave millions more in your pocket.

And it’s not just about money either. By choosing the Cayman Islands as your base, you’ll be able to bring in your team from anywhere around the world. Something that would be nearly impossible in the US and elsewhere.

Less hassle, more money and white sand beaches? It should be no surprise to Insiders why this is one of the top crypto hubs today.

Originally published at cryptolawinsider.com on December 18, 2018.