Launching a crypto product with international reach and counterparties that care about credibility? Cayman’s VASP framework gives you a structured route—good news if you can show clean governance, custody discipline, and monitoring that actually works. This briefing is written for builders: what Cayman reviewers and banking partners look for, how to architect v1 without rework, and how to evidence controls. For a step-by-step service route, see Cayman Islands VASP license.
Contents
Is Cayman the Right Fit? A 60-Second Triage
- Your model touches client assets (exchange, brokerage/OTC, hosted wallet, payments, on/off-ramp) and you’re willing to run a documented AML/CTF program.
- You prefer predictable supervision over ambiguity, and you’re ready to align product flows to written policies.
- You need partner trust signals—banks, PSPs, market makers, or enterprise clients who recognize Cayman as a compliant venue.
If your app is truly non-custodial (no key control, no routing/matching, no settlement), your burden can be lighter—but validate scope before you commit your architecture.
Regulatory Snapshot: What “VASP” Covers in Practice
Think less about labels, more about flows. If users onboard, fund, transact, and withdraw through your stack—and you can move or safeguard their assets—you’re in VASP territory. Typical in-scope activities include:
- Exchange/Brokerage—order routing, matching, OTC.
- Custody/Hosted Wallets—you control keys or can initiate movement of client assets.
- Transfers/Payments—moving crypto between users or to external wallets, plus on/off-ramps.
- Yield/Staking Programs—extra scrutiny due to custody and counterparty risk.
The more your model looks like a market or a balance-holding platform, the more depth is expected across custody, monitoring, and disclosures.
The “Bank-Ready” Standard: What Reviewers Expect to See
Governance & People
- Named Compliance Officer with real authority and a clean reporting line to the board.
- Fit-and-proper evidence for directors and UBOs; simple ownership chart.
Policy Stack
- AML/CTF manual, sanctions control, KYC/KYB standards, Travel Rule method, transaction monitoring playbook, recordkeeping, and training calendar.
- Customer conduct: T&Cs, risk disclosures, fee schedule, fair-marketing and complaints handling.
Custody & Security
- Key management (HSM or audited multisig), role-based access, segregation of client vs company assets, dual-control withdrawals, reconciliation cadence.
- Change management, incident response, vendor risk management, penetration-testing posture.
Financials & Continuity
- 12–24-month budget and liquidity plan sized to the model; continuity and incident communication procedures.
Architecture Patterns (Pick One and Keep v1 Narrow)
Pattern A — Non-Custodial Tool
Lower custody risk if you truly never touch keys or control settlement. Beware hidden brokerage (order routing, auto-swap) that pulls you back into scope.
Pattern B — Custodial Wallet
Design withdrawals with dual approvals, allow-lists for higher-risk cohorts, hot/cold thresholds, and daily/weekly recs with evidence.
Pattern C — Exchange/OTC
Start with spot only; keep listings simple; split market-making relationships from client flows and document conflict controls.
Pattern D — Payments/On-Ramp
Double-down on Travel Rule interoperability, sanctions, source-of-funds, and a clear counterparty policy (exchanges, brokers, custodians).
Evidence Pack: Turn Promises into Proof
- Onboarding: KYC/KYB screens, risk-rating outputs, sanctions hit handling.
- Monitoring: example alerts, case notes, analyst timestamps, escalation trail.
- Custody: key ceremony summary, withdrawal approval logs, reconciliation excerpt.
- Travel Rule: sample message traces for your main corridors.
- Governance: board minutes or resolutions appointing the Compliance Officer and approving the policy suite.
Attach sanitized screenshots/logs to your submission. “Controls in action” is the fastest way to reduce clarification cycles.
Sequencing That Keeps Momentum
- Model mapping (1–2 weeks)—diagram onboarding → funding → action → withdrawal; decide custodial vs non-custodial; list vendors and corridors.
- Policy build (2–4 weeks)—write AML/CTF, sanctions, Travel Rule, monitoring, custody, and security tied to the actual flows.
- Pre-filing alignment (1–2 weeks)—appoint Compliance Officer, finalize vendors, assemble the evidence pack and ownership attestations.
- Submission & clarifications—reply with short, evidenced answers (policy snippet + screenshot/log) to keep the clock moving.
- Go-live readiness (parallel)—vendor integrations, incident tabletop, withdrawal approval test, MI/reporting templates.
Scope creep kills timelines. Add leverage, staking, or complex listings only after the base is live and stable.
Banking & PSP Reality Check
Every provider will ask four questions:
- Who owns and runs the business? Clean UBO tree; fit-and-proper for controllers.
- What exactly do you do? A one-pager that matches your website, contracts, and policies—no buzzword soup.
- How do funds move? Corridors, monthly volumes, counterparties, and currencies—diagram included.
- How do you keep illicit funds out and assets safe? Screenshots, logs, and approvals that prove sanctions/KYC/monitoring/segregation work.
Start with a fintech-friendly EMI/PSP for speed and cards; add a bank for redundancy and extra currencies. Choose partners that already serve your corridors—re-onboarding mid-scale is costly.
Cost Buckets (Budget Without Surprises)
- One-off setup: advisory/policy drafting, application preparation, legal review.
- Technology & security: KYC/KYB, Travel Rule provider, custody tooling, monitoring stack, pen-test.
- Ongoing compliance: officer time, audits, monitoring/reporting, training, renewals.
Chasing a single “license fee” number is misleading; under-budgeting creates gaps that later stall authorization or banking.
Seven Mistakes That Stall Approvals
- Policy–product mismatch—manuals say one thing, screens show another.
- Fuzzy custody narrative—no clear key governance, weak reconciliation, or missing dual controls.
- Travel Rule “later”—intent isn’t enough; show messages moving in your corridors.
- Entity role confusion—group structure without a clean service map (who serves whom, from where).
- Vendor due diligence gaps—thin assessments for custodians, exchanges, or monitoring providers.
- Over-broad v1 scope—derivatives/margin/staking before the base model is live.
- Paper-trail chaos—no organized data room; contracts and invoices scattered across chats.
Fast FAQ
Do all crypto businesses in Cayman need the same authorization?
No. It hinges on activities and whether you touch client assets or operate market features.
Can a non-custodial app avoid the heavy lift?
Often lighter, yes—but embedded brokerage, routing, or settlement can still bring you into scope.
How long does it take?
Depends on completeness and complexity. Narrow scope + evidence-based answers typically move faster.
What convinces banks?
Segregation, reconciliation, sanctions/KYC/monitoring that work in production, plus credible governance—demonstrated with logs, screens, and minutes.
Who Can Help
LegalBison helps crypto and fintech teams obtain permissions, design workable compliance by default, and secure banking. The approach blends legal precision with hands-on build support so you can launch safely and scale without drama. Learn more at legalbison.com.
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