Cayman Islands legislative framework for tokenised funds now in force

Recent legislative amendments have now come into force in the Cayman Islands to provide regulatory clarity for tokenised investment fund structures. In this update, we consider the changes which formally establish the statutory framework for tokenised funds, strengthening investor confidence, enhancing supervisory oversight and supporting innovation in the jurisdiction’s funds sector.

The statutory framework for tokenised investment fund structures came into force in the Cayman Islands on 24 March 2026, pursuant to the Mutual Funds (Amendment) Act, 2026, Private Funds (Amendment) Act, 2026 and Virtual Asset (Service Providers) (Amendment) Act, 2026. The enactment of the framework has removed uncertainty around the regulatory treatment of tokenised investment fund structures and follows an extensive consultation process with the financial services industry and the Cayman Islands Monetary Authority (CIMA).

Background

Tokenisation refers to the digital representation of an investor’s equity or investment interest in a fund using blockchain or similar distributed ledger technology. The underlying legal rights and investor protections remain unchanged, but tokenisation offers potential efficiencies in recordkeeping, transfer controls, settlement processes and investor onboarding.

In the absence of express statutory provisions, there had been uncertainty as to whether issuing digital tokens representing fund interests constituted a ‘virtual asset issuance’ under the Virtual Asset (Service Providers) Act (2024 Revision) (the VASP Act). With these changes, the Cayman Islands Government and CIMA have confirmed that tokenised funds are most appropriately regulated within the existing funds regulatory framework, with the targeted amendments having been made to support technological innovation while maintaining investor protection and AML/CFT standards.

Key changes

The key changes introduced by the statutory framework for tokenised funds are summarised below.

Mutual Funds (Amendment) Act, 2026

The Mutual Funds Act (2025 Revision) has been amended to expressly provide for tokenised mutual funds, (being mutual funds with equity interests represented by digital equity tokens) as follows:

• updating and adding various definitions for consistency across the framework
• placing obligations on licensed mutual fund administrators to ensure that tokenised mutual funds:
  • securely maintain all records relating to token issuance, creation, sale, transfer and ownership
  • provide such records to CIMA within the period it requires
  • comply with all other obligations under the principal Act
• placing the following obligations on tokenised mutual funds:
  • the fund’s operator must provide an annual confirmation that token‑related records are properly maintained
  • transfers of digital investment tokens may only be made with the approval of the fund’s operator in accordance with the offering document
  • identified risks specific to the digital investment token must be disclosed in the offering document
  • the offering document must set out how the risks identified are addressed or mitigated for investors; and
• empowering CIMA to supervise tokenised mutual funds, including oversight of token transactions and underlying technology.

Private Funds (Amendment) Act, 2026

Mirroring the mutual funds amendments, the Private Funds Act (2025 Revision) has been amended to address tokenised private funds (where investment interests are represented by digital investment tokens) with equivalent amendments.

Virtual Asset (Service Providers) (Amendment) Act, 2026

This VASP Act has been aligned with the updated funds legislation to remove uncertainty around the treatment of tokenised fund issuances by:

• updating and adding various definitions for consistency across the framework; and
• providing clarification that the issuance of digital equity or investment tokens by regulated tokenised funds is not a virtual asset issuance under the VASP Act.

It should be noted that tokenised funds that provide virtual asset services to third parties (such as custody, exchange or transfer services) remain fully within the scope of the VASP Act.

Next steps

For more information, please reach out to your usual Mourant contact or one of the key contacts listed.