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Charting the Course: CIMA sets out its criteria for approving tokenised funds

2 hours ago
3 min read


The Cayman Islands Monetary Authority (CIMA) has published a Regulatory Policy on the Approval of Tokenised Funds, setting out the criteria it will apply when assessing registration and licensing applications from funds that intend to issue interests as digital tokens. The Policy implements the framework introduced by amendments to the Mutual Funds Act, Private Funds Act and Virtual Asset (Service Providers) Act that took effect on 24 March 2026, and it is part of CIMA's Rule and Statement of Guidance on Tokenised Funds. It takes effect on gazettement.


Under what flag


The Policy applies to three categories of applicant:


  • a person seeking registration of a new fund as a Tokenised Fund under the Mutual Funds Act or Private Funds Act;

  • a Regulated Entity seeking CIMA's approval to convert an existing fund to a tokenised structure; and

  • any fund that CIMA determines, during the course of assessing an application, to constitute a Tokenised Fund in substance.


CIMA assesses each application against the Mutual Funds Act, Private Funds Act, Virtual Asset (Service Providers) Act and the Anti-Money Laundering Regulations together, rather than treating tokenisation as a separate licensing track.


The process


First an applicant submits a Tokenised Fund Questionnaire through CIMA's Regulatory Enhanced Electronic Forms Submission (REEFS) platform. CIMA will then consider the offering document, whether the Virtual Asset (Service Providers) Act applies to the structure, and any other documentation it considers relevant, including constitutional documents, the governance framework and business continuity arrangements. CIMA may consult other divisions within the Authority or overseas regulators before deciding. Where it approves an application subject to conditions, the applicant has five business days to confirm those conditions in writing; if it does not, CIMA may return the application.


Six tests for tokenisation


In substance, CIMA will approve a Tokenised Fund only where the arrangement:

  • is consistent with the applicable Acts and regulatory measures;

  • adequately protects the interests of investors;

  • is supported by appropriate governance, operational and risk management arrangements;

  • maintains the integrity of the fund's register and investor records;

  • provides appropriate disclosure to investors about the tokenisation arrangements; and

  • does not give rise to material regulatory, operational or investor protection risk.


Staying shipshape after approval


Once approved, a Tokenised Fund carries ongoing obligations to CIMA. Records of token issuance, transfers and redemptions must be maintained securely and be capable of independent audit through the blockchain or other distributed ledger supporting them. Operators must promptly notify CIMA if issued tokens become impaired through a failure or disruption of the supporting blockchain infrastructure, if the fund cannot redeem tokens within a reasonable period, or if any other event occurs that may materially affect the fund's operation. A Tokenised Fund must also notify CIMA of any material change to its approved tokenisation arrangements, or to the basis on which approval was granted.


What now


Managers structuring or converting a Cayman fund to a tokenised structure should:

  • confirm whether the proposed structure falls within the Policy's scope, including where tokenisation is added to an existing registered or licensed fund;

  • engage with CIMA before applying, particularly where the application of the Virtual Asset (Service Providers) Act to the structure is unclear;

  • build the blockchain audit trail and redemption-monitoring capability the Policy expects into the fund's operational design from the outset, rather than as an afterthought for the Questionnaire; and

  • put in place the notification protocols the Policy requires for token impairment, redemption failure and other material events before launch, not after the first incident.


As at April 2026, nine tokenised funds were conditionally registered with CIMA, a number officials expect to rise now that the underlying legislative amendments and this Policy give managers a settled process to follow.


The Cayman Island's scale, with more than 30,000 registered funds holding around US$16 trillion in assets, and 58 percent share of the world's crypto and digital asset hedge funds, makes it a natural home for tokenised funds. Other fund centres are moving on a similar timeline : Australia's ASIC has consulted on a Digital Asset Platform framework that would bring tokenised custody arrangements within its financial product perimeter, while Singapore and Luxembourg are each working through their own settings for tokenised fund interests.


The approaches differ in how directly tokenisation is folded into existing fund law, but the direction of travel, treating a token as an instrument of existing fund regulation rather than a reason to invent a new one, is now shared across multiple countries.

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