Tokenised Fund Structures in the Cayman Islands

A Cayman tokenised fund is a mutual fund or private fund some or all of whose equity or investment interests are represented by digital tokens. Since amendments published on 24 March 2026, these funds sit expressly within the Mutual Funds Act and Private Funds Act, with added rules on records, transfers and risk disclosure, and token issuance by them is excluded from virtual asset issuance under the VASP Act.

Key takeaways

• The Mutual Funds (Amendment) Act, 2026, the Private Funds (Amendment) Act, 2026 and the Virtual Asset (Service Providers) (Amendment) Act, 2026 were published in the Legislation Gazette on 24 March 2026.
• A tokenised mutual fund has any of its equity interests represented by digital equity tokens; a tokenised private fund has any of its investment interests represented by digital investment tokens.
• The operator must confirm annually to CIMA that token records are properly kept, and tokenised interests are transferable only with the operator's approval in accordance with the offering document.
• CIMA's Regulatory Policy on the Approval of Tokenised Funds (October 2026) requires a Tokenised Fund Questionnaire through REEFS and allows CIMA to approve applications subject to conditions.
• The VASP carve-out covers issuance only; a tokenised fund that provides exchange, custody or transfer services to third parties remains within the VASP regime, according to the Government.

Why the Cayman Islands legislated for tokenised funds

Tokenised funds existed in the Cayman Islands before 2026, but there was no express statutory treatment. The Government's announcement of the bills in February 2026 explained the problem: it was unclear whether issuing digital tokens representing fund interests could itself fall within the Virtual Asset (Service Providers) Act. After consultation with industry and CIMA, the Ministry of Financial Services and Commerce concluded that tokenised funds belong within the existing mutual fund and private fund framework.

The three amending Acts received assent on 19 March 2026 and were published as Acts 4, 5 and 6 of 2026. The VASP amendment also repealed the Virtual Asset (Service Providers) (Amendment) Act, 2025. For managers comparing structures, our overview of asset tokenisation structuring and governance explains how fund tokenisation differs from tokenising a single underlying asset.

What the legislation defines

Tokenised mutual funds

The Mutual Funds Act (As Revised) now defines a digital equity token as a digital representation of the whole of an equity interest held by an investor in a mutual fund, and a tokenised mutual fund as a mutual fund that has any of its equity interests represented by digital equity tokens. The amendment also brings LLC interests into the definition of equity interest.

Tokenised private funds

The Private Funds Act (As Revised) mirrors this with the digital investment token, a digital representation of the whole of an investment interest held by an investor in a private fund, and the tokenised private fund. A fund can be tokenised even if only one class or series is represented by tokens, because the definitions apply where any interests are tokenised.

Both definitions refer to the whole of an interest. Structures that rely on fractionalising a single fund share across several tokens should be reviewed against that wording before launch.

Statutory requirements for tokenised funds

New Part 3B of the Mutual Funds Act and new section 19A of the Private Funds Act apply in addition to the existing requirements of each Act. They require that:

• Records are kept and confirmed. All records relating to the issuance, creation, sale, transfer and ownership of tokenised interests, including any additional information CIMA requires, are securely maintained and available to CIMA within the period it specifies. The operator must confirm annually to CIMA that these records have been properly kept.
• Transfers are controlled. A tokenised interest is transferable only with the approval of the operator, in accordance with the offering document.
• Risks are disclosed and addressed. The offering document must disclose risks specific to the tokens, including cybersecurity and transferability, and explain how those risks are addressed or mitigated for investors.
• CIMA may restrict token design. CIMA may impose specific restrictions on the characteristics of the tokens, and the fund must comply.
• Reporting and supervision apply. The fund must meet any periodic reporting CIMA specifies, and CIMA must supervise tokenised funds, including by inspecting the underlying technology and token transactions.

For mutual funds whose principal office is provided by a licensed mutual fund administrator, section 16 now requires the administrator to be satisfied about the token record-keeping. For private funds, a tokenised fund applies for registration in the prescribed manner and must meet the same record standard.

CIMA's approval policy

CIMA's Regulatory Policy on the Approval of Tokenised Funds, dated October 2026 and effective on gazettement, sets out how CIMA processes applications. It applies to new applicants under either Act, to regulated funds seeking approval to operate as tokenised funds, and to any application that CIMA determines during assessment to be a tokenised fund.

• The applicant submits the completed Tokenised Fund Questionnaire through CIMA's REEFS platform.
• CIMA considers the offering document, the applicability of the VASP Act, the proposed structure, and may review the constitutional documents, governance framework and business continuity arrangements.
• CIMA may approve subject to conditions; the applicant must confirm acceptance in writing within five business days, failing which CIMA may return the application.
• The assessment asks whether the arrangements protect investors, are supported by appropriate governance, operational and risk management, maintain the integrity of the fund's register and investor records, and give appropriate disclosure.

The Policy also states CIMA's ongoing expectations. Records of token issuance, transfers and redemptions should be capable of independent audit through the relevant blockchain or ledger. Operators should notify CIMA promptly if tokens become impaired through failure of the supporting blockchain infrastructure, if the fund cannot redeem tokens within a reasonable period, or if any other event may materially affect the fund, and should notify material changes to the approved arrangements. The Policy refers to a Rule and Statement of Guidance on Tokenised Funds, which applicants should read with it. The current measures are published on cima.ky.

How the VASP Act now applies

The amended VASP Act excludes from virtual asset issuance the issuance of a digital equity token by a tokenised mutual fund in accordance with the Mutual Funds Act and of a digital investment token by a tokenised private fund in accordance with the Private Funds Act. The Government's statement on the bills was explicit that tokenised funds offering exchange, custody or transfer services to third parties remain fully subject to the VASP Act.

The carve-out therefore answers one question: whether the fund's own token issuance is a virtual asset service. It does not settle the position of every party around the fund. A tokenisation platform, a wallet or key custodian, or a secondary trading venue should each be assessed in its own right. Our guide to Cayman VASP registration and licensing requirements sets out that analysis. Funds that hold digital assets as investments, rather than tokenising their own interests, are covered in our guide to setting up a Cayman crypto and blockchain fund.

Structuring and governance decisions

Which record is the register

A Cayman exempted company must keep its register of members in writing under the Companies Act, and CIMA's assessment looks at the integrity of the fund's register. The board should document which record is the statutory register, how the token ledger reconciles to it, who performs the reconciliation, and what happens if the two disagree. The administrator's role as registrar should be defined in the administration agreement.

Transfer controls and AML

Because transfers need operator approval, the token design should prevent a transfer settling to an unapproved wallet. Whitelisting of investor wallets, smart contract permissions and a defined approval workflow are common ways of achieving this. Each incoming investor still needs customer due diligence under the fund's AML programme before approval.

Technology and continuity risk

The board should understand who controls the smart contract, who holds administrative keys, how upgrades are approved, and what the fund does if the chain is disrupted. CIMA's corporate governance guidance for regulated funds expects operators to oversee delegated functions; the same applies to technology providers. Our note on priorities for independent boards of crypto funds covers that oversight in more detail.

Platform or standalone

Some managers tokenise a class within an existing fund; others launch a dedicated vehicle or a segregated portfolio. The choice affects cost, timetable and how CIMA's questionnaire is answered. Our comparison of a fund platform and a standalone launch sets out the trade-offs. CV5 Capital, a partner of Bell Rock Group, provides Cayman fund platform infrastructure to third-party managers of digital asset strategies (cv5capital.io).

Frequently asked questions

Does a tokenised fund need a VASP registration?

Issuing its own digital equity or investment tokens in accordance with the Mutual Funds Act or Private Funds Act is excluded from virtual asset issuance. A tokenised fund that provides exchange, custody or transfer services to third parties remains within the VASP Act.

Can an existing Cayman fund tokenise a share class?

Yes. CIMA's Policy applies to regulated funds seeking approval to operate as tokenised funds. The fund would submit the Tokenised Fund Questionnaire, update its offering document with the required disclosures and amend its documents to give the operator transfer approval.

Can tokenised fund interests be traded freely?

No. A tokenised interest is transferable only with the operator's approval in accordance with the offering document.

What does the annual confirmation cover?

The operator confirms to CIMA each year that all records relating to the issuance, creation, sale, transfer and ownership of tokenised interests have been properly kept and maintained.

Where Bell Rock fits

Bell Rock Group Financial Services Limited is licensed by the Cayman Islands Monetary Authority as a Company Manager under the Companies Management Act (As Revised), Licence No. 633916. Through its Cayman digital asset funds service, Bell Rock forms and maintains tokenised fund vehicles, keeps statutory registers, and coordinates CIMA applications, including the Tokenised Fund Questionnaire, with the fund's administrator and technology providers. Independent directors appointed through Bell Rock act in their personal capacity.

Related reading

• Cayman investment funds: structures and regulation
• Cayman segregated portfolio companies: formation guide
• Decentralised protocols: legal and governance questions
• Digital Asset Custody for Cayman Funds: What Boards and CIMA Expect
• How to Launch a Cayman Islands Fund: A Step-by-Step Guide
• Crypto-Asset Reporting Framework (CARF) in the Cayman Islands

Bell Rock supports tokenised and digital asset fund launches through its Cayman digital asset funds service.