Cayman is released from the blacklist ahead of Seychelles, one of the world’ biggest crypto hubs
The European Union (EU) has decided to remove the Cayman Islands from its blacklist of tax havens. The area is one of the most popular jurisdictions for crypto businesses and was added to the EU’s blacklist in February this year.
Reuters reported that Oman was also removed from the tax haven list, while Barbados and Anguilla were added.
In 2019, six crypto exchanges in the area were responsible for around $1.5 billion in international Bitcoin (BTC) transactions. While the Seychelles far surpasses this number — a country with 12 exchanges responsible for $36 billion — the east African country remains on the blacklist and has been categorised as a nation that “does not cooperate with the EU or has not fully implemented its commitments”.
BitMEX, a crypto exchange giant based in the Seychelles, was recently charged by the US Commodity Futures Trading Commission (CFTC) with operating an unregistered trading platform and violating Anti-Money Laundering regulations. The CFTC filed a civil enforcement action against five entities and three individuals who are suspected to own and operate the exchange.
The Commission claimed that BitMEX illegally offered leveraged trading services to retail traders with $1 trillion in notional value since its creation in 2014. While the crypto exchange was successful, the CFTC argues that they had failed to undergo “the most basic compliance procedures”.
The US attorney for the District of New York also indicted several executives for violating and conspiring to violate the Bank Secrecy Act.
Allison Nolan, the founder of a governance solutions provider named Athena International Management, said that the Cayman Islands is a location with “robust regulation,” enforcing strict know your customer (KYC) and anti-money laundering (AML) controls.
“Part of the robust framework for the Cayman Islands is the innovative approach to the regulation of virtual assets. So, the Cayman Islands government enacted the Virtual Assets (Service Providers) Law 2020, in May. It provides for the regulation of virtual asset businesses and for the registration and licensing of persons who are providing virtual assets services,” Nolan explained.
Nolan added that all local regulated businesses need to follow strict cybersecurity requirements.
The EU blacklist was drafted by the European Parliament as a response to the information that was leaked in the Panama and Paradise papers.
Jurisdictions that are on the blacklist may face reputational damage, a higher level of scrutiny in their financial transactions, and the risk of losing EU funds.