The global digital assets sector has matured significantly, with clients now prioritising regulatory clarity, compliance, and long-term credibility over quick fixes, according to a new white paper from international law firm Walkers.
In the Cayman Islands, there is a growing acceptance that regulation is both inevitable and necessary, the report said.
Published ahead of the Consensus conference in May in Toronto, the white paper noted that clients proactively choose jurisdictions offering certainty.
As such, the Cayman Islands continues to complement – not compete with – onshore structures as clients establish both US and offshore entities to balance tax neutrality and operational needs, Walkers said.
Regulatory clarity inseparable from commercial viability
Most institutional investors (83%), meanwhile, plan to increase their digital asset allocations in 2025, according to a survey by EY-Parthenon and Coinbase.
“The digital assets market has seen unprecedented growth, particularly in the last 18 months and, with renewed enthusiasm coming from the US, it won’t slow down any time soon,” said Walkers Partner Melissa Lim.
But in the wake of ‘crypto winter’, the sector is recalibrating with a renewed focus on making sure continued growth is sustainable.
“This is being driven by the arrival of new international and institutional players with more sophisticated expectations; credibility and compliance are now at the top of the agenda,” she added.
In the wake of FTX’s collapse businesses have come to understand that regulatory credibility is inseparable from commercial viability.
Lim said, “Considering compliance from day one and building it into your business model can greatly boost a firm’s ability to scale effectively and also attract investment from institutions, who themselves, face regulatory challenges.”
The ‘race to the bottom’ has passed, she noted, and business leaders are becoming more aware of benefits regulatory compliance can bring.
“Cayman’s evolving VASP regime demonstrates this. Largely reflecting international standards on AML, governance and compliance, Cayman domiciled businesses can be confident in their controls,” she said.
Distribution remains a challenge
A key challenge for institutional investors globally is distribution. Clients are developing tokenised products backed by assets ranging from US Treasuries to gold and fine wine, but reaching investors remains a hurdle.
While many jurisdictions can “manufacture” the product, navigating marketing restrictions – particularly into the US and Europe – is far more complex than launching the product itself, the Walkers report said.
As institutional clients are subject to their own regulatory requirements, the pool of compliant counterparties continues to narrow, making regulation central to all strategic conversations.
Security concerns are evolving
Security has also emerged as a major concern for institutional clients, extending beyond digital vulnerabilities to encompass physical threats.
“Across sectors and industries, we’re seeing security at the forefront of businesses’ minds—and the digital assets space is no different,” Lim said.
“Stories of crypto-related kidnappings, ransom demands and extortion are no longer rare headlines but growing concerns, especially for clients managing large crypto treasuries. As the sector grows, it will increasingly attract the attention of illicit actors who may view these businesses as more vulnerable than traditional financial institutions.”
Firms with large crypto holdings are now required to implement both robust cybersecurity systems and physical safeguards. This dual-risk environment has raised the stakes for custody solutions, with clients demanding institutional-grade, regulated frameworks for asset protection.
Jurisdictions increasingly specialised
Jurisdictional selection is becoming more strategic. Clients are moving away from jurisdictions chosen merely for ease of setup, and instead evaluating them based on long-term regulatory credibility, operational efficiency and alignment with institutional standards.
Factors such as speed to market, cost-effectiveness and reputational strength are increasingly important. As a result, clients often adopt a multi-jurisdictional approach, choosing the most suitable location for token issuance, custody or foundation establishment.
In response, each jurisdiction is carving out a niche. The Cayman Islands is establishing itself as a preferred location for foundations, benefiting from flexible structuring, a growing legal talent pool and regulatory responsiveness.
“The Cayman Islands continues to be a hub for many of these new digital assets businesses looking at finding a jurisdiction that provides both credibility and flexibility,” Lim said. “There is greater regulatory certainty, and each of the regulator and the government has shown it is responsive to industry feedback. Furthermore, Cayman Islands as a first mover jurisdiction in the industry has created the eco-system and talent pool on-island that have the required technical fluency in a complex sector.”
The complete white paper can be downloaded here.
Melissa Lim is a partner at Walkers in the Cayman Islands.
