Launching a Tokenised Fund or Adding a Tokenised Share Class in Cayman

A manager who wants to offer investors tokenised fund interests in Cayman has two routes: launch a new tokenised fund, or add a tokenised share class to a fund that already operates. The 2026 amendments to the Mutual Funds Act and the Private Funds Act made both routes available under a single statutory framework, and they apply the same obligations to each. The choice is therefore not about permission. It turns on the existing investor base, the documents already in place, the regulatory posture of the vehicle and how easily the decision can be reversed. Adding a tokenised class looks like the smaller step, but under the statutory definition a single tokenised class makes the whole fund a tokenised fund, and that consequence should drive the analysis.

Most managers arrive assuming a tokenised share class is the quick option and a new fund is the slow one. In practice the class route often carries more work, because it reopens documents that existing investors have already signed and brings the whole vehicle into the tokenised regime. A new fund starts clean. The right answer depends on who the tokenised interest is for, and that is the first question we ask. Settle it before anyone drafts anything.

David Lloyd, Chief Executive Officer at CV5 Capital

Executive Summary

The Cayman framework treats a fund with any tokenised interest as a tokenised fund. The obligations that follow attach to the fund, not to the class, so a tokenised class carries most of the regulatory weight of a tokenised fund while inheriting the history and investor base of the existing vehicle.

• The Mutual Funds (Amendment) Act, 2026 and the Private Funds (Amendment) Act, 2026 define a token as a digital representation of the whole of an investor's interest, and a fund issuing any such interest is a tokenised fund.
• Record-keeping, annual confirmation to CIMA, operator approval of transfers and token-specific risk disclosure apply to the fund as a whole once any class is tokenised.
• CIMA's operational expectations are currently set out in interim measures, including a preliminary questionnaire and an auditor-confirmed annual token summary, pending a final rule.
• A new fund suits a new strategy, a new investor base or a digitally native distribution model, and keeps existing investors outside the regime entirely.
• A tokenised class suits an existing fund whose investors want the option of holding tokens in the same strategy, provided the constitutional documents and investor consents allow it.
• Unwinding a tokenised class is harder than adding one, which makes the decision less reversible than it first appears.

The Cayman Tokenised Fund Framework in Brief

The Mutual Funds (Amendment) Act, 2026 inserted a new Part 3B into the Mutual Funds Act, comprising sections 22I and 22J. The Private Funds (Amendment) Act, 2026 inserted sections 19A and 19B into the Private Funds Act. Both Acts, together with an amendment to the Virtual Asset (Service Providers) Act, were published in the Gazette on 24 March 2026. Our earlier analysis of digital equity tokens and digital investment tokens under the 2026 framework examines the statutory text in detail.

The architecture is the same in both regimes. A digital equity token, in a mutual fund, or a digital investment token, in a private fund, is a digital representation of the whole of the interest held by an investor. All records relating to the issuance, creation, sale, transfer and ownership of tokenised interests must be securely kept and made available to the Authority, and the operator confirms annually that this has been done. A tokenised interest is transferrable only with the operator's approval, in accordance with the offering document. The offering document must disclose the risks specific to the token, including cybersecurity and transferability, and explain how they are mitigated. The Authority may restrict the characteristics of the token, require periodic reporting and inspect both the technology and token transactions.

The Virtual Asset (Service Providers) amendment removes the issuance of tokenised interests by a regulated tokenised fund from the scope of virtual asset issuance. It does not remove other virtual asset services from scope. A fund, or a service provider, that offers wallet, exchange or custody services to third parties still needs to consider the VASP regime separately.

Where CIMA's position currently stands

The statute is in force. CIMA's detailed operational requirements are not yet set out in a final rule. In the interim, the Authority has applied registration conditions and a preliminary questionnaire. The conditions include secure and auditable token records, prompt notification to CIMA of any token impairment or inability to redeem, an annual confirmation letter within six months of the financial year end accompanied by a summary of tokens issued, redeemed, transferred and outstanding that has been confirmed by an auditor, and at least one operator with expertise in tokenised products. Managers should plan to these measures and expect refinement when the final rule is published.

The market remains small. Cayman Finance reported 13 tokenised funds registered with CIMA as at 28 September 2026. Early adopters are still establishing practice, which is a reason to document decisions carefully rather than to assume a settled market standard.

Why One Tokenised Class Makes the Whole Fund a Tokenised Fund

The definition of a tokenised fund turns on whether any interest in the fund is represented by a token. It does not ask whether all interests are tokenised, or whether the tokenised interests are material. A fund with ten conventional classes and one tokenised class is a tokenised fund for the purposes of the legislation.

The practical consequence is that a tokenised class is not a contained experiment. The annual confirmation covers the fund. The Authority's inspection power extends to the fund's technology and token transactions. The risk disclosure belongs in the fund's offering document, which every investor in every class receives. The operator must have, or appoint, the relevant expertise for the fund as a whole. Investors who never hold a token still invest in a vehicle whose regulatory profile has changed.

For a segregated portfolio company registered as a single mutual fund, the same logic raises a structural question. If one segregated portfolio issues tokenised interests, does the whole company become a tokenised fund, with the annual confirmation and inspection regime reaching portfolios that have nothing to do with tokens? The definition is framed by reference to the fund, and an SPC registered under the Mutual Funds Act is one registered fund. The board should settle how this applies to its structure with the Authority before any portfolio is tokenised. Our guide to the Cayman segregated portfolio company explains how segregation operates in law and where its limits lie.

New Tokenised Fund or Tokenised Share Class: The Core Comparison

The table sets out how the two routes differ on the points that usually decide the question. It assumes in each case a CIMA-registered open-ended fund offered to professional or sophisticated investors.

Neither column is better in the abstract. A manager launching a new strategy for a new investor base gains little from the class route. A manager whose existing allocators want a tokenised version of the strategy they already hold gains little from launching a second vehicle that dilutes assets and duplicates costs.

Regulatory Requirements Under Each Route

A new tokenised fund

A new fund is registered under the Mutual Funds Act or the Private Funds Act with the tokenised fund information included from the start. The preliminary questionnaire asks, among other things, whether the token will be offered publicly or only to qualified investors and whether it will be listed, how transfer restrictions and secondary transfers will work, how redemptions are processed, which blockchain and smart contracts are used and who deploys and maintains them, who controls the private keys, what risk disclosure is given, who keeps the records and how AML and KYC obligations, wallet screening and whitelisting are discharged. A new fund answers these questions once, in documents written to the answers.

The usual registration thresholds still apply. A registered mutual fund under section 4(3) requires a minimum initial investment of CI$80,000 or its equivalent per investor. The administered fund route has no statutory minimum but requires a principal office provided by a licensed mutual fund administrator. Tokenisation does not alter either threshold, so a token cannot be used to offer fractional access below the registered fund minimum.

A tokenised share class

An existing fund that adds a tokenised class becomes a tokenised fund and engages the same requirements, but it does so through amendment. The offering document must be updated with token-specific risk disclosure for all investors, the amended document filed with the Authority, and the questionnaire answered for a vehicle that is already operating. For a mutual fund with a licensed administrator, the administrator must also be satisfied as to the tokenised records and compliance arrangements. Every existing service agreement should be reviewed for whether it contemplates tokenised interests at all.

Corporate mechanics depend on the articles. Some articles allow the directors to create new classes by resolution. Others require a special resolution, and where the creation of a new class affects the rights of existing classes, the variation of class rights procedure in the articles applies. The tokenised class should carry the same economic rights as its conventional equivalent unless a difference is intended and disclosed, and the treatment of each class in allocations of income, expenses and gains should be explicit. The principles are the same as in any multiple share class structure, with the added requirement that the token record and the register agree.

Operational Considerations

The legal framework is common to both routes. Operational burden is not, because a tokenised class must be run alongside conventional classes on the same dealing cycle, with the same NAV and the same register.

The register question deserves attention in either route. The Companies Act register of members remains the legal record of ownership, and the 2026 amendments did not displace it. A fund must decide whether the token record is the register or a reflection of it, and every document must give the same answer. Our analysis of how the official register works in a tokenised fund sets out both models. In a tokenised class, the reconciliation between token record and register runs alongside conventional holdings, so exceptions must be identified class by class.

Transfer controls are the second area. Because a tokenised interest moves only with operator approval, the fund needs an approval process that operates at the speed investors expect without bypassing the eligibility, AML and sanctions screening applied at subscription. The controls discussed in our review of AML and KYC on secondary transfers apply equally to both routes. A class route has the added risk that two transfer processes run in parallel and drift apart.

Investor Implications

For investors in a new tokenised fund, the position is straightforward: they subscribe on documents written for tokenisation and accept the token-specific risks as disclosed. For existing investors in a fund adding a tokenised class, the questions are more delicate.

• Choice. Existing investors may be offered the option of converting into the tokenised class or remaining in their conventional class. Conversion should be at NAV, subject to fund approval, and the documents should say whether it is permitted and on what terms.
• Equal treatment. Holders of conventional and tokenised classes in the same strategy should be treated consistently on dealing, liquidity and information, and any difference should be disclosed and justified.
• Cost allocation. Technology, record-keeping and audit costs specific to the tokenised class should be borne by that class unless the documents provide otherwise.
• Liquidity expectations. A token does not make an interest more liquid than the dealing terms allow. Secondary transfers remain subject to operator approval, and redemptions remain subject to the fund's notice periods, gates and suspension powers.
• Exit asymmetry. Once tokens are issued, discontinuing the class requires redemption or conversion of the token holders, a further amendment to the documents and notification to the Authority. Adding a class is a board decision; removing one depends on investors.

Allocators conducting operational due diligence on a tokenised fund will ask the same questions whichever route was taken: who controls the keys, who maintains the register, how transfers are approved and what happens if the chain or the smart contract fails. The governance controls set out in our analysis of wallets and transfer restrictions in a tokenised fund are the controls those allocators expect to see evidenced.

A Decision Framework for Managers

The choice can usually be made by answering five questions in order.

1. Who is the tokenised interest for? If it is for a new investor base, start with a new fund. If it is for existing investors, a class is the natural candidate.
2. Do the existing documents permit a new class without investor consent, and would the tokenised class affect existing class rights? If consent is needed and uncertain, the class route carries execution risk.
3. Will existing service providers support a tokenised class on the fund's current dealing cycle? If the administrator, auditor or directors cannot support it, the class route may require changes that amount to a rebuild.
4. Is the vehicle a segregated portfolio company, and if so, how will the tokenised fund regime apply across portfolios? Settle this with the Authority first.
5. How likely is the manager to reverse the decision? Where the tokenised offering is exploratory, a self-contained new vehicle is easier to close than a class embedded in an established fund.

Managers who complete this exercise generally find that the decision is clearer than the technology debate suggests. The structural options CV5 supports are set out on our fund tokenisation page.

The CV5 Implementation Perspective

CV5 Capital operates CV5 SPC for traditional strategies and CV5 Digital SPC for digital asset strategies, both registered with CIMA under the Mutual Funds Act. Each provides third-party investment managers with a segregated portfolio, an independent board, and coordinated fund administration, audit, banking, custody and compliance arrangements from day one. CV5 Capital is not the investment manager of the strategies operated on its platforms. Each strategy is managed by its own investment manager.

For a manager considering tokenisation, the platform model means the governance, register policy, transfer approval process and reporting to the Authority are designed once and applied consistently. The questions that matter most, including the register model, the approval process for transfers, the treatment of existing investors and the application of the regime across portfolios, are settled at board level before documents are drafted.

Key Takeaways

• Decide who the tokenised interest is for before choosing between a new fund and a tokenised class.
• Treat a tokenised class as changing the regulatory status of the whole fund, and brief every investor and service provider on that basis.
• Check the articles for how a new class is created and whether existing class rights are affected before committing to the class route.
• Plan to CIMA's interim measures, including the questionnaire and the auditor-confirmed annual token summary, and expect refinement in the final rule.
• Choose one register model and make every document, including the token contract, describe it consistently.
• Assess how the decision would be reversed, because closing a tokenised class depends on investors in a way that opening one does not.

Frequently Asked Questions

Can an existing Cayman fund add a tokenised share class?

Yes. The 2026 amendments to the Mutual Funds Act and the Private Funds Act allow a fund to represent investor interests by tokens, and nothing limits this to newly launched vehicles. The fund must amend its documents, provide token-specific risk disclosure and meet the tokenised fund requirements, and the corporate steps depend on what its articles permit.

Does a tokenised share class make the whole fund a tokenised fund?

Under the statutory definition, a fund in which any interest is represented by a token is a tokenised fund. The record-keeping, annual confirmation, transfer approval and disclosure obligations therefore attach to the fund as a whole, not only to the tokenised class.

What does CIMA require from a tokenised fund?

The legislation requires secure records of token issuance, transfer and ownership, an annual confirmation by the operator, operator approval of transfers and token-specific risk disclosure. Pending a final rule, CIMA has applied interim measures including a preliminary questionnaire, prompt notification of token impairment, an auditor-confirmed annual token summary and an operator with tokenised product expertise.

Can a token be used to lower the minimum investment in a registered fund?

No. A token represents the whole of an investor's interest and does not change the registration requirements. A registered mutual fund under section 4(3) of the Mutual Funds Act still requires a minimum initial investment of CI$80,000 or its equivalent per investor.

Are tokenised fund interests freely transferable?

No. Under both the Mutual Funds Act and the Private Funds Act, a tokenised interest is transferrable only with the approval of the operator, in accordance with the offering document. Transfers remain subject to the fund's eligibility, AML and sanctions screening.

Does a tokenised fund need a VASP registration?

The 2026 amendment to the Virtual Asset (Service Providers) Act excludes the issuance of tokenised interests by a regulated tokenised fund from virtual asset issuance. Other virtual asset services provided to third parties, such as custody or exchange services, remain within the VASP regime and must be assessed separately.