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crypto currencies would be unable to make
direct payments to CIMA for annual fees
and assorted expenses, requiring that any
payments be made through an intermediary,
such as its insurance manager, in fiat
currency.
In these circumstances what requirements
will CIMA introduce for ’source of wealth’
due diligence? Would a copy of the relevant
blockchain be sufficient for example? Would
CIMA consider engaging an agency such
as Chainalysis - which includes US Drug
Enforcement Administration, IRS, FBI and
Immigration and Customs, Europe and
more than half the police forces in Europe
as clients (see USAspending.gov) or similar
company such as BlockSeer or Elliptic to
screen submissions? While the onus is
not on CIMA to verify the source of wealth,
but on the licensee or prospect licensee to
provide proof or evidence of same, some
guidance will be needed.
CAPTIVE INSIGHT
I asked if CIMA would allow a captive holding
crypto currency to include these balances as
admissible assets in their solvency margin
calculations and, if so, would they consider
allowing some crypto currencies (such as
bitcoin, ripple or ether) and not others (such
as monero or Zcash). Cryptocurrency does
not currently come under any of the eight
admissible asset classes as defined by the
Insurance (Capital and Solvency)(Classes B,
C and D Insurers) Regulations (2018 Revision)
and is therefore currently an inadmissible
asset. However CIMA highlights that they
use the word ‘currently’ as CIMA does have
the discretion to approve other assets.
Clearly if this policy is to change and CIMA
recognises crypto currencies as admissible
assets there are a number of questions
which would then need to be considered
and answered. For example: if CIMA allows
captives to be capitalised with crypto
currencies, how would they require balances
to be verified? What sorts of statements
or assurances would CIMA insist upon
and would these be required from either
the owners or the insurance managers of
the captive or the custodian of the crypto
currency(ies)? Would CIMA consider
imposing any limitations as to how the capital
is held? For example, would they insist the
assets could only be held with a Cayman
Islands registered custodial service? Would
CIMA only recognise custodial services
offering cold storage? Would CIMA
require a percentage of the entity’s capital
be held in fiat currency and a maximum
percentage in crypto currencies? Where
funds are required to be held locally, would
crypto currencies be able to satisfy that
requirement? How could this be achieved?
CIMA issued a publication on its website
earlier in the year stating it does not accept
crypto currency as payment. Unless that
changes, any captive which held solely
WOULD CRYPTO
CURRENCIES
BE ABLE TO
SATISFY THAT
REQUIREMENT?
HOW COULD THIS
BE ACHIEVED?
/USAspending.gov