What the Cayman Tokenization Amendments Mean for Fund Boards and Independent Directors

The financial services sector is undergoing a period of significant digital transformation, and investment funds are no exception. Tokenization is one of the new advancements and it is already moving from a niche experiment to a mainstream structural option, and the Cayman Islands has responded accordingly.

The Mutual Funds (Amendment) Act, 2026 and the Private Funds (Amendment) Act, 2026 came into force on 24 March 2026, establishing the first clear statutory framework for tokenized investment funds in the Cayman Islands. 

Much of the commentary since has focused on what the amendments mean for fund structuring and legal certainty, and rightly so. However, the governance implications deserve equal attention. Several of the obligations introduced by the new framework fall directly on the fund's operator, which in the case of a corporate fund means the board.

This is not primarily a technology story. It is a governance story. Let’s dive in!

What the amendments actually change

Before March 2026, tokenized funds existed in Cayman but were not officially registered. The new legislative framework now provides the certainty the market had been waiting for. 

The amendments confirm that tokenized funds are regulated under the existing Mutual Funds Act and Private Funds Act rather than the Virtual Asset (Service Providers) Act, removing the dual-licensing uncertainty that had been holding some structures back.

For those who may not know, tokenization refers to the digital representation of an investor's equity or investment interest in a fund using blockchain or similar technology, offering potential operational efficiencies while leaving legal ownership and investor rights unchanged. 

By using smart contracts, tokenized funds can automate subscriptions, redemptions, and transfers, allowing for near-real-time settlement and fractional ownership.

In other words, the fund itself, its assets, its regulatory classification, and its investors' legal rights all remain the same. What changes is the operational infrastructure (how ownership interests are recorded and transferred), and with that change comes a set of new obligations that boards need to understand.

Where the obligations land

The amendments are not simply a clarification for lawyers and structuring advisers. They introduce named responsibilities that sit with the fund's operator, and in the context of a corporate fund, that means the board of directors.

Digital tokens representing fund interests may only be transferred with operator approval, in accordance with the fund's offering and constitutional documents. 

The operator refers specifically to;

• The directors where the fund is incorporated as a company.

• The general partner where the fund is structured as a partnership.

• Or the trustee where the fund is constituted as a unit trust. 

Transfer approval is therefore not an administrative function that can be quietly delegated. It is a board-level decision, and the process for making it needs to be clearly defined and documented.

Beyond transfer approvals, operators must obtain and securely maintain all records relating to the issuance, creation, sale, transfer and ownership of fund tokens. They must also make those records available to CIMA upon request, and confirm annually to CIMA that such records are being properly maintained.

That annual confirmation is, in my view, the most significant new obligation for independent directors. It is a direct, named accountability that cannot be passed quietly to the administrator or technology provider.

There is also a disclosure obligation. Offering documents must now disclose technology-specific risks, including cybersecurity and transferability considerations, and explain how those risks are mitigated. 

Directors signing off on offering documents for tokenized funds need to be satisfied these disclosures are complete and accurate, which means understanding the risks being described, not just approving the document.

What directors should be asking their service providers

Most independent directors sitting on tokenized fund boards will not be blockchain experts, and they do not need to be. What they do need is confidence that the right service provider arrangements are in place and properly documented. 

As an independent director, these are the key questions I would be asking:

• Are the record keeping obligations for token issuance, transfer and ownership clearly assigned in service provider agreements, and is it clear who is responsible for producing the annual confirmation to CIMA? 

• Is there an audit trail for token transactions that is accessible and inspection-ready? 

• Have the offering document risk disclosures been reviewed by legal counsel specifically against the new amendment requirements? 

• And has the board been briefed not just on how the tokenized structure works, but on what its own approval responsibilities are in relation to token transfers?

These are governance questions, not technology questions, and they fall squarely within what a board should be asking before a tokenised structure goes live. 

Service agreements between a fund and its service providers must clearly document responsibilities for transaction reconciliation, record-keeping, smart contract governance, data privacy, cybersecurity, on-chain audits, and private wallet usage.

This is still early days

CIMA data shows nine tokenised investment funds are currently registered in Cayman. The institutional pipeline is growing, with the March 2026 amendments giving managers a clear statutory route for tokenised fund structures without the dual-licensing risk that had previously been slowing decisions. 

The numbers will grow, and as they do, the governance questions will become more routine. But for now, tokenised fund mandates are still relatively new territory for many directors, and that makes it important to be clear-eyed about what is being signed up for before taking one on.

The governance principle does not change

Tokenization adds a layer of technology-specific obligations, but the underlying principle of good governance remains the same: ask the right questions, satisfy yourself that obligations are being met, and ensure the fund is operating within its regulatory framework. 

The annual confirmation to CIMA is a useful reminder of this. It is a moment at which the board must actively engage with the mechanics of the fund's tokenised infrastructure and confirm, on the record, that everything is in order. That is exactly what independent directors are there to do.

If you are a fund manager considering a tokenised structure, or an independent director being asked to take on a tokenised fund mandate, our team at Daymer are happy to discuss what good governance looks like in this context and how Daymer's fiduciary and governance services can support boards navigating this new framework.