Surge in Foundation Companies in the Cayman Islands
Recent statistics indicate a significant surge in the establishment of foundation companies in the Cayman Islands, with registrations soaring by 70% compared to the previous year. The jurisdiction recorded over 1,300 foundation companies by the end of 2024, with more than 400 additional registrations occurring in just the first month of 2025. This rising trend is largely attributed to the increasing adoption of these structures as legal entities for decentralized autonomous organizations (DAOs) and as management bodies for leading projects within the Web3 space.
Legal Advantages for DAOs
A report from Cayman Finance highlights that some of the largest Web3 projects globally are now based in the Cayman Islands, including at least 17 foundation companies managing treasuries exceeding $100 million each. One of the driving factors for DAOs opting for Cayman is the legal advantages these foundation companies provide. They enable DAOs to engage in essential activities such as:
- Signing contracts
- Recruiting contributors
- Securing intellectual property
- Complying with regulations
All while protecting tokenholders from personal liability associated with the DAOs’ commitments.
Impact of Legal Cases
The pivotal legal case in 2024, Samuels v. Lido DAO, served as a wake-up call for many in the cryptocurrency community when a federal judge determined that an unstructured DAO might be classified as a general partnership under California law, thus potentially exposing participants to personal liability.
In contrast, the Cayman foundation company offers a distinct legal identity, which not only facilitates asset ownership and contract signing but also reassures tokenholders that they are not considered default partners.
Regulatory Environment and Tax Neutrality
In addition to these legal benefits, the Cayman Islands provides tax neutrality and a regulatory framework that is increasingly accommodating to institutional investors. This has contributed to the trend of numerous projects relocating their foundations to Grand Cayman to take advantage of these favorable conditions.
Comparison with Other Jurisdictions
In contrast, while promises have been made by various policymakers, such as former US President Donald Trump’s pledge for the U.S. to become the leader in the crypto sector, many states still lack robust legal recognition for DAOs at the entity level. Meanwhile, Switzerland, notably the Crypto Valley region, has established itself as a premier onshore center for Web3 foundations, boasting over 1,700 blockchain companies—a growth of more than 130% since 2020.
Future Regulatory Changes
The rise in the number of Web3 foundations in the Cayman Islands comes alongside a shift in its regulatory environment, particularly with the upcoming implementation of the Organisation for Economic Co-operation and Development’s Crypto-Asset Reporting Framework (CARF). Starting January 1, 2026, this framework will enforce reporting and due diligence requirements on entities classified as Reporting Crypto-Asset Service Providers, which include businesses that facilitate crypto exchanges or provide custodial services.
Legal experts suggest that this obligation is primarily directed towards those entities involved actively in trading or providing direct crypto services, potentially leaving foundation structures that simply hold crypto assets, such as treasuries and investment funds, exempt.
Legal guidance points out that the essential determining factor is whether an entity actively provides exchange services to customers or acts as an intermediary. Therefore, many of the foundations that focus purely on ecosystem management or treasury functions may continue to benefit from the legal stability and tax advantages offered by the Cayman jurisdiction, avoiding the heavier regulatory burdens associated with CARF compliance.
