The landscape of decentralized autonomous organizations (DAOs) and cryptocurrency projects is undergoing a significant transformation, marked by a dramatic increase in the establishment of foundation structures in the Cayman Islands. These offshore entities have become a crucial refuge for projects navigating the complex and often perilous waters of global regulation, particularly concerning the personal liability of tokenholders.
The Cayman Islands: A Growing Hub for Crypto Foundations
Recent data underscores the profound shift towards offshore jurisdictions. By the close of 2024, Cayman foundation formations had surged by more than 70% year over year, exceeding 1,300 registrations. The momentum shows no signs of abating, with early 2025 figures from Cayman Finance indicating over 400 additional registrations. This trend persists despite concerted efforts by the United States to re-establish itself as a competitive jurisdiction for digital asset companies.
This remarkable growth isn't a mere coincidence. The foundation model has emerged as the preferred legal wrapper for DAOs seeking robust legal personhood. The catalyst for this exodus was a pivotal California court ruling in the case of Samuels v. Lido DAO. This decision, which treated an unincorporated DAO as a general partnership, sent shockwaves through the industry. While its precedential weight was limited, its signal effect was undeniable, prompting numerous governance projects to seek jurisdictions that offered a clearer separation between individual contributors and the activities of the protocol.
Haymon Rankin, associate director at Cayman Finance, highlights the jurisdiction's established prominence in the financial world:
“We’re one of the largest domicile jurisdictions for funds to come here and set up, and people were just, there’s over 30,000 funds at the moment to put it into context. I think the only jurisdiction that’s ahead of us is Delaware. So we really are punching above our weight.”
Indeed, the Cayman Islands has attracted major players in the digital asset space, including the OpenSea Foundation and various subsidiaries supporting cryptocurrency-linked exchange-traded funds (ETFs). Industry experts largely attribute this magnetic pull to the stability and specific advantages offered by the jurisdiction’s foundation company regime. These structures allow projects to:
- Safeguard invaluable intellectual property.
- Effectively manage multisignature treasuries.
- Adopt purpose-driven governance frameworks.
- Crucially, shield tokenholders from devastating personal liability.
Understanding the Liability Architecture
The post-Samuels shift represents more than just a search for favorable regulatory arbitrage; it signifies a broader recalculation of governance risk within the crypto ecosystem. Unwrapped DAOs, operating without the protection of legal personhood, face escalating scrutiny from courts, insurance providers, and centralized service providers. Foundations, in contrast, provide a predictable and robust corporate interface.
By establishing a foundation, projects can mitigate the likelihood that plaintiffs or regulators might successfully argue that protocol participants collectively constitute a general partnership. This separation is paramount in protecting individual tokenholders from being held personally responsible for the actions or liabilities of the DAO.
Further bolstering the Cayman Islands’ appeal is its clear regulatory framework for virtual assets. Rankin explains:
“Now there is a VASP Act, and it really regulates the industry and tells you exactly what you have to do to operate legitimately.”
The Virtual Asset Service Providers Act (VASP Act) provides much-needed clarity for companies offering exchange, custody, or issuance services, cementing the jurisdiction’s status as a default choice for governance entities seeking robust legal insulation.
The United States Repositions Itself
While capital and governance structures predominantly flowed offshore throughout 2023 and 2024, US policymakers have recently begun to adopt a more accommodating posture toward the digital asset industry. The current administration has signaled a pro-crypto stance, focusing on strengthening American leadership in this burgeoning sector. This shift is evident in several initiatives, including the White House’s endorsement of a Strategic Bitcoin Reserve and the appointment of individuals known for their pro-crypto perspectives.
Although these moves do not immediately resolve existing regulatory ambiguities, they clearly signal an intent to stabilize a market that had increasingly migrated abroad. This evolving sentiment has already begun to influence corporate strategy.
A notable example is Galaxy Digital’s redomiciliation from the Cayman Islands to Delaware in mid-2025. This move illustrates how enhanced access to lucrative US capital markets can, for some entities, begin to offset the governance advantages historically offered by offshore domiciles. While Galaxy’s decision does not yet indicate a widespread industry reversal, it serves as an early indicator that a less adversarial regulatory climate could potentially draw some activity back onshore.
Concurrently, financial regulatory bodies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have also taken steps to refine their approach. The SEC, for instance, launched its “Crypto 2.0” initiative, which has reportedly led to the closure of several investigations into crypto firms and is contributing to the development of a more comprehensive and transparent regulatory framework for crypto assets. These measures, though still in their early stages and requiring formal rulemaking, reflect a departure from the aggressive enforcement posture that characterized previous periods.
Regulatory relief has also come indirectly through the Corporate Transparency Act (CTA). The Treasury Department announced earlier in the year that it would not enforce penalties for beneficial ownership reporting by domestic companies, concurrently proposing new rules that would narrow the CTA’s scope primarily to foreign reporting entities. While not crypto-specific, this change significantly reduces a compliance burden frequently cited by smaller digital asset startups operating within the US.
A Bifurcated Operating Model Takes Hold
Even as conditions in the United States show signs of improvement, the broader crypto market is solidifying into a multi-jurisdictional operating model. Crypto platforms are increasingly adopting a bifurcated approach, separating their governance functions from their commercial operations to adeptly navigate inconsistent global regulatory regimes.
Typically, foundations are established in jurisdictions like the Cayman Islands or Switzerland. These entities are tasked with holding intellectual property, managing token treasuries, and formalizing protocol oversight. Simultaneously, market-facing components such as exchanges, commercial subsidiaries, and infrastructure providers seek licenses and operate in jurisdictions that boast specialized and well-defined regulatory frameworks tailored for digital assets.
For instance, Hong Kong’s Securities and Futures Commission has actively expanded its virtual asset trading platform licensing program, successfully attracting exchanges keen on tapping into Asia-Pacific capital flows. Similarly, Dubai’s Virtual Assets Regulatory Authority (VARA) had issued approximately 30 licenses by mid-2025, with a particular focus on custodians, OTC desks, and derivatives platforms. This strategic geographic distribution allows projects to effectively ring-fence governance liability in the Caribbean while simultaneously acquiring users and liquidity in vibrant markets across Asia and the Middle East.
This trend is further reflected in the growing inquiries about “digital asset treasury companies,” or DATs, as observed by Rankin. These specialized structures are designed to manage protocol reserves, liquidity, and fiat operations. Often, DATs are paired with US or Asian operating companies, creating sophisticated multi-jurisdictional arrangements that meticulously separate governance, compliance, and core commercial functions.
The Path Ahead: An Open Question for the New Cycle
Whether the United States can meaningfully repatriate the high-level foundation activity that has migrated offshore remains an open and critical question. Offshore jurisdictions continue to offer compelling advantages, including clearer liability shields, simpler governance mechanics, and more predictable tax treatment. The US, conversely, offers unparalleled access to public markets, banking infrastructure, and capital formation opportunities, but its policy direction remains susceptible to political cycles and the slow, arduous process of regulatory reform.
For the foreseeable future, crypto companies are employing a strategic hedging approach. Their operational entities are increasingly gravitating towards established and emerging hubs like Delaware, Hong Kong, and Dubai. Concurrently, their core governance structures, which manage the foundational aspects of their protocols, remain firmly anchored in George Town and Zug, navigating the complexities of the global digital asset landscape with prudence and foresight.
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