Financial Crime World

Bermuda Digital Assets Regulatory Framework

The Government of Bermuda has implemented a comprehensive regulatory framework to govern the digital assets industry in the country. The framework consists of two main pieces of legislation: the Digital Asset Business Act (DABA) and the Digital Asset Issuance Act (DAIA).

Digital Asset Business Act

Under the DABA, licensees are required to:

  • Appoint a senior representative who is approved by the Bermuda Monetary Authority (BMA)
  • Maintain an office in Bermuda
  • Have sufficient knowledge of both the licensee and the industry

The senior representative will be responsible for reporting certain significant matters to the BMA, including failures to comply with conditions or directions imposed by the BMA.

Additionally, licensees must obtain prior authorization from the BMA before conducting any digital asset business, which includes activities such as:

  • Trading
  • Holding
  • Issuing
  • Transferring digital assets

The BMA has granted several licenses to date, with a growing list of approved licensees in the industry.

Digital Asset Issuance Act

The DAIA regulates digital asset issuances, which are defined as offers to the public or any section of the public to acquire digital assets or enter into an agreement to acquire them at a future date. Any undertaking seeking to conduct a digital asset issuance must obtain prior authorization from the BMA.

The DAIA also imposes certain continuing obligations on authorized undertakings, including:

  • Filing periodic reports
  • Maintaining records of transactions

The BMA has published rules and guidelines to support the implementation of the DAIA, including requirements for digital asset issuance documents and ongoing disclosures.

Penalties

Conducting a digital asset issuance in or from within Bermuda without authorization is a criminal offence punishable by:

  • A fine of up to US$100,000
  • Imprisonment for a term of up to five years
  • Both

Industry Reaction

Industry stakeholders have welcomed the regulatory framework, praising the BMA’s proactive approach to regulating the digital assets industry. The framework is seen as a key factor in attracting investment and talent to Bermuda, while also ensuring the protection of consumers and the integrity of the financial system.

Conclusion

The DABA and DAIA provide a comprehensive regulatory framework for the digital assets industry in Bermuda, with a focus on ensuring the integrity and stability of the financial system. The BMA continues to monitor and review the framework to ensure it remains fit for purpose and meets international standards of regulation, compliance, and transparency.