Financial Crime World

Bermuda Regulator Cracks Down on Digital Asset Firms

Hamilton, Bermuda - The Bermuda Monetary Authority (BMA) has issued new guidelines to tighten its grip on digital asset firms operating in the country. These regulations require licensees to notify authorities of significant changes or events.

New Requirements for Digital Asset Businesses

  • Notify the BMA within 30 days if they cease to operate from Bermuda
  • Inform the regulator of material changes to their business model
  • Report cyber reporting events
  • Firms that fail to meet licensing criteria under the Investment Business Act 2003 must notify the BMA

Enhanced Supervision and Enforcement Powers

The BMA has increased its powers of supervision and enforcement, allowing it to:

  • Compel production of information and documents
  • Issue directions to safeguard client interests
  • Impose conditions and restrictions on licenses
  • Firms that fail to comply with these requirements could face fines of up to US$10 million or public censure

Head Office Requirement

Digital asset firms operating in Bermuda must maintain a head office in the country and direct their business from there. The BMA will consider several factors when determining whether a firm meets this requirement, including:

  • Location of key decision-makers
  • Management structure
  • Operational activities

Annual Prudential Return

Licensed digital asset firms must file an annual prudential return with the BMA, which includes information on:

  • Business strategy
  • Risk appetite
  • Products and services
  • Customer accounts
  • Risk and cybersecurity measures
  • Anti-money laundering controls
  • Corporate governance
  • Financial statements

Digital Asset Issuance Act

The Digital Asset Issuance Act (DAIA) came into force in May 2020, regulating digital asset issuances in or from Bermuda. The act:

  • Prohibits unauthorized digital asset issuances
  • Grants the BMA supervisory and enforcement powers over issuers and promoters
  • Applies to undertakings incorporated outside of Bermuda that conduct digital asset issuances in or from Bermuda

Authorisation Criteria for Digital Asset Issuance

To obtain authorisation, firms must demonstrate their:

  • Fitness and propriety
  • Prudent business practices
  • High standards of corporate governance

The BMA has published the Digital Asset Issuance Rules 2020, outlining requirements for digital asset issuance documents, ongoing disclosures, and information.

Conclusion

The BMA’s increased scrutiny is aimed at ensuring the integrity of Bermuda’s financial system and protecting investors in the digital asset space.