The wave of digital innovation continues to surge globally, and Bermuda, a pioneering leader in regulating digital assets, has again risen. As of May 19, 2023, the island nation's government has effectively amended the Digital Asset Business Act 2018, known as "DABA" or the "Act."
This transformative move augments the legal and regulatory framework underpinning the digital asset business (DAB) landscape in Bermuda. With a sharpened focus on specifying the classes of DAB activity necessitating a license from the Bermuda Monetary Authority (BMA), the amendments are also aimed at fostering a more streamlined administration of the Act.
Unveiling a New Licensable Activity in DAB The latest amendment to the Digital Asset Business Act 2018 ushers in a new frontier in Bermuda's digital asset landscape with the inclusion of an additional licensable activity. This expanded jurisdiction includes those service providers who engage in 'digital asset lending or digital asset borrowing or digital asset repurchase transactions.'
In the vibrant and dynamic realm of digital assets, this development is significant. It captures a wider range of financial activities under the Act, allowing for increased oversight and regulation of emerging business models in the digital assets space.
With respect to the administrative aspect, undertakings granted a license following the enforcement of this new activity will be obligated to pay a proposed new annual fee. The magnitude of this fee is set to reflect the nature and complexity of the DAB activity involved. Meanwhile, for undertakings already licensed and performing this DAB activity, the obligation to pay the annual fee will only arise when such a fee is due next.
License Exemptions for Entities Under the Investment Business Act 2003 The alterations to the Digital Asset Business Act (DABA) also bring relief to entities licensed under the Investment Business Act 2003 (IBA). This amendment recognizes the intersection of operations between these entities and those involved in digital asset businesses (DAB).
The new stipulation exempts IBA-licensed entities engaged in DABA-related activities on an 'ancillary' basis from obtaining a separate DABA license.
However, the exemption is not without checks and balances. It necessitates the DAB's senior representative to report to the Bermuda Monetary Authority if the DAB ceases its provision of IBA services in an 'ancillary' manner. The Notification Requirement The DAB's senior representative must notify the Bermuda Monetary Authority when the DAB stops providing Investment Business Act 2003 (IBA) services in an 'ancillary' fashion. This change is a move to ensure the clear demarcation of activities carried out under the IBA and DABA.
Deciphering Administrative Penalties: A Note on Terminology The government has removed the term "civil" from sections 7, 16, 57, and 66 of the Act. This action has been undertaken to distinguish these penalties from civil penalties prescribed under section 39. Through this change, the clarity of the Act’s provisions on administrative penalties has been reinforced.
* * * Navigating new regulatory landscapes can be a complex task, and our team at Prokopiev Law Group is here to help you. Our experts and partners can advise on the applicable laws relevant to your organization. We stand ready to assist you in comprehending how to meet any requirements and ensuring that your business operations align with the current regulatory provisions.
Reach out to us for comprehensive, precise, and personalized advice. Let us help you turn legal complexities into clear pathways for your business growth. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.
Comments