Bermuda Reveals Draft Crypto Regulations, Plans to Embrace ICOs
The Bermuda Monetary Authority has issued a consultation paper on draft regulations pertaining to “virtual currency businesses” and initial coin offerings (ICOs). The proposed bill seeks to create a framework that encourages and fosters the development of Bermuda’s nascent cryptocurrency industry.
Bermuda Reveals Regulatory Proposals for Crypto Industry
The minister of national security, Wayne Caines, described the proposed regulations a “landmark legislation for Bermuda,” adding that “The emergence of new financial products and services created through the use of technology has opened new and exciting opportunities for entrepreneurs and businesses.”
On Thursday, Mr. Caines presented “Bermuda’s fintech strategy” to “more than 150 of Bermuda’s key business partners.” Mr. Caines stated that the government “recognize[s] that there’s significant interest in virtual currencies and blockchain technology,” emphasizing Bermuda’s desire to “become a global leader in the fintech space.”
Crypto Sector to be Encouraged Despite Virtual Currency Not Recognized as Legal Tender
The consultation paper defines “virtual currency [as] a digital representation of value that can be digitally traded,” adding that “such does not have legal tender status […] in any jurisdiction,” however, fulfills monetary “functions only by agreement within the community of users of the virtual currency.”
Whilst the document notes that “The virtual currency sector is varied in business types,” the major participants are described as being comprised of “ICO issuers,” “virtual currency exchange providers and traders,” “custodial wallet providers,” and “virtual currency miners.”
The proposed framework will require that businesses facilitating the sale of or providing services relating to cryptocurrencies collect and retain key information pertaining to customers, noting that the cryptocurrency sector “presents tremendous risk that requires robust […] Anti-Money Laundering/Anti-Terrorism Financing (AML/ATF) regulation.”
ICOs Subject of Particular Focus
Under the proposed legislation, “an initial coin offering will be treated as a restricted business activity that will require consent from the minister of finance.” As such, ICO issuers will be required to adhere to specific regulations -the “Companies and Limited Liability Company (Initial Coin Offering) Act – in addition to applying for consent from the finance minister.” Companies applying for consent to conduct an ICO will be required to provide information regarding:
“The company conducting the ICO and the underlying digital asset offered for sale; The development and implementation of any product, service or other project related to the ICO, including timelines for completion; The target amount to be raised through the ICO; Rights, features, functionality and intended transferability of the digital asset offered for sale; The technology to be used and confirmation of the ability of the technical platform to enable the collection, confirmation and storage of purchaser identity information; and compliance and auditing of ICO transactions.”
Mr. Caines stated “By being one of the few countries in the world to specifically regulate ICOs, we believe that the proposed regulatory framework will provide legal certainty to companies looking to conduct ICOs in Bermuda […] Embracing this new world with responsible regulation could lead to the attraction of new companies and capital investment to Bermuda, additional government revenues, new career, employment and training opportunities for Bermudians and the laying of a foundation for a prosperous future for our next generation of Bermudians.”
