Digital Asset Business Act 2018

Summary

The Digital Asset Business Act 2018 establishes Bermuda's licensing and regulatory regime for persons carrying on digital asset business, administered by the Bermuda Monetary Authority (BMA). It defines the scope of regulated digital asset business activities, sets minimum licensing criteria, and creates ongoing prudential, governance, disclosure and AML/CFT obligations for licensed undertakings.

Licensing: No person may carry on digital asset business in or from Bermuda without a licence issued by the BMA under the Act, subject to any exemption orders; licences must be displayed and registered.
Regulated activities: Covers issuing/selling/redeeming digital assets, digital asset exchanges, payment services using digital assets, custodial wallet services, digital asset trust services, derivative exchange operation, digital asset services vending, and digital asset lending/repurchase transaction services.
Client asset protection: Licensees must maintain separate client accounts and arrangements for custody and protection of client assets, and maintain access to and proper maintenance of client transaction records.
Governance and reporting: Licensees must appoint a senior representative who must report certain events to the Authority, notify material changes to the business, and notify the Authority of new, increased or existing shareholder controllers.
Accounts and audit: Licensees must prepare annual financial statements/accounts and appoint auditors, who must communicate certain matters to the Authority.
Fees: Annual fees payable by licensed undertakings are calculated by formula depending on the digital asset business activity carried on and estimated or actual client receipts, subject to specified minimum and maximum amounts.
Enforcement powers: The Authority may impose civil penalties, issue public censures, prohibition orders, warning and decision notices, restrict or revoke licences, and conduct investigations, with corresponding rights of appeal for licensees.
AML/CFT status: The Act amends the Anti-Terrorism (Financial and Other Measures) Act 2004, the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing Supervision and Enforcement) Act 2008, the Proceeds of Crime Act 1997, and related Regulations to designate licensed digital asset businesses as AML/ATF regulated financial institutions.
Restrictions: Use of the words "digital asset business" is prohibited for unlicensed persons, and restricted information provisions limit disclosure of information obtained under the Act.

The Act commenced operation on 10 September 2018 and has since been amended several times (2019, 2020 and 2023) to refine definitions, activities and fee provisions.

Key obligations

A person must not carry on digital asset business in or from Bermuda without a licence issued by the Authority under section 13.
Licensed undertakings must display and register their licence as required.
Licensees must maintain separate accounts and appropriate custody and protection arrangements for client assets.
Licensees must appoint a senior representative, who must report certain specified events to the Authority.
Licensees must notify the Authority of any material change to their business.
Licensees must notify the Authority of new or increased shareholder control before it takes effect.
Licensed undertakings must prepare annual financial statements and accounts and appoint auditors, and auditors must communicate certain matters to the Authority.
Licensees must pay the annual fee calculated under the fee schedule based on their licensed digital asset business activity and client receipts.
Licensees must maintain access to and proper maintenance of client transaction records.
Persons must not use the words "digital asset business" in connection with their business unless licensed.
Licensed undertakings are treated as AML/ATF regulated financial institutions and are subject to related anti-money laundering and anti-terrorist financing supervision and reporting obligations.

Applies to

digital asset business licensees, digital asset exchanges, custodial wallet providers, digital asset trust services providers, digital asset derivative exchange providers, digital asset services vendors, digital asset lending or repurchase transaction service providers, payment service providers utilising digital assets, digital asset benchmark administrators

Deadlines

10 September 2018: Operative date of the Digital Asset Business Act 2018.
25 June 2018: Assent date of the Act.

Digital Asset Business Act 2018

Summary

Key obligations

Applies to

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