Digital Asset Issuance Act 2020

Summary

The Digital Asset Issuance Act 2020 is Bermuda's regulatory framework for offerings of digital assets to the public (sometimes called token sales or initial coin offerings), replacing the earlier initial coin offering regime under the Companies Act 1981 and Limited Liability Company Act 2016. It gives the Bermuda Monetary Authority (the Authority) power to authorise, supervise and discipline undertakings that conduct digital asset issuances in or from Bermuda, and to protect digital asset acquirers.

• Authorisation required: An undertaking (company, limited liability company or partnership) may not conduct a digital asset issuance in or from Bermuda without authorisation from the Authority, granted against minimum criteria set out in Schedule 1.
• Issuance document: An authorised undertaking must publish a digital asset issuance document containing information to facilitate acquisition, and is subject to offence and civil liability provisions for misstatements in it.
• Private placement exemptions: Offers to no more than 150 persons, to qualified acquirers, or to persons whose business involves dealing in digital assets can avoid public-offer treatment, but only if the undertaking files a digital asset placement declaration form with the Authority before the transaction.
• Ongoing compliance duties: Authorised undertakings must maintain a local representative, report certain events and material changes to business, keep separate accounts for acquirer assets, provide cooling-off rights and risk warnings, and notify the Authority of changes of control.
• Supervisory and enforcement powers: The Authority can restrict, revoke or attach conditions to authorisations, object to shareholder controllers, impose civil penalties, issue public censures and prohibition orders, obtain information and documents, and conduct investigations, subject to rights of appeal to a tribunal.
• Fees: Schedule 2 sets an application fee of $2,266 and authorisation fees tiered by offering size (from $5,000 up to $50,000 for direct offerings, half that for offerings through an accredited digital asset business), plus fees for exemptions/modifications and variations of authorisation conditions.
• Consequential changes: The Act amends the Bermuda Monetary Authority Act 1969, Companies Act 1981, Digital Asset Business Act 2018 and Banks and Deposit Companies Act 1999, and repeals the prior Initial Coin Offering regimes and related regulations.

The Act received Royal Assent on 19 March 2020 and became operative on 6 May 2020.

Key obligations

• An undertaking must obtain the Authority's authorisation before conducting or offering a digital asset issuance in or from Bermuda.
• An authorised undertaking must publish an issuance document containing the information required to facilitate an acquisition of digital assets.
• Undertakings relying on the private-offer exemptions (150-person limit, qualified acquirers, or business acquirers) must file a digital asset placement declaration form with the Authority in the specified format prior to entering into any transaction.
• Authorised undertakings must appoint and maintain a local representative and report certain specified events through that representative.
• Authorised undertakings must notify the Authority of any material change to their business.
• Persons proposing to become or increase their status as a shareholder controller must notify the Authority of new or increased control.
• Authorised undertakings must maintain separate accounts in respect of acquirer assets.
• Authorised undertakings must provide cooling-off rights and risk warnings to digital asset acquirers.
• Applicable application, authorisation, exemption/modification and variation fees set out in Schedule 2 must be paid to the Authority.

Applies to

undertakings (companies, limited liability companies and partnerships) conducting digital asset issuances, accredited digital asset exchanges/digital asset businesses, promoters of digital asset issuances, shareholder controllers and officers of authorised undertakings, local representatives of authorised undertakings, digital asset acquirers

Deadlines

• prior to entering into any transaction: Undertakings relying on the private-offer exemptions must file a digital asset placement declaration form with the Authority before entering into any transaction.
• 06 May 2020: Operative date of the Digital Asset Issuance Act 2020.
• 19 March 2020: Date of Assent for the Act.

Related documents

• This document amends Bermuda Monetary Authority Act 1969
• This document amends Banks and Deposit Companies Act 1999
• This document amends Companies Act 1981
• This document amends Digital Asset Business Act 2018
• Digital Asset Issuance Rules 2020 commences this document