Virtual Currency Business Act 2018

Summary

The Virtual Currency Business Act 2018 establishes a licensing and supervisory regime administered by the Bermuda Monetary Authority (BMA) for persons carrying on virtual currency business in or from Bermuda. It sets out licensing requirements, ongoing prudential and reporting obligations, disciplinary powers, investigation powers, and confidentiality rules, and includes transitional arrangements for businesses already operating when the Act commenced.

• Licensing: No person may carry on virtual currency business in Bermuda without a licence from the Authority; licence classes, display/registration requirements and fees are prescribed.
• Covered activities: Virtual currency business includes issuing/selling/redeeming virtual currency, operating a virtual currency payment service, operating an electronic exchange, providing custodial wallet services, and acting as a virtual currency services vendor.
• Governance and conduct: Licensees must maintain a head office and senior representative in Bermuda, report certain events, notify material changes to business, and comply with codes of practice and Authority guidance.
• Client asset protection: Licensees must maintain separate accounts and provide for custody and protection of client assets, including use of qualified custodians.
• Financial reporting: Licensees must prepare annual audited financial statements, appoint auditors who must communicate certain matters to the Authority, and file prudential/statutory returns.
• Certificate of compliance: Licensees must annually certify compliance with minimum licensing criteria and codes of practice.
• Controllers: Notification and objection procedures apply to new, increased or existing shareholder controllers.
• Enforcement: The Authority may impose civil penalties, issue public censures, make prohibition orders, restrict or revoke licences, and conduct investigations, with rights of appeal to tribunals.
• Confidentiality: Restrictions apply on disclosure of information obtained under the Act, with exceptions for regulatory and law enforcement purposes.

Persons already conducting virtual currency business before the Act commenced were required to apply for a licence within a set transitional window or cease operating, and may continue trading pending determination of a timely application.

Key obligations

• A person must not carry on virtual currency business in or from Bermuda without a licence issued by the Authority under the Act.
• Licensed undertakings must file with the Authority any applicable prudential Rule or statutory return not later than four months after the close of their financial year.
• Licensed undertakings must keep a copy of the most recent filed Rule or return at their head office for at least five years from the filing date.
• Licensed undertakings that fail to file audited financial statements, accounts, or required Rules/returns within the four month deadline are liable to a civil penalty of up to $5,000 per week or part-week of default.
• Licensed undertakings must, within four months of the end of their financial year, deliver to the Authority a certificate signed by an officer certifying compliance (or non-compliance) with the minimum licensing criteria and codes of practice, and confirming observance of any licence limitations.
• Licensed undertakings must maintain separate accounts and provide for custody and protection of client assets.
• Licensed undertakings must maintain a senior representative and head office, and the senior representative must report certain specified events to the Authority.
• Licensees must notify the Authority of any material change to their business.
• Licensed undertakings must appoint auditors, and auditors must communicate certain matters to the Authority.
• Persons must notify the Authority of new or increased shareholder control, and existing controllers may be subject to objection procedures.
• Persons carrying on virtual currency business before the Act's commencement must apply to the Authority for a licence within three months of commencement, or cease conducting the business.
• Every licensed undertaking must have regard to any code of practice issued by the Authority in conducting its business.
• No person other than a licensee may use the words "virtual currency business" in connection with their operations.

Applies to

virtual currency businesses, licensed undertakings (companies, partnerships, individuals) carrying on virtual currency business, custodial wallet providers, electronic exchanges, virtual currency payment service providers, virtual currency services vendors, shareholder controllers of licensed undertakings, auditors of licensed undertakings

Deadlines

• not later than four months after the close of its financial year: Licensed undertaking must file applicable prudential Rule or statutory return with the Authority.
• within four months from the end of its financial year: Licensed undertaking must deliver a certificate of compliance with minimum licensing criteria and codes of practice to the Authority.
• within three months of the date of commencement of the Act: Persons already carrying on virtual currency business prior to commencement must apply to the Authority for a licence or cease conducting business.
• five years from the filing date: Licensed undertaking must retain a copy of the most recent Rule or return filed with the Authority at its head office.

Related documents

• This document amends Bermuda Monetary Authority Act 1969
• Virtual Currency (Client Disclosure) Rules 2018 is made under this document
• Code of Practice Virtual Currency Business Act 2018 is made under this document
• Virtual Currency Business (Prudential Standards) (Annual Return) Rules 2018 is made under this document
• Virtual Currency (Cybersecurity) Rules 2018 is made under this document
• Virtual Currency Business Act 2018 - Statement of Principles (April 2018) is made under this document