Consultation Paper - Call for Proposal - Embedded Supervision in the context of Decentralised Finance (2025-02-03)

Summary

This is a call for proposals from the Bermuda Monetary Authority's Innovation Hub inviting interested parties to submit pilot project proposals testing Embedded Supervision within Decentralised Finance (DeFi). Embedded Supervision refers to building regulatory oversight, compliance checks, and reporting directly into a platform's smart contracts, protocols, or data layers so requirements are enforced in real time. This is a voluntary consultation and call for pilot proposals, not a binding rule.

• Who can apply: Digital Asset Businesses, foundations, protocols, FinTech companies, DeFi operators, technology developers and academic institutions are all invited to submit proposals.
• Pilot objectives: Collaboratively understand DeFi risks, test technical feasibility of embedding supervision, and develop best practices for real time compliance monitoring and reporting.
• Example pilot ideas: Regulatory DAO participation, embedded supervision of DeFi lending platforms, smart contract driven compliance, real time compliance reporting systems, stablecoin collateral monitoring, and regulatory node deployment on DeFi protocols.
• Proposal content required: Executive summary, project description and objectives, methodology, work plan and timeline, technological overview, regulatory considerations, risk analysis, and team composition.
• Fees: No fee applies to the pilot initiative itself, but entities whose pilot requires a licence under the Digital Asset Business Act (DABA) remain subject to DABA fees.
• Licensing note: A pilot does not need to hold a DABA licence to participate, but participation does not exempt any entity from existing statutory obligations.

Proposals must be submitted in PDF format (no more than 20 pages) by email to fintech@bma.bm by 30 April 2025. The BMA retains full discretion to modify or terminate the pilot and gives no guarantee of regulatory approval or endorsement through participation.

Key obligations

• Proposals must be submitted in PDF format, not exceeding 20 pages, via email to fintech@bma.bm by 30 April 2025
• Proposals must follow the outlined structure covering executive summary, project description, methodology, work plan and timeline, technological overview, regulatory considerations, risk analysis, and team composition
• Entities running a pilot that requires a licence under the Digital Asset Business Act must obtain that licence and pay applicable DABA fees
• Participation in the pilot does not exempt an entity from its existing statutory obligations

Applies to

Digital Asset Businesses, Foundations, Protocols, FinTech companies, DeFi operators, Technology developers, Academic institutions

Deadlines

• 30 April 2025: Deadline for submitting pilot project proposals to fintech@bma.bm