Consultation Paper - Regulation of Virtual Currency Business (2018-04)

Summary

This is a 2018 consultation paper in which the Bermuda Monetary Authority (BMA) sets out proposals for a dedicated prudential and AML/ATF regulatory framework for virtual currency business (VCB), to be implemented through a proposed Virtual Currency Business Act 2018 (VCBA). It explains the rationale for regulation, the scope of activities to be captured, and the outline of a licensing, supervisory and enforcement regime, and invites industry comment before the proposals are finalised.

• Scope of proposed regulation: Businesses providing, as a commercial activity to the general public: issuing/selling/redeeming virtual coins or tokens (including running ICOs for others); payment services using virtual currency; operating virtual currency exchanges; providing custodial wallet services; and other virtual currency services vendors (including custody or power-of-attorney rights over customer virtual currency).
• Excluded: Companies conducting their own ICO to fund their own business (regulated instead by the Government Registrar of Companies), virtual currency miners, and non-custodial wallet developers.
• Proposed regime elements: A licensing regime with minimum licensing criteria, fitness requirements for controllers/shareholder controllers/directors/officers, risk management and custody/protection-of-customer-assets requirements, a senior representative and principal office requirement, prudential returns and ongoing supervision, and BMA powers to obtain information/reports and to issue directions, conditions, restrictions or revoke licences, plus enforcement powers.
• AML/ATF treatment: Detailed AML/ATF requirements for VCBs are stated to be addressed in a separate, subsequent consultation paper rather than this one.
• Flexibility mechanism: The proposed Act would let the Minister of Finance, after consulting the Authority, add, amend, suspend or delete VCB activities by order (subject to negative resolution procedure), and the Authority proposes to appoint an advisory panel on VCB developments.

As a consultation paper, the document does not itself impose binding compliance obligations on firms; it seeks industry feedback on the proposed VCBA framework before Bermuda's regime is finalised and enacted.

Key obligations

• Interested persons and industry participants must submit comments and suggestions on the proposals to the Authority (policy@bma.bm) by 2 May 2018.

Applies to

virtual currency business service providers (VCBs), initial coin offering (ICO) issuers/administrators acting for third parties, virtual currency exchange providers and traders, custodial wallet providers, payment service providers utilising virtual currency, virtual currency services vendors (including custodial/power-of-attorney service providers)

Deadlines

• 2 May 2018: Deadline for submitting comments and suggestions on the consultation paper's proposals to the BMA at policy@bma.bm.