Guidance Notes - Guidance for DAB Conducting Investment Business in an Ancillary Manner - October 2022 (Revised)

Summary

This BMA guidance explains when a Digital Asset Business (DAB) licensee under the Digital Asset Business Act 2018 (DABA) that also carries on investment business can be treated as a Non-Registrable Person (NRP) under the Investment Business Act 2003 (IBA), avoiding a separate IBA licence, because its investment activities are merely ancillary to its core digital asset business.

• Ancillary threshold: Investment business revenue must not exceed 25% of the DAB's total gross revenue from IBA and DABA activities combined to qualify for NRP status.
• Buffer zone: A DAB may operate with ancillary investment revenue between 25% and 35% of total gross revenue for up to one year, subject to any BMA direction, while agreeing a remediation plan or a roadmap to obtain an investment business licence.
• Breach notification: If the 25% threshold is exceeded, the senior representative must forthwith notify the Authority under section 20 of DABA.
• Reporting: In-scope entities must report semi-annually to the Authority: a 12-month revenue projection and the key assumptions underlying it.
• Controls and material change: DABs must maintain adequate systems of control to stay within permitted thresholds, and must notify material business plan changes (e.g. new products) under section 22 of DABA.
• Authority discretion: The BMA may impose conditions or limitations on a DABA licence, and may adjust its supervisory approach and applicable annual licensing fees for in-scope entities.

The guidance applies to entities that have not yet been licensed under DABA, where revenue projections submitted at application stage are used instead of a financial track record to assess the ancillary threshold.

Key obligations

• A DAB must ensure ancillary investment business revenue does not exceed 25% of total gross revenue from IBA and DABA activities to retain NRP status under the IBA.
• If the 25% threshold is exceeded, the entity must notify the BMA and agree either a remediation plan or a roadmap toward obtaining an investment business licence.
• The senior representative must forthwith notify the Authority of any threshold breach pursuant to section 20 of DABA.
• A DAB operating within the 25% to 35% buffer zone may do so for no more than one year, subject to BMA direction.
• Entities subject to the ancillary exemption must report semi-annually to the Authority their 12 month revenue projection and key supporting assumptions.
• DABs must implement and maintain adequate systems of control to ensure continuous operation within the permitted ancillary thresholds.
• Introduction of new products constituting a material change to the business plan must be notified to the Authority under section 22 of DABA.

Applies to

Digital Asset Businesses (DABs) licensed under the Digital Asset Business Act 2018, entities applying for a DABA licence conducting investment business in an ancillary manner, entities potentially subject to the Investment Business Act 2003

Deadlines

• semi-annually: In-scope entities must report a 12-month revenue projection and key assumptions to the Authority.
• forthwith: Senior representative must notify the Authority immediately upon a threshold breach under section 20 of DABA.
• not exceeding one year: Maximum period a DAB may operate within the 25% to 35% buffer zone before remediation or licensing must be achieved, absent contrary BMA direction.