Notice - Investing: Understanding Product Risk and Your Ability to Absorb Losses (2022-11-14)

Summary

This is a public awareness notice from the Bermuda Monetary Authority reminding investors and the public to understand the risks of digital asset products before entering into agreements, following institutional failures in the sector during 2022. It is informational in nature rather than a new rule, but it reiterates an existing disclosure obligation on licensed digital asset businesses.

• Risk awareness: The Authority highlights that digital asset products vary widely in risk depending on use case and design, and that higher potential returns are generally associated with higher risk.
• Customer due diligence: Customers are urged to consider their own ability to absorb potential losses before investing, and to seek out regulated financial institutions, while noting regulation does not eliminate failure risk.
• Existing disclosure duty: Bermuda businesses licensed under the Digital Asset Business Act 2018 are reminded that they are required to disclose material risks to customers, and customers are encouraged to read all product information and ask questions.

The notice does not introduce new regulatory requirements, deadlines, or compliance deadlines; it functions as a consumer protection reminder tied to existing statutory disclosure obligations under the Digital Asset Business Act 2018.

Key obligations

• Digital asset businesses licensed under the Digital Asset Business Act 2018 must disclose material risks to customers.

Applies to

digital asset business licensees, members of the public/investors