Stakeholder Letter - Consultation Paper: Conduct of Business Regulatory Regime: Digital Asset Business (2023-02-08)

Summary

This is a stakeholder letter from the Bermuda Monetary Authority summarising industry feedback on its October 2022 Consultation Paper concerning a Conduct of Business regulatory regime for Digital Asset Business. It responds to specific comments on the Digital Asset Business Act 2018 Code of Practice (CoP) and the Digital Asset Business (Client Disclosure) Rules 2018 (CDR), and outlines the Authority's planned next steps rather than introducing final binding rules.

• Retail client definition: The Authority declined to adopt a formal or US SEC style definition of retail client, relying instead on the CoP's existing proportionality principle to let licensed Digital Asset Businesses tailor protections to their client and product risk profiles.
• Vulnerable clients: The Authority will continue to define vulnerable clients as natural persons only, though it may revisit extending protections to legal persons (e.g. SMEs) in future.
• Client agreements: The Authority will consider whether Section 9.13 (Client Agreements) needs amendment to clarify who is authorised to receive instructions and render advice on behalf of a DAB.
• Next steps: The Authority intends to finalise the CoP and make corresponding CDR rule changes based on the feedback received, and will announce a transition period to allow DABs time to comply once the changes are issued.

No new obligations take effect through this letter itself; it is a consultation response and interim update. DABs should monitor for the finalised CoP and CDR amendments and the associated transition period, and may contact the Authority at conduct@bma.bm for clarification.

Applies to

Digital Asset Businesses (DABs) licensed under the Digital Asset Business Act 2018