Stakeholder Letter - Consultation Paper on Amendments to Digital Asset Business Act 2018 (2019-09-13)

Summary

This is a stakeholder letter from the Bermuda Monetary Authority (BMA) responding to comments received on its consultation paper proposing amendments to the Digital Asset Business Act 2018 (DABA). It works through stakeholder questions and sets out the Authority's position on each, clarifying scope, definitions and forthcoming changes rather than itself constituting new law.

• Trustees and custody: Trustees or executors holding digital assets as fiduciaries (not just those buying/selling assets) are intended to fall within DABA's licensing scope, because the trustee rather than the client owns the digital asset; a case by case exemption request to the BMA remains available.
• Specialist skills and qualified custodians: The BMA points to its Digital Asset Custody Code of Conduct 2019 as the standard for demonstrating 'specialist skills'; qualified custodian status is determined by the Authority on request rather than via a published list.
• Fees: Minimum licence fees (e.g. the $15K threshold raised by stakeholders) may be lowered or waived based on the Authority's assessment of nature, scale and complexity, on application by the licensee.
• Annual re-notification: The Authority confirms it is introducing an annual re-notification requirement for exempted persons, rejecting the alternative of only notifying on material changes.
• Definitional changes agreed: The Authority agreed to amend several DABA definitions: 'digital asset services vendor' limbs to be read as 'or' not 'and'; 'administration and management of digital assets' to be defined; 'digital asset exchange' to include issuances and conversions; 'market maker' to be narrowed to activities involving client digital assets; non-digital asset securities (e.g. BSX dematerialised securities) remain out of scope.
• Transitional provisions: Section 79(1) and 79(3) transitional provisions are to be amended to cover additional activities for digital asset businesses already conducting them.

The letter is explanatory and responsive in nature; it signals the direction of the amended DABA and Authority policy but readers should consult the finalised amendment legislation and related codes (such as the Digital Asset Custody Code of Conduct 2019) for binding requirements and their effective dates.

Key obligations

• Trustees or executors who hold digital assets in a fiduciary capacity are expected to obtain a DABA licence unless granted an exemption by the BMA
• Digital asset businesses relying on an exemption will be required to re-notify the BMA annually
• A trustee outsourcing digital asset custody remains responsible for exercising appropriate oversight of the custodian and cannot outsource that fiduciary oversight obligation
• Businesses seeking recognition as a qualified custodian or requesting fee reduction/waiver must apply to the BMA directly

Applies to

trust companies, trustees, digital asset businesses, digital asset custodians, digital asset services vendors, market makers, digital asset exchanges