DABA revision 2023

The Bermuda Government has enacted legislation to amend the Digital Asset Business Act 2018 (“DABA” or the “Act”), which further strengthens the legal and regulatory digital asset business (“DAB”) framework, clarifies the classes of DAB activity that require a license from the Bermuda Monetary Authority (“BMA”), and makes changes to facilitate more efficient administration of the Act.

These amendments were made to the Act:

Fresh DAB Action

The addition of a new licensable activity for “digital asset lending, digital asset borrowing, and digital asset repurchase transactions services providers”

In addition to the foregoing, organizations granted a licence after the new activity is implemented will be subject to a proposed new annual fee (which will account for the nature and complexity of DAB), whereas organizations already licensed and engaged in this DAB activity will be subject to the proposed annual fee when it next becomes due.

Exemption for Investment Business Act of 2003 (“IBA”)-licensed entities

A provision that would exempt from licensure under DABA entities that are licensed under the IBA and engage in ‘ancillary’ DABA-related activities. In addition to this exemption, the DAB’s senior representative will be required to notify the Authority if the DAB ceases to provide IBA services in a ‘ancillary’ manner.

Method For Exemptions

A new exemption rule-making authority under DABA (the “Exemption Rules”), under which all exemptions are to be consolidated. This amendment is intended to increase flexibility in situations where the Authority identifies a new business model as either falling within (where an existing exemption would be removed from the Exemption Rules) or outside the scope of the Act (where a new exemption would be introduced under the Exemption Rules).

Clarification on Administrative Sanctions

To avoid any ambiguity in the current language regarding penalties, the word “civil” should be removed from sections 7, 16, 57, and 66 so that these penalties can be distinguished from the civil penalties in section 39.

The BMA continually evaluates the suitability of DABA for its intended purpose, and these modifications demonstrate its commitment to ensuring that Bermuda continues to meet the demand for legal certainty, simplification of the application process, and suitability of the rules to this dynamic sector.

The Fintech Team at Walkers can provide guidance on the relevant activity classifications and help entities determine how to comply with any applicable DABA requirements.

Please do not hesitate to contact Natalie Neto or Rachel Nightingale at the contact information listed below if you require assistance.

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About the Author: Sanjh Vishwakarma

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