Deputy Prime Minister and Minister of Finance the Hon. K. Peter Turnquest explained that the Digital Assets and Registered Exchanges Bill, 2020 (DARE Bill) will provide the legal framework to regulate the issuance and sale of digital assets, or cryptoassets, including digital tokens.
“Furthermore, it sets the legal framework for the regulation of digital asset businesses involved in the issuance or sale of digital assets. These digital assets businesses include digital token exchanges and distributed ledger technology platforms,” DPM Turnquest stated as he introduced the Bill in the House of Assembly on Wednesday, November 4, 2020. He said in providing the requisite legal certainty, including by providing a legal definition for digital assets and stipulating licencing and registration requirements, it lays the framework for the establishment of an industry, and for ensuing investment, entrepreneurial and employment opportunities, within a well-regulated environment.
The DPM stated that the Bill was designed to meet the compliance objectives of international standards-setting organisations, such as the Financial Action Task Force, with regard to anti-money laundering and countering terrorism financing measures in particular, as well as the relevant principles of the International Organization of Securities Commission. It lays the ground work for, and introduces sound investor protection standards.
He noted that the Commission performed extensive benchmarking in the development of the DARE Bill. The regulatory and legal frameworks of a number of jurisdictions were examined. These included, but were not limited to Bermuda, Gibraltar, Hong Kong, Ireland, Luxembourg, Malta, Singapore, Switzerland and the United States. DPM Turnquest explained that these jurisdictions have taken different approaches to many aspects of the regulation and oversight of digital assets business. He added that this Bill incorporates the best practices and the most suitable standards for this jurisdiction to provide a strong, inviting regulatory environment for participants in a manner that was safe for investors and consistent with best practices and standards.
The DPM said importantly, in providing definitions for digital assets, digital assets business and digital assets service providers, the Bill sets out the Commission’s conceptual framework and policy.
“In the process, the Commission carved out the unique regulatory space for digital assets business outside of the regulatory space of securities and securities business. This is a critical policy component, demanded by potential industry participants.”
He explained that the Bill provides legal definitions and provides registration and other requirements for digital tokens, digital token exchanges, Distributed Ledger Technology (or DLT), such as blockchain, DLT Platforms, token offerings, utility tokens, and smart contracts among other things. DPM Turnquest said, “While the Bill defines such terms and activities and technologies, it does so with the purpose of focusing regulation on the providers of digital assets business and services. It does not seek to regulate the underlying technology itself.
“This is an important distinction, as the regulator, the Securities Commission of The Bahamas, which is celebrating its 25th anniversary this year, is quite experienced in the supervision, oversight and regulation of financial services providers. The regulatory principles, supervisory techniques and risk based approach to regulation positions the Commission to oversee these service providers.”
He stressed that importantly, the approach espoused in the legislation is in keeping with the recommendations of the Financial Action Task Force, or FATF. The DPM said, “FATF recommends that for new business lines and the introduction of products based on new technologies, that the regulatory focus is on the products and the service providers, not the technology itself.
In the case of digital assets, this means the regulatory focus would be on what FATF refers to as virtual assets and the virtual assets service providers.”