/Bermuda Issues Draft Cryptocurrency Custody Rules

Bermuda Issues Draft Cryptocurrency Custody Rules

Moad Fahmi

The financial services regulator of Bermuda, the Bermuda Monetary Authority (BMA), is inviting comments on a draft Code of Practice for Digital Asset Custody that it has released.

The purpose of the code of practice is to offer protection to the public while clarifying the expectations of the authority with regards to digital assets custody. The financial services regulator has set January 18, 2019 as the deadline for receiving feedback, according to a statement issued by the BMA.

Per a senior adviser at the Bermuda Monetary Authority, Moad Fahmi, the Code of Practice for Digital Asset Custody will benefit the country’s financial system:

We remind stakeholders that the [regulatory] framework was built with the aim of making sure that the core objectives of financial regulation are respected, that is: protecting consumers, ensuring stability of our institutions and maintaining integrity and confidence in financial markets – with a focus on maintaining the highest standards of AML/ATF [Anti-Money Laundering/Anti-Terrorism Financing].

Global Regulatory Leadership Ambitions

Bermuda’s Code of Practice for Digital Asset Custody has been issued as part of the island’s efforts towards becoming ‘regulatory leaders in digital assets’ as the managing director in charge of supervision at the BMA, Craig Swan, stated.

Other efforts by the British island territory to become a darling of the cryptocurrency sector have included amending the banking act with a view of attracting blockchain startups.

The amendments which were made to the country’s banking act came after the realization that local financial institutions were unwilling to provide banking services to blockchain firms owing to stringent regulations which saw them avoid new risks.

As CCN reported at the time, Bermuda’s premier David Burt, made it clear that his government would not allow the reluctance of banks to welcome blockchain companies as clients to deter the island’s efforts to spur growth by supporting and nurturing new industries such as distributed ledger technology.

ICO Regulations

Earlier in the year, Bermuda outlined a goal to become one of the first nations on the globe to provide a regulatory framework for initial coin offerings. This was disclosed in March by Burt in a parliamentary address:

Bermuda has an opportunity to become a global leader in the Fintech space by being one of the first countries in the world to specifically regulate ICOs. The proposed regulatory framework will provide legal certainty to companies looking to conduct ICOs in Bermuda.

Bermuda’s efforts to provide a conducive environment for cryptocurrency and blockchain startups have been rewarded to some extent with some investments flowing into the island. In April this year, for instance, cryptocurrency exchange Binance inked a Memorandum of Understanding with Bermuda promising to invest up to US$5 million in blockchain startups based in the country.

Featured image from Shutterstock. Fahmi photo from LinkedIn.

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