26/09/22

Bahamas Attorney-General Touts Digital Asset Evolution in The Bahamas.

Press release from the Bahamas Financial Services Board on Monday 26 September, 2022.

Attorney-General and Minister of Legal Affairs of The Commonwealth of The Bahamas, Senator, the Hon. L. Ryan Pinder, addressing delegates at the 2022 STEP LATAM conference in Panama declared that in order for a jurisdiction to be a preeminent player in the digital assets industry there must be confidence in a regulatory regime that is respected worldwide and incorporates real-time best practices, and a commitment of government policy to advance the growth of the industry supported by a nimble regulator.

He went on to share that participants want to be assured that the jurisdiction is a safe place to do business that will do what is necessary to keep the bad actors out. I am proud to say The Bahamas is an example of the success of the model. Attorney-General Pinder noted that the “DARE ”, the Digital Assets and Registered Exchanges Act, 2020, the legislative framework for the regulation of digital assets business and the issuance, sale, and trade of digital assets in The Bahamas, has enabled the jurisdiction to attain the number one world ranking on Solidus Labs’ recent Global Crypto Index ranking for digital assets regulations that both protect consumers and encourage innovation.

“The jurisdiction has issued Anti-Money Laundering, Countering Financing of Terrorism and Countering Financing of Proliferation Rules specific registered digital assets businesses, which we believe capture the spirit and meet the technical requirements of the Financial Action Task Force’s Recommendations, including those specific to new, virtual assets service providers and the Travel Rule, “he said.

Since the official launch of Bitcoin in January 2009, the new world of possibilities that cryptocurrency presented piqued interest across the financial and technology worlds. By 2018, there had already been such advancement in the cryptocurrency space that more and more individuals and institutions were interested in cryptocurrencies comprising some portion of their portfolios.

“Despite this, many jurisdictions had not introduced any legal or regulatory framework that specifically addressed digital assets, and in cases they had, there were discrepancies and gaps in the global regulatory framework. This is still the case,” he said.

In contemplating how The Bahamas wanted to be engaged with the crypto-asset space, the Minister said the country’s reputation was a key factor pressing the direction the jurisdiction would take.

“The digital asset space has long been targeted by nefarious players due to several of its features and had become a place for criminal actors trying to hide their presence and activity, with minimal or no regulation,” he said.

“Therefore, in choosing whether to regulate the space or not, it was vital that we demonstrate The Bahamas’ full-throated commitment to the global fight against money laundering, terrorist financing and proliferation financing. The intricacies and challenges related to AML/CFT/CPF in the decentralized digital assets space presented an opportunity to display the competence and excellence in AML and CFT regulation that exists in The Bahamas and particularly as supported by our educated and accomplished domestic human capital in the financial services and compliance space. This was an opportunity to appear at the top of praise-lists of world-leading AML/CFT regulatory regimes, and particularly for digital assets.”

In developing DARE, the Securities Commission of The Bahamas (SCB) which is the competent authority for the registration and licensing of digital assets businesses sought to achieve certain objectives in the legislation: robust risk management, consumer and investor protection, and market growth and innovation.

The DARE Act provides the Securities Commission of The Bahamas appropriate authority and scope to regulate, monitor and supervise the issuance of digital asset business in the Bahamas, with suitable functions and powers. The DARE regulatory framework establishes a risk-based approach for the supervision of digital assets business, inclusive of registration and ongoing supervision requirements.

The Commission is empowered to conduct onsite and offsite inspections of the businesses of registrants to determine compliance with DARE or the Financial Transactions Reporting Act or any other law. It is also empowered to conduct investigations to satisfy itself that no unregistered persons are engaged in a registrable digital assets business, or any activity identified for registration under DARE.

“Regulation and legislation are important, especially in evolving industries such as fintech and digital assets,” said the Attorney General. “But you can’t expect it to thrive without progressive government policy support. The Government of The Bahamas created a vision and a framework to guide digital asset policy in The Bahamas, as laid out in a White Paper our government has published. We have defined a vision to transform The Bahamas into the leading digital asset hub, and a global leader in the progressive regulation of businesses in this profoundly innovative space.”

The White Paper includes the following policy objectives:

• To explore new opportunities in a rapidly and continuously evolving digital asset landscape, including developments in decentralized finance (DeFi), non-fungible tokens (NFTs), stablecoins, and asset-referenced tokens;
• To improve the attractiveness of The Bahamas as a well-regulated jurisdiction where well-run digital asset businesses, of any size, can operate, grow, and prosper;
• Where necessary, to clarify and expand the scope of the current legislative framework generally, and the DARE Act, in particular, to continue to safely regulate digital assets and digital asset businesses;
• To encourage innovation in the Fintech space and identify emerging technologies that would help maintain The Bahamas’ competitive advantage;
• To explore linkages between The Bahamas’ existing financial services toolkit (i.e. corporate and fiduciary services) and to facilitate continued innovation in the international financial services sector;
• To develop the skills and expertise necessary to fill jobs created in the Bahamian digital asset sector;
• To build capacity and expand the resources of the SCB to support and enhance its role as the pre-eminent digital asset regulator, and to enable it to become a global center of excellence in the pragmatic, risk-adjusted regulation of digital assets and digital asset businesses; and
• To provide sustainable funding for our digital asset policies, initiatives, and programs.

“Taken together, fulfillment of these objectives will encourage the growth of an exciting new industry while protecting consumers, businesses, and investors,” he said. “They will also offer safeguards against systemic risks which may emerge.”