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Bermuda Issues Proposal to Regulate Cryptocurrency Businesses

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The Bermuda Monetary Authority has released a consultation paper on draft regulations pointing to “virtual currency businesses” and initial coin offerings (ICOs).

The proposed bill is looking to make a framework that fosters the development of Bermuda’s nascent cryptocurrency industry.

The minister of national security, Wayne Caines, called the proposed regulations a “landmark legislation for Bermuda,” saying that “The emergence of new financial products and services created through the use of technology has opened new and exciting opportunities for entrepreneurs and businesses.”

On Thursday, Caines introduced “Bermuda’s fintech strategy” to “more than 150 of Bermuda’s key business partners.” Caines explained that the government “recognize[s] that there’s significant interest in virtual currencies and blockchain technology,” noting Bermuda’s desire to “become a global leader in the fintech space.”

The consultation paper calls “virtual currency [as] a digital representation of value that can be digitally traded,” saying that “such does not have legal tender status […] in any jurisdiction,” however, fulfills monetary “functions only by agreement within the community of users of the virtual currency.”

Whilst the document does note that “The virtual currency sector is varied in business types,” the major participants are described as being comprised of “ICO issuers,” “virtual currency exchange providers and traders,” “custodial wallet providers,” and “virtual currency miners.”

The proposed framework would need businesses facilitating the sale of or providing services relating to cryptocurrencies to gather and retain important information relating to customers, noting that the cryptocurrency sector “presents tremendous risk that requires robust […] Anti-Money Laundering/Anti-Terrorism Financing (AML/ATF) regulation.”

Under the said regulation, “an initial coin offering will be treated as a restricted business activity that will require consent from the minister of finance.”

As such, ICO issuers would be mandated to comply with specific regulations -the “Companies and Limited Liability Company (Initial Coin Offering) Act – in addition to applying for consent from the finance minister.” Companies applying for consent to conduct an ICO would be required to provide information.

“The company conducting the ICO and the underlying digital asset offered for sale; The development and implementation of any product, service or other project related to the ICO, including timelines for completion; The target amount to be raised through the ICO; Rights, features, functionality and intended transferability of the digital asset offered for sale; The technology to be used and confirmation of the ability of the technical platform to enable the collection, confirmation and storage of purchaser identity information; and compliance and auditing of ICO transactions.”

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