A draft of the “Digital Assets and Registered Exchanges Bill, 2019”, also known by the acronym “DARE”, was introduced on March 27 for an eight-week period of industry and public consultation.
The draft bill focuses on token offerings not deemed as securities and the proposed rules would be applicable to wallet providers, exchanges, token issuers and other entities involved with ICOs in The Bahamas.
According to the bill published on the commission’s website, token issuers will be required to publish a memorandum describing their project and update it in case their offering undergoes any significant changes. Failure to disclose any information that can “reasonably negatively affect the interests” of token-buyers will put the issuer at risk of a fine of 10,000 Bahamian dollars (10,000 USD). Additionally, insurance coverage requirements are set out in the bill.
“The proposed legislation requires that participants adhere to established anti-money laundering (AML) and counter-financing of terrorism (CFT) laws, ensure data protection measures related to the personal information of clients, and implement measures to prevent data breaches that would jeopardize clients’ cryptoassets,” said an SCB press release.
SCB Chairman Robert Lotmore said the draft legislation is the first of a series that aims to establish a comprehensive approach to cryptoassets regulation in the country.
“The SCB has been working in close consultation with the industry on the development of this bill, which we anticipate will be the first piece of a suite of legislation that will establish the regulatory framework for cryptoassets in The Bahamas,” he said.
“A comprehensive policy position paper will be released next, and the Securities Commission looks forward to input from the industry and general public on that as well,” he added.
All communication with the regulator during the registration period will be performed by an attorney hired by the token issuer. The project will be subject to Bahamas’ Data Protection Act, Financial Transactions Reporting Act, Financial Transactions Reporting Regulations and Financial Intelligence Regulations.
Infringing on any of these laws could result in fines of 500,000 USD or jail terms of up to five years, with 10 years’ imprisonment possible in case of filing misleading information in the registration documents.
SCB Executive Director Christina Rolle said, due in large part to the intense interest in crypto-related business recently, the jurisdiction had to move to ensure an appropriate regulatory framework is in place.
“Over the last year, the number of queries the jurisdiction has received from entrepreneurs interested in venturing into this form of capital raising has mandated that the jurisdiction ensure legislative and regulatory parameters are in place to address how operators conduct themselves and how token issues come to market,” she said.
“The bill establishes a framework for regulation of digital token issuances in or from within The Bahamas. We anticipate that while non-security tokens will not be directly approved for issuance by the SCB, the SCB will have some level of oversight. Issuance of security tokens, that is, tokens which meet criteria to be deemed securities, will require direct approval by the commission,” she added.
The legislation’s requirements for crypto exchanges are applicable to not only fiat-to-crypto exchanges but also crypto-to-crypto exchanges as well as both centralized and decentralized exchanges.
The consultation deadline was set for May 27 but is likely to be extended due to a large number of requests received by the regulator. Commissioner Rolle revealed that some companies have already asked the commission for clarifications and have received no-action letters, stating that the regulator “will not pursue any enforcement action” against them until new legislation is introduced.