Christina R. Rolle B. G., Opalesque Geneva:
The passage of the Digital Assets and Registered Exchanges Bill, 2020 (DARE Bill) put in place the legal framework for a well-regulated and compliant industry in the Bahamas for those interested in entering the digital asset space. But its revamped regime, to be approved soon, should reposition The Bahamas at the forefront of digital asset regulation.
The Securities Commission of The Bahamas began an update to the DARE Act in mid-2022, prompted by market events and crises for cryptocurrencies, now commonly referred to as the crypto winter, explains Ms Christina R. Rolle, who is the Executive Director of the Commission, at a recent Opalesque Roundtable. This phase was characterized by some crashes, exposing the risks associated with these assets.
Crypto winter is a common expression that refers to a poorly performing cryptocurrency market. The term is comparable to a bear market in the stock market. There have been several crypto winters in the past. For example, from late 2017 to December 2020, crypto prices fell and hovered far off from prior peak prices, reports Investopedia. However, in December 2020, prices exploded to record highs in a significant crypto bull market. Then in 2022, a perfect storm of headwinds (inflation, raised interest rates, selling-off of risk assets) sent the prices of leading cryptocurrencies Bitcoin, Ethereum, Cardano, XRP and others down more than 55% each. When Bitcoin prices finally recovered above the psychological level of $30,000 in April 2023, some investors and analysts declared an official end to crypto winter, according to Forbes.
The Bahamas’ updating of DARE coincided with crypto policy recommendations for regulators issued by IOSCO, the global standard setter for securities markets, to which The Bahamas significantly contributed.
The extent of the amendments to the DARE Act will effectively be a complete cancellation and replacement of the Act.
The new version of the DARE Act includes regulatory measures such as a fully stable coin regime, making the jurisdiction one of the few in the world to have a robust framework. They also address important issues like conflicts of interest, custody of assets, and off-balance sheet asset holding.
A stable coin is a digital currency that is pegged to a “stable” reserve asset like the US dollar or gold. Stable coins are designed to reduce volatility relative to unpegged cryptocurrencies like Bitcoin.
A rest-of-the-world strategy
“Looking ahead, I foresee that entities wishing to operate in major markets such as the US, UK, or Europe will likely seek licenses in those locations,” Ms Rolle says. “While the US still lacks a clear regulatory framework, the UK and the EU are developing comprehensive ones. Thus, firms will be licensed in these jurisdictions if they have clients there.
“As for The Bahamas, I see our role as a “rest-of-the-world” strategy, similar to how we are positioned with many other regulations currently. Other countries may be more flexible regarding regulatory locales, or they may lack a regulatory framework but still possess a crypto market. Therefore, crypto firms could be licensed in The Bahamas to access those
markets without necessarily targeting larger jurisdictions like Europe, the UK, the US, Canada, or Australia.”
The amendment draft was under consultation from March to May. The Commission is currently reviewing the feedback. “Interestingly, this legislation has generated the largest volume of comments from any consultation in the history of the Securities Commission,” she notes.
So far, there are minor tweaks to be done to the draft, although there may be some greater changes in the conflicts of interest section. The final bill should be ready for the parliamentary session sometime this month.
Everyone is anticipating the new DARE Act
We are witnessing clear signs that the so-called crypto winter is behind us, says Chris Illing, chief commercial officer at ActiveTrades Corp, a broker. And everyone is eagerly anticipating the new version of the DARE Act.
“It’s evident from our international clients that the need and the desire to incorporate digital currencies into everyday life are present,” he adds. “With the DARE Act at the forefront, which is due for improvements, the Bahamas has reclaimed its reputation in this sector. Our clients are excited to collaborate with institutions licensed here, knowing they’ll be working within a well-regulated framework.”
To read more about new developments in The Bahamas’ financial space, you can access the Opalesque Bahamas 2023 Roundtable report here and here:
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