BERMUDA Law and Practice Contributed by: Bourn Collier and Sharon A. Beesley, BeesMont Law Limited
• other structures that demonstrably insulate token- holders’ interests from claims against the issuer or originator of the underlying assets. As mentioned in 5.1 Ability to Use DeFi , DABA licen- sees are able to receive approval for and operate DeFi business models including DAOs. 5.3 Liability See 1.2.5 Insolvency in respect of enforcement action. There is no restriction in Bermuda on the form in which payments may be made, save for the exchange control regime administered by the BMA under the Exchange Control Act 1972 and Exchange Control Regulations 1973, which restricts the conversion of Bermuda dol- lars into other currencies (and triggers the 1% Foreign Currency Purchase Tax noted in 1.2.4 Tax ). Subject to that constraint, payments denominated in digital assets are valid in Bermuda. To date, digital-asset-denominated payment activity in Bermuda has been confined to discrete, organ- ised initiatives – including pilot activations involving airdropped tokens used as a means of payment for goods and services, the government’s consideration of digital asset (stablecoin) acceptance for govern- ment departments, and some acceptance by busi- nesses of payments in stablecoin. 6. Payments and Stablecoins 6.1 Payments This pattern is expected to evolve materially as Ber- muda implements the strategic positioning referred to in 1.1.1 Evolution of Uses of Blockchain – the trajec- tory towards a fully on-chain national economy, sup- ported by the licensed digital asset infrastructure is already established in the jurisdiction. Further Details on Payment Service Regulation • “Operating as a payment service provider” utilising digital assets for the transfer of funds is a licens- able activity under DABA (see 1.1.3 Regulation of Blockchain Technology ), and a number of current DABA licensees are licensed for this activity.
• The proposed Payment Services Act will introduce a unified, risk-based payment licensing framework superseding the Money Service Business Act 2016, sitting alongside DABA (see 1.1.2 Regulatory Sandbox on the prospective PSA Sandbox). 6.2 Stablecoins 6.2.1 Fiat Currency and Algorithmic Stablecoins The BMA has broadly implemented Recommendation 9 of the FSB 2023 Recommendations*, which pro- vides that a stablecoin’s stabilisation method must rest on a reserve of assets at least equal to outstand - ing tokens in circulation and that a stablecoin should not derive its value from algorithms. The BMA’s Digital Asset Business Single Currency Pegged Stablecoins (SCPS) Guidance (November 2024) gives effect to this position through its definition of an SCPS as a digital asset pegged to a specified asset, or pool or basket of assets, in a single fiat cur- rency (paragraph 2), and through the backing asset, segregation and liquidity requirements. The cumulative effect is that the SCPS regime is built exclusively around a reserve-based stabilisation logic, and algorithmic designs – which rely on mint-and- burn mechanics or arbitrage incentives rather than high-quality liquid reserves – cannot satisfy these requirements. Non-conforming models fall outside the SCPS perim- eter and are relegated to case-by-case assessment under paragraph 10 of the Guidance. See 6.2.3 Backing Assets for further details as to eli - gible backing assets. *Financial Stability Board: High-level Recommenda- tions for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements (July 2023). 6.2.2 Stablecoin Regulation Similar to tokenised securities, activities involving stablecoins are licensable under DABA in Bermuda and Bermuda hosts a number of stablecoin issuers as DABA licensees. In 2024 the BMA published detailed guidance (SCPS Guidance) applicable to stablecoin issuances which maintain a stable value relative to a
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