BERMUDA Law and Practice Contributed by: Bourn Collier and Sharon A. Beesley, BeesMont Law Limited
ited (in Liquidation) and In the Matter of the B Trust (2025) SC (Bda) 110 Civ. DABA licensees are required to maintain segrega- tion of client assets and recent authority and in the case of In the Matter of Bittrex Global ( Bermuda ) Lim- ited (in Liquidation) (2025) SC (Bda) 78 Civ (Martin J) (affirmed by the Court of Appeal in Bittrex Global Inc v Howie and others (2026) CA (Bda) 1 Civ, it was held that the purported attempt in the Terms and Condi- tions of now defunct exchange Bittrex to transfer legal title in customer-deposited tokens to the company in exchange for a contractual claim failed, with Martin J and Sir Julian Flaux JA affirming, that Sections 17 and 18 of DABA require segregation of client assets notwithstanding any contractual provision to the con- trary, and that a licensed undertaking cannot contract out of the statute – the Court of Appeal drawing on In Re Ipagoo LLP (2022) EWCA Civ 302 and Lehman Brothers International ( Europe ) ( in administration ) v CRC Credit Fund Ltd (2012) UKSC 6. Read together, BlockFi and Bittrex establish that customer digital assets held by a DABA licensee are insulated from the licensee’s insolvent estate either by contract ( BlockFi ) or by statute ( Bittrex ), with both routes converging on the same customer-protective outcome and giving Bermuda one of the more devel- oped bodies of digital-asset insolvency case law in the offshore world. Custody and Control Frameworks Consistent with the importance of control in asserting title to digital assets, in guidance and rules published by the BMA (exercising powers pursuant to DABA) which DABA licensees are required to adhere to (in respect of custody of digital assets for clients), it is provided that DABA licensees must have “adequate accounting... other records… systems and controls” to accurately track ownership and quantity of client digital assets, and the beneficial ownership rights of clients to digital assets held by DABA licensees are referred to in rules, whilst the recently introduced Custody Rules (see below) refers to holders of digi- tal assets having “respective beneficial ownership rights”.
In general, pursuant to the Digital Asset Business Custody Code of Practice (Custody Code) the BMA (and its Cyber Risk team) typically considers control of private keys (even by way of authorisation procedures for a multi-party computation (MPC) wallet) as essen- tial for determining the status of control of any digital assets and determining ownership interest and finality of any transfer. The Custody Code includes technical standards applicable to those DABA Licensees who provide custodial wallet services to ensure effective management and control of private keys (and thereby, of the digital assets themselves). The control-based approach has been further entrenched by the Digital Asset Business (Custody of Client Assets) Rules 2025 (Custody Rules), intro- duced in early 2025, which formalise control-based supervision of custodial wallet service providers and capture in scope DABA licensees that exercise effec- tive control over client assets through their business model (see further in 1.2.5 Insolvency and 3.1 Licens- ing Requirements ). Use as Collateral Certain of Bermuda’s DABA licensees have looked to use digital assets for collateral arrangements in a number of ways in recent years. Most recently, several DABA licensees have been establishing facilities to issue yield-bearing stable- coins in Bermuda with the intention that those tokens will be used as collateral for derivatives trading – a particularly high growth sector. Second, the use of digital assets as collateral for stak- ing was permitted with the addition of a DABA activity (operating as a digital asset lending or digital asset repurchase transactions service provider), although volumes of staking activity peaked in 2022. Finally, transactions have occurred in Bermuda in which digital assets have been granted as collateral security for regular corporate transactions (by Ber- muda companies holding digital assets), including for loan transaction security. Bermuda does not have a specific statutory legal regime for granting collateral security over digital
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