BERMUDA Law and Practice Contributed by: Bourn Collier and Sharon A. Beesley, BeesMont Law Limited
5. Decentralised Finance 5.1 Ability to Use DeFi
engage simultaneously with multiple supervisory regimes – though GFIN is a co-operation framework rather than a passporting regime.
As a legal person is required to apply for a DABA or DAIA licence, such activity is confined to DABA licen- see firms (CeFi firms) utilising DeFi structures to pro- vide products and services. All such DeFI structures are required to still operate in accordance with the scope of the applicable DABA licence and certain of the activities. However, DeFi activities which have been undertaken include the fol- lowing. Decentralised Governance (DAOs) There have been instances of several DABA licensees including a governance mechanism or complete DAO structure within their operations to offer Tokenholders participation in project governance. Decentralised Process Structures (Including Smart Contracts) In recent months there have been a number of DABA licence applications for business models which involve the deployment of operative code within smart con- tract environments (for greater scale and operational efficiency). 5.2 DeFi Structures DABA and DAIA Licensees are typically structured as limited companies although for reasons of bankrupt- cy remoteness the BMA has recommended in guid- ance that licensees use appropriate legal structures which enable segregation of client assets (to protect upon the occurrence of insolvency of the licensee) and thereby comply with protection of client assets and segregation required pursuant to DABA and the Custody Rules. Recommended structures include: • Incorporated Segregated Accounts Companies (ISACs); • Segregated Accounts Companies (SACs); • Special Purpose Vehicles (SPVs); • trust arrangements; or
4. Cross-Border Services 4.1 Marketing
For DABA licensees, the DABA Code of Practice (2024) incorporates several standards in respect of advertising and promotions, including that the man- ner of promotion must, amongst others, be clear, fair and not misleading and advertisements do not contain untrue or misleading statements, not distort, use clear language and include a statement of related risks. The Code specifies sales practices must prohibit missel- ling, misrepresentation, with requirements on how information is presented to clients. In a Consultation Paper last year, the BMA indicated it will look to introduce amendments to expressly prohibit DABA licensees from publishing misleading advertising. Advertising and marketing rules also are in addition to disclosure obligations under DABA and DAIA further on in this chapter. 4.2 White Labelling White-labelling or using an existing licensee is not current practice or practicable in Bermuda due to the minimum criteria for licensing and DABA and DAIA licensing being anchored to the business model approved by the BMA, with strict oversight require- ments for counterparties. In the case of parties seeking to acquire an existing licensed business the acquirer would need to com- plete the change of control procedure and, in the case of change of business plan, submit a material change notification under Section 22 of DABA and complete product due diligence for new products (see 2.2 Crypto-Asset Regulatory Frameworks and 3.3 Change of Control ).
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