BAHAMAS Law and Practice Contributed by: Dwayne Whylly, Kamala Richardson-Deal and Nastassia Rigby-Rodriguez, Glinton Sweeting O’Brien
statements, plus record-keeping to identify indi - vidual client holdings even under omnibus arrange - ments where digital assets are custodied. • It requires suitability assessments, periodic reviews (at least every two years), warnings, and ongoing client reporting duties for digital asset advisory and management business. • It regulates staking services, including requiring disclosures on protocol/consensus, lock up peri - ods, rewards/penalties, client warnings (eg, loss/ theft risk, tax liability, insurance coverage), and alignment with custody requirements, if custody is involved. • It prohibits carrying on mining as a business except where ancillary to a registered DABs or as propri - etary mining. • It expands the anti-money laundering/countering the financing of terrorism (AML/CFT) framework, including requiring annual follow-up risk assess - ments, maintaining AML programmes and formal appointment of a compliance officer and a money laundering reporting officer, with duties and out - sourcing limits clarified. • It substantially strengthens enforcement, market integrity, and sanctions by introducing compliance orders, penalties up to BSD100,000 per contraven - tion for failure to comply with orders or directives, elaborating administrative sanctions (public repri - mands, bans, conditions, disgorgement, etc) and adding market integrity offences. The industry anticipates that the Securities Commis - sion will issue regulations and guidelines under the DARE Act 2024 that will further regulate the conduct of DABs. As of the date of publication, it is unclear whether these regulations and guidelines will address the use of AI in Bahamas-based DABs. In addition to the anticipated regulations and guide - lines, the industry anticipates the enactment of legis - lation governing the establishment and operation of digital autonomous organisations (DAOs) in or from within The Bahamas. As of the date of publication, it is understood that the DAO legislation will be introduced by the end of Q2 of 2026. There are also discussions around the possibility of The Bahamas playing host to all-digital banks. This
will be a development to look for over the next 12–36 months, as the Central Bank of The Bahamas (the “Central Bank”), the regulator in The Bahamas of banking business and payment services providers, has put itself to the forefront of fintech, being one of the first central banks in the world to introduce a cen - tral bank digital currency, known as the Sand Dollar. This will also align with the Central Bank’s focus on financial inclusion.
2. Fintech Business Models and Regulation in General 2.1 Predominant Business Models
Fintech business models that are recognised and regulated in The Bahamas include the following. • Digital asset exchanges and marketplaces: these are Bahamas-based or Bahamas-facing platforms that list, match and execute trades in digital assets under a dedicated licensing regime. Operators must meet activity-specific standards for systems, business continuity, market transparency and ongoing financial resources, including maintaining assets in The Bahamas to cover operating costs for a defined period under the DARE Act 2024. • Custody and safekeeping of digital assets: stan - dalone custodians and exchanges offering custody are subject to additional safeguards, including seg - regation of assets (proprietary and client), record- keeping and operational resilience as prescribed for custodial businesses under the DARE Act 2024. • Advisory, portfolio management and investment funds: licensed advisers and discretionary manag - ers develop strategies across tokens and other digital assets, including strategies for alternative investment funds. Bahamas funds, which are regu - lated under the Investment Funds Act, 2019 (the “IFA 2019”), such as SMART Funds, are commonly used to gain digital asset exposure; where activi - ties amount to advising or managing digital assets (or related derivatives), they are regulated under the DARE Act 2024. • Staking and yield services: third-party staking and pool operations are regulated activities. Registrants must make clear, plain English disclosures of pro - tocol mechanics, lockups, redemption pathways,
62 CHAMBERS.COM
Powered by FlippingBook