BAHAMAS Law and Practice Contributed by: Dwayne Whylly, Kamala Richardson-Deal and Nastassia Rigby-Rodriguez, Glinton Sweeting O’Brien
cy or digital assets”, while a “digital asset derivative exchange” is defined as “a system or platform which facilitates the issuance, distribution, sale, trading or exchange of digital asset derivatives”. The types of marketplaces or platforms that would be recognised under these broad definitions include decentralised, centralised, hybrid decentralised/centralised and peer-to-peer (P2P) exchanges. Where promoters of a marketplace or exchange seek to launch the mar - ketplace or exchange from The Bahamas, they are required to apply to the Securities Commission to be registered to conduct digital asset business. It should be noted that where a digital assets exchange provides custody of the assets traded on its platform, it is required to comply with the provisions of the DARE Act 2024 that generally apply to custodians of digital assets. 6.2 Regulation of Different Asset Classes The DARE Act 2024 generally applies to digital assets. A digital asset is defined in the DARE Act 2024 as “a digital representation of value or a right which may be transferred and stored electronically, using distributed ledger technology or similar technology”. However, by virtue of Section 3 (b) of the DARE Act 2024, the following types of assets are expressly excluded from regulation under the DARE Act 2024: • a security token, which is a digital asset and, when issued or traded, has one or more of the charac - teristics of a “security” as defined in the Securities Industry Act (SIA); instead, the issuance of security tokens is regulated under the Bahamian securities law pursuant to the provisions of the SIA; • a digital representation of value issued by or on behalf of the publisher and used within an online game, game platform, or family of games sold by the same publisher or offered on the same game platform (ie, a gaming token), which is not subject to regulation under Bahamian law; • a non-fungible token which, by its nature and func - tion rather than the designation given by its issuer, is not used for payment or investment purposes, and is not a digital representation of any other financial asset, which is not subject to regulation under Bahamian law;
• electronic representations of a fiat currency, secu - rity or any other financial assets (eg, electronic credit or debit cards), which are regulated under the provisions of the Central Bank of The Bahamas Act and the PSA; • a digital asset which, when issued or traded, has one or more of the same characteristics as elec - tronic money – electronic money may only be issued in The Bahamas by the Central Bank; and • a digital currency; as legal tender for use in The Bahamas may only be issued by the Central Bank. 6.3 Impact of the Emergence of Cryptocurrency Exchanges The emergence of cryptocurrency exchanges or digital assets exchanges, as they are called under Bahamian law, were part of the impetus driving the enactment of the DARE Act 2024. The Bahamas has taken a sand - box approach to regulating the digital asset indus - try, allowing innovation to take place within a strong regulatory framework that promotes safeguarding of customer interests. 6.4 Listing Standards Although the DARE Act 2024, pursuant to Section 23 (b), requires digital asset exchanges to maintain appropriate rules for admission to list digital assets on the exchange, it does not prescribe the standards to be adhered to by digital asset exchanges when determining whether or not to list digital assets. At present, listing standards are by and large dictated by the industry, which aligns with the sandbox approach adopted for regulating the digital asset industry in The Bahamas. That said, as a basic rule, digital asset exchanges are not permitted to list security tokens unless they are separately registered as a marketplace under the provisions of the SIA. It is possible that the Securities Commission may, in the future, issue regulations, rules or guidance which prescribe listing standards. 6.5 Order Handling Rules By virtue of Section 22 (b) of the DARE Act 2024, digi - tal asset exchanges are required to maintain operat - ing rules to ensure that transactions executed on the digital asset exchange are settled in a timely fashion. As part of its application for registration, a digital asset
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