Fintech 2025

BERMUDA Law and Practice Contributed by: Steven Rees Davies, Kyle Masters, Charissa Ball and Alexandra Fox, Carey Olsen

models, such as DeFi protocols established as decentralised autonomous organisations (DAOs), into Bermuda law and regulation. Bermuda-regulated digital asset businesses are not restricted from using AI models and these are already being used by existing businesses. The BMA regulates the use of such models in accordance with its proportionality principles that embrace innovation and the use of innova - tive tools, while ensuring appropriate oversight and risk management. The BMA has also launched a consultation paper proposing the introduction of a regulatory regime to govern digital identification service providers (DISPs). The proposals follow a similar structure to the way in which Bermuda regulates digital asset businesses and is expected to be finalised and introduced in 2025. To promote innovation in the insurance sector, the Bermuda government introduced an insur - ance regulatory sandbox, which allows start- up innovators to experiment in a regulated but smaller-scale environment. In 2023, the concept and scope of a regulatory sandbox was broad - ened to encompass investment business, pro - moting the offering of innovative products and the testing of new technologies and delivery methods in the traditional financial sectors. The regulatory sandbox continues to be used by entities looking to innovate and test new mod - els. Its success and the approach of the BMA to innovative models have also allowed innovative businesses to skip the sandbox and success - fully obtain licences specifically designed for innovation – for example, the classes of “inno- vative insurer (general business)” and “innovative insurer (long term)” under Bermuda’s insurance regulatory regime.

The Bermuda government has also announced its intention to launch a blockchain-based stim - ulus token for use in Bermuda’s retail market, which will be a Bermuda dollar-backed stable - coin using technology developed by a Bermuda business regulated under the DABA. The gov - ernment has also been working on numerous other technology projects to further enhance the island’s digital infrastructure, including: • the development of a digital ID system that meets internationally recognised standards of both privacy and AML/anti-terrorist financing (ATF) regulation; and • the introduction of submarine cabling legis - lation to protect both the environment sur - rounding the island and the submarine cables themselves – the latter being the critical hard - ware infrastructure that supports the digital asset sector. 2. Fintech Business Models and Regulation in General 2.1 Predominant Business Models The extensive scope and flexibility of the Ber - muda licensing regime supports a wide range of business models. This creates diversity and choice for industry across a range of industry sectors, including: • digital asset payment service providers; • digital assets and digital asset derivatives exchanges and trading platforms; • digital asset trust service providers; • digital asset issuers (eg, stablecoins and util - ity tokens); • custodians and custodial wallet providers; • regulatory and environmental technology; • digital asset vendors (including market mak - ers);

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