BERMUDA Law and Practice Contributed by: Steven Rees Davies, Kyle Masters, Charissa Ball and Alexandra Fox, Carey Olsen
4.3 Sources of Funds for Fiat Currency Loans Bermuda’s legal and regulatory landscape – in particular, the regulation of lending or repurchase transactions under the DABA – does not distin - guish between the sources of funds for loans. An entity lending either fiat or digital assets will be required to submit its credit risk manage - ment framework and controls to the BMA with its licensing application and as part of its ongoing regulatory monitoring and reporting obligations. DABA licensees, banks and deposit-taking com - panies are prescribed as AML/ATF-regulated financial institutions and must comply with rel - evant AML/ATF regulations, which may include requirements to verify source of funds of cus - tomers. 4.4 Syndication of Fiat Currency Loans The syndication of loans involving Bermuda obli - gors is not uncommon. Typically, the syndica - tion of loans takes place on a cross-border basis involving lenders and counterparties overseas, where documentation is usually subject to the laws of a foreign jurisdiction, and is not other - wise directly captured under current regulation (subject to bespoke conditions such as minimum capitalisation requirements for DABA licensees or regulated insurtech entities in Bermuda).
prompt the licensing requirements under the DABA. A payment processor (excluding an entity licensed under the Banks Act) may also require a licence under Bermuda’s Money Service Busi - ness Act 2016 (unless subject to an exemption under the Guidance Notes – Money Service Business Act 2016) if it conducts any of the fol - lowing money service business activities: • money transmission services; • cashing cheques that are made payable to customers, as well as guaranteeing cheques; • issuing, selling or redeeming drafts, money orders or traveller’s cheques for cash; • payment services business; or • operating a bureau de change whereby cash in one currency is exchanged for cash in another currency. 5.2 Regulation of Cross-Border Payments and Remittances Any purchases of foreign fiat currency made by a Bermuda resident in Bermuda dollars from an institution licensed under the Banks Act will be subject to a foreign currency purchase tax of 1.25%, which must be withheld by the appli - cable institution and thereafter remitted to the Bermuda Tax Commissioner. Cross-border payments and remittances using digital assets are separately regulated under the DAB Regime, but are not subject to the foreign currency purchase tax.
5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails
Payment processors are not required to use existing payment rails under Bermuda law, nor are they precluded from creating or implement - ing new payment rails. However, creating or implementing a new payment rail for the pur - poses of advancing digital asset business may
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