Bermuda eyes future crypto regulation

The Bermuda Monetary Authority (BMA) is looking to implement cryptocurrency regulation.

The Caribbean financial regulator is looking for public feedback on an anti-money laundering law that would regulate domestic cryptocurrency activity.

In a newly released consultation paper, BMA said it aims to capture a ‘wide range of cryptocurrency-related activities’ under the bill in a bid to prepare a more formal framework that would ‘attract and foster’ cryptocurrency businesses.

The suggested virtual currency act would mandate that cryptocurrency exchanges, wallet services and payment providers, as well as businesses that promote and facilitate token sales and initial coin offerings (ICO), collect and retain customer information. However, regulation on ICO organisers is not part of the proposed act, with the paper indicating supervision over ICOs would fall under a separate rule.

The objective the paper is to provide an outline for the effective regulation of service providers within the virtual currency business industry (virtual currency business service providers or (VCBs)) in Bermuda.

In the paper, Bermuda said while it is keen to embrace the potential offered by the virtual economy, it is recognised that the sector presents tremendous risk that requires robust prudential and Anti-Money Laundering/AntiTerrorism Financing (AML/ATF) regulation.

In spite of its growing popularity, in many quarters, BMA added that virtual currency sector still faces an image problem arising from its use on the dark web, association with recent ransomware attacks, virtual currency thefts, and a number of high profile frauds and other money laundering/terrorism funding cases.

“The pseudoanonymity or anonymity associated with some of the technology poses a significant challenge for both law enforcement and regulators. Although VCBs are not currently regulated in most countries, the international focus on AML/ATF obligations has added additional relevance to the local debate given Bermuda’s desire to remain a responsible global citizen and a credible financial centre.

“Mutual evaluations are strict and a country is only deemed compliant if it can prove ongoing compliance to the other members. In other words, the onus is on the assessed country to demonstrate that it has an effective framework to protect the financial system from abuse,” the report added.

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