Quarterly Fintech Regulatory Update

Since the inaugural issue of Appleby Asia Alert in June 2018 which briefly introduced the regulatory landscapes of fintech-related areas in Bermuda, Cayman Islands and BVI, there have already been some important changes to such legal and regulatory frameworks in these jurisdictions.

BERMUDA

Initial Coin Offerings

The Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 (ICO Act) became operative on 9 July 2018 and the related Companies and Limited Liability Company (Initial Coin Offering) Regulations 2018 (ICO Regulations, together with the ICO Act, ICO Legislation) came into force on 10 July 2018.

The ICO Legislation regulates all aspects of offering digital assets to the public in or from Bermuda. A digital asset covers anything that exists in binary format, including all forms of cryptocurrencies, digital coins and tokens issued in connection with initial coin offerings (ICOs). We have published a separate article with guidance for issuers seeking to undertake an ICO. Please get in touch with your usual Appleby contact should you wish to receive the ICO framework guide.

Digital Asset Businesses

The Digital Asset Business Act 2018 (DABA) came into force on 10 September 2018.

DABA provides that an applicant may apply for a class F licence (a full asset digital licence) or a class M licence (a sandbox licence for a predefined period). The Bermuda Monetary Authority (BMA) Assessment and Licensing Committee has produced an Information Bulletin outlining the requirements for Digital Asset Business (DAB) applications. In addition, DAB sector specific AML/ATF guidance notes have been published.

On 11 September 2018, the following rules in relation to DABA:

Digital Asset Business (Client Disclosure) Rules 2018 (Client Disclosure Rules) Digital Asset Business (Cybersecurity) Rules 2018 (Cybersecurity Rules) Digital Asset Business (Prudential Standards) (Annual Return) Rules 2018 (Prudential Standards Rules) Client Disclosure Rules

The Client Disclosure Rules provide that every licensed undertaking shall disclose to the client, prior to entering into an initial transaction, all material risks associated with its products, services and activities and any additional disclosure that the BMA determines is necessary for the protection of clients.

Cybersecurity Rules

The Cybersecurity Rules provide that every licensed undertaking should file annually a written report assessing certain functions of its electronic systems and...