The law regulating the activities of VASPs
There is a current law DIGITAL ASSETS AND REGISTERED EXCHANGES (AMENDMENT) ACT of 2022, but a new draft law DIGITAL ASSETS AND REGISTERED EXCHANGES BILL of 2024 is currently under consideration.
The following information is provided in accordance with the text of the draft law.
VASP regulator
1. The Central Bank of the Bahamas
2. The Securities Commission of the Bahamas (SCB)
Activities included in VASP services
Article 6 (1) of draft law.
A digital asset business includes a business conducting any of the following activities —
(a) operating a digital asset exchange;
(b) exchanging digital assets for fiat currency;
(c) exchanging digital assets for other digital assets;
(d) operating as a payment service provider business involving digital assets;
(e) executing orders for digital assets;
(f) issuing a stablecoin;
(g) placing digital assets;
(h) providing the reception and transmission of orders for digital assets;
(i) providing transfer services;
(j) providing the custody of digital assets;
(k) providing advice on digital assets;
(l) providing management of digital assets;
(m) providing DLT network node services;
(n) providing anonymity-enhancing services;
(o) providing digital asset derivative services;
(p) providing staking services; and
(q) any other activity which may be prescribed by regulations
Prohibition on mining of digital assets.
(1) No person shall carry on the mining of digital assets as a business in or from within The Bahamas, or purport to do so, except where the —
(a) mining is ancillary to a digital asset business registered under section 9;
(b) person carries on proprietary mining of digital assets
VASP registration procedure for a local company
Article 9 of draft law. Registration of a digital asset business.
(1) Subject to subsection (2), a legal entity intending to provide or which is providing services as a digital asset business shall apply to be registered under the provisions of this Act by submitting to the Commission, the following —
(a) completed Form 1 set out in the First Schedule;
(b) completed Form 2 set out in the First Schedule in respect of each founder, beneficial owner, security holder, director and officer of the applicant;
(c) completed Form 3 set out in the First Schedule with respect to the appointment of the chief executive officer, compliance officer and money laundering reporting officer;
(d) the application fee as prescribed by the Commission; and
(e) any other document or information the Commission may require.
(3) Upon filing of a complete application for registration, the Commission may investigate the financial responsibility, financial and business experience, and adherence to a high standard of professional conduct of the applicant and of its chief executive officer, compliance officer and money laundering reporting officer.
Article 10 of draft law. Appointment of CEO.
Every registrant shall appoint a chief executive officer who is —
(a) suitably educated, qualified and experienced, having regard to the nature of the digital asset business activity or activities to be performed by the registrant; and (b) able to demonstrate a meaningful understanding of the registrant’s business model and governance mechanisms, the sector in which it operates, and the risks relevant to the registrant.
The draft bill also provides for additional requirements for the following digital assets business:
– Requirements of business providing the custody of digital assets
– Requirements of business providing advice on and management of digital assets.
– Requirements of business providing staking services
– Requirements of a digital asset exchange.
Authorization of VASP from another state to provide services in the jurisdiction
Article 7 of draft law. Prohibition to carry on unregistered digital asset business.
No person shall carry on a digital asset business in or from within The Bahamas, or purport to do so, unless that person is a legal entity registered under section 9.
Requirements to the VASP after registration (corporate maintenance, reporting, substance)
Subject to the approval of the Commission, every registrant shall appoint a compliance officer.
Subject to the approval of the Commission, every registrant shall appoint a money laundering reporting officer.
Article 15 of draft law. Financial and other reporting requirements of digital asset businesses.
(1) The Commission may prescribe the financial requirements to be met by registrants.
(4) Every registrant shall —
(a) meet the financial requirement applicable to its digital asset business;
(b) prepare annual financial statements or accounts as required by this Act in respect of all transactions and balances relating to its business;
(c) appoint an approved auditor who shall audit the financial statements or accounts of the registrant in accordance with generally accepted international standards on auditing or such standards as the Commission may recognise, and shall provide the Commission with an auditor’s report in respect thereof;
(d) file with the Commission a copy of its annual audited financial statements certified by an approved auditor not later than four months following the end of its fiscal year; and
(e) keep a copy of the most recent audited financial statements together with a copy of the auditor’s report thereon or accounts as the case may be, at its head office for a period of not less than five years beginning with its filing date.
(5) Every registrant shall —
(a) at all times, maintain liquid capital which is not less than the required liquid capital as may be prescribed by the Commission;
(b) for the purposes of calculating its liquid capital and required liquid capital, account for all its assets, liabilities and transactions in accordance with any rules as may be prescribed by the Commission;
(c) in respect of each month at the end of which it remains a registrant, submit to the Commission no later than three weeks after the end of the month concerned, a return which is in the prescribed form and includes the registrant’s liquid capital computation as at the end of the month, and any other information as may be required by the Commission.
A registrant shall implement and maintain where applicable, record keeping measures for the accurate collection of information and documents related to the originator and beneficiary of digital assets.
Every registrant shall implement and maintain data protection measures consistent with the Data Protection (Privacy of Personal Information) Act (Ch. 324A) concerning the protection of personal data relative to its customers and as may be prescribed.
Duty to maintain professional conduct.
Requirements for Conflicts of interest.
General duty to comply and co-operate.
Requirements for prevention of money laundering and terrorism financing.
Liability provided for the activities of a VASP without local registration
Article 61 of draft law. Compliance order.
(1) The Commission may, where at any time it appears to it that a person has failed to comply with any requirement of this Act, the Commission may by written notice, order that person to —
(a) comply with the requirements within such period and on such terms and conditions as the Commission shall specify;
(b) cease and desist carrying on digital asset business or their involvement in a digital asset business;
(c) cease and desist any activity which purports that the person is carrying on a digital asset business in or from within The Bahamas.
Article 62 of draft law. Penalty for failure to comply.
(1) Any person who fails to comply with —
(a) a compliance order made under section 61; or
(b) any directive of the Commission made under section 84, within the time period specified in the compliance order or directive, shall be subject to a penalty of up to one hundred thousand dollars for each contravention.
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The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.
