Bahamas Introduces New Bill To Tighten Crypto Regulation After FTX Crash

Key Points:

• The Bahamas intends to tighten cryptocurrency regulations, which have been tainted by the collapse of the FTX exchange.
• More activities would be included in the new bill.
• The use of algorithmic stablecoins and privacy tokens would be prohibited.

Following months of FTX damage control, the Bahamas’ securities regulator has opened a consultation period for the country’s Digital Assets and Registered Exchanges (DARE) Bill.

The DARE Bill 2023, which is set to go into effect at the end of the second quarter of 2023, expands customer protection rules and adds disclosure and registration requirements from the DARE 2020 Act.

The definition of “Digital Business Activities” in DARE 2023 is expanded to include financial advice on digital assets, digital asset derivatives activities, blockchain node operation, and staking services.

According to the statement, new regulatory frameworks will be developed to ensure that the Bahamian legislative regime is “current, proactive, and compliant” with international standards.

The legislation specifically seeks to strengthen investor protections and risk management from industry-related companies while also improving provisions for market innovation and development.

The new bill includes provisions for stablecoins, proof-of-work mining, and staking, and it has the potential to become among the most advanced pieces of digital-asset legislation in the world, according to Christina Rolle, executive director of the Bahamas’ regulator.

Strengthened regulations for crypto exchanges, financial and reporting requirements, and stablecoin regulation will all be prioritized.

Businesses intending to operate an exchange in the country will be required to demonstrate that they have systems in place to handle the scale and nature of their operations.

DARE is also said to include staking provisions, advice on managing digital asset activities, and distributed ledger network nodes.

The Bahamas was the headquarters of Sam Bankman-Fried’s bankrupt crypto exchange FTX. The company, which declared bankruptcy in November, was allegedly riddled with corruption and fraud, which was fueled by commingling and misappropriating user funds.

Bankman-Fried has since been accused of stealing corporate funds and spending them on luxury villas in the Bahamas. The US Department of Justice charged him with fraud, and he pleaded not guilty. FTX’s new management has criticized poor governance during his tenure, and the company is also embroiled in a lengthy legal dispute with the Bahamas over jurisdiction.

Following the collapse of the TerraUSD stablecoin last year, the new bill will include a new and comprehensive regulatory framework for stablecoins whose value is pegged to the US dollar or another stable asset.

The creation of algorithmic stablecoins and privacy tokens will be “expressly” prohibited as well. The bill also addresses crypto services such as advice, derivatives, and staking, as well as non-fungible token oversight.

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Harold

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