The Memorandum creates a framework under which the Bermuda Monetary Authority and the Wyoming Division of Banking can co-operate to facilitate the establishment of digital assets entities across jurisdictions and their effective supervision. The framework includes supervisory co-operation, mutual assistance and the exchange of information.

The notice said the Statement of Principles is relevant to the BMA's decisions on whether to authorise a digital asset issuance and whether to revoke or restrict an authorisation. As such, the statement considers and details the factors underlying the interpretation of each of the minimum authorisation criteria under the Digital Asset Issuance Act 2020.

The rules provide requirements as to digital asset issuance should be conducted, including details of:

• required information;
• ongoing disclosure and other requirements;
• information technology and cybersecurity;
• custody of assets;
• compliance measures; and
• exemptions.

Specific feedback is sought on:

• the definition of local issuer;
• the types of custody arrangements seen in digital asset issuances; and
• the availability and cost of technology systems to support the requirements of the Rules.

Responses should be received by 20 July 2020.

The Act replaces the 2018 initial coin offering legislation, which amended the country's company laws to allow the issuance of digital assets to the public.

Responsibility for the administration of offerings of digital assets also passed from the Minister of Finance to the Bermuda Monetary Authority (BMA). 

Firms authorised to launch a digital asset in or from Bermuda will also need a local representative, who must be approved by the BMA and have a local office.

The draft Digital Asset Business Act includes minimum requirements that will be applicable to all ICOs, including:

• mandatory disclosures of certain information related to the company;
• the digital asset being offered for sale;
• the rights of the purchaser.

Other key provisions include the establishment of a FinTech Advisory Committee to assist with consent applications and Copys around the publication and content requirements of ICO white papers.  

“Bermuda has an opportunity to become a global leader in the Fintech space by being one of the first countries in the world to specifically regulate ICOs," said Bermuda Premier, David Burt. 

"The proposed regulatory framework will provide legal certainty to companies looking to conduct ICOs in Bermuda."

This will not be a new bill, but will contain proposed amendments to the Companies Act 1981 and the Limited Liability Company Act 2016. 

Burt said that the aim of the bill was to make the island "a global leader in the FinTech space". 

"Bermuda has an opportunity to become a global leader in the Fintech space by being one of the first countries in the world to specifically regulate ICOs. The proposed regulatory framework will provide legal certainty to companies looking to conduct ICOs in Bermuda," Burt said. 

Under the proposed bill, ICOs would be treated as "a restricted business activity" and consent would have to be obtained from the Minister of Finance before beginning operations. 

An application for consent would need to include various information, such as the identity of the people managing the company behind the ICO, details of the asset on offer and the technology to be used, the amount being raised, as well as details of the "rights, features, functionality and intended transferability" of the digital asset for sale. 

The bill will include minimum requirements that will apply to all ICOs, including mandatory disclosures about the company, the digital asset for sale and "the rights of the purchaser to assist the public in making informed decisions about participating in any proposed ICO". 

Other laws governing ICOs, such as securities laws, will continue to apply. 

Burt said that Bermuda was taking a "measured approach" to entering the ICO space. 

The first step was the creation of a Legal and Regulatory Working Group, comprising Bermuda's former attorney general, representatives from the Ministry of Economic Development and Tourism, the Ministry of Finance, the Bermuda Monetary Authority, the Business Development Agency as well as stakeholders from the banking and legal industries. 

Burt said that he recognised that there were concerns "within well-established industries in Bermuda" about digital assets such as bitcoin, but that blockchain and distributed ledger technology were much bigger than bitcoin. 

He also warned that Bermuda could not afford to get stuck in "a comfort zone" and miss out on the economic benefits that becoming a blockchain hot spot could bring, including attracting new companies and investment to the island, with the ensuing opportunities for job growth and additional government revenue. 

Burt also said that governmental action to regulate ICOs will help mitigate some of the risks normally associated with them, such a "cybercrime, consumer fraud, money laundering and terrorist financing". 

The bill will soon be circulated for consultation, and following the end of the consultation, ICO legislation will be debated in the Bermudan parliament "at the earliest opportunity". 

In addition, the government is also consulting with the Bermuda Monetary Authority on further legislation on digital asset businesses, which will then also come in front of parliament.