New Cryptocurrency Law in the Bahamas: Response to FTX Collapse
Date: 2024-08-05 Author: Henry Casey Categories: IN WORLD
The Bahamas has passed a new cryptocurrency law aimed at regulating and strengthening oversight in this area. This decision was a response to the bankruptcy of the FTX cryptocurrency exchange in November 2022, which was headquartered in the Bahamas.
The Bahamas Parliament has officially approved the Digital Assets and Registered Trading Platforms Act (DARE 2024). The new law introduces strict requirements for companies providing digital asset trading and custody services. This move is aimed at adapting to changes in the industry after the collapse of FTX.
Key Provisions of DARE 2024
The DARE 2024 Act contains several key provisions:
- Investor Protection: Crypto companies must comply with strict investor protection measures, including Know Your Customer (KYC) procedures.
- Disclosure and Financial Reporting: Disclosure and financial reporting requirements have been tightened.
- Expanded Scope of Activities: The Act covers a wider range of crypto firms’ activities, including advisory and management services, derivatives trading, and staking.
Staking Innovations
DARE 2024 introduces a unique disclosure regime for staking of clients’ digital assets and staking pool management. This is the first regulation of its kind, aimed at increasing transparency and protecting the interests of investors.
The Act clearly defines stablecoins, provides for their registration, and sets requirements for the storage, management, and reporting of reserves. The issuance of algorithmic stablecoins is strictly prohibited, which is aimed at preventing financial risks.
The Executive Director of the Bahamas Securities Commission, Christina Rolle, emphasized the importance of the adopted law for strengthening the country's reputation as a financial services hub:
"The passage of the law demonstrates our commitment to robust risk management. We have created a framework that not only focuses on investor protection, but also encourages responsible innovation."
The Aftermath of the FTX Collapse
After the collapse of FTX, the Bahamas authorities announced their intention to tighten the cryptocurrency legislation. This was necessary to restore the reputation of the jurisdiction. In November 2022, the FTX crypto exchange filed a request to sell 35 properties in the Bahamas, including the $30 million apartment of the former CEO of the company Sam Bankman-Fried (SBF).
The adoption of the new cryptocurrency law in the Bahamas is a significant step towards strengthening regulation and investor protection. The authorities are striving to create a sustainable and safe environment for cryptocurrency operations, which is important for the future development of the country's financial sector.
