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Obtain Bermuda Digital Asset license

Bermuda Digital Asset license

Bermuda Digital Asset license
The Digital Asset Business Act 2018 (the "DABA") in Bermuda became operative with effect from 10 September 2018, creating a legislative framework for digital asset business and services to be operated within a regulated environment in or from within Bermuda.
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Timeframe: : contingent upon the complexity of the applicant's business and the collation of the documents needed for the license application

Company incorporation – approx. 5 business days from the lodgment of the application

Initial BMA decision in respect of the License – approx. 4-6 weeks

Minimum net assets: $100,000 USD or such other amount as the Bermuda Monetary Authority (“BMA”) may direct taking into consideration the nature, size and complexity of the licensed undertaking


Overview

DABA regulates the following “digital asset business” activities where they are conducted by any entity in or from within Bermuda:

  • issuing selling or redeeming virtual coins, tokens or any other form of digital asset;
  • payment service provider business utilising digital assets;
  • operating an electronic exchange whereby digital assets of any type are exchanged for cash or other digital assets;
  • provision of digital assets custodial wallet services;
  • digital asset service vendors.

The term “digital asset” is widely defined and covers anything which exists in binary form and comes with the right to use it and includes a digital representation of value. It captures digital coins, security, equity or utility tokens and anything intended to provide access to an application, product or service by means of distributed ledger technology.

There are two classes of the License available for applicants:

  • The Class M - is a restricted form of license intended as a regulatory "sandbox", with modified requirements and certain restrictions, and will be valid for a specified period, the duration of which will be determined by the BMA on a case-by-case basis. Following the expiry of this specified period, it is generally expected that the licensee will either have to apply for a Class F license (as described below) or cease carrying on business, although the BMA has discretion to extend the specified period.
  • The Class F -  is a full license not subject to any specified period, although it may still be subject to restrictions the BMA may deem appropriate in any given case.

Given that DABA is still relatively new legislation, it is prudent to meet with the BMA to discuss the proposed application. While the BMA will not give any confirmations prior to submission of the formal application, such meetings allow the parties to ask any questions they may have and will inform the content of the application.

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Licensing Criteria and Procedures for Applying for Bermuda Digital Asset license

Notable features
Procedure
Documents Required

General information

Company structure

  • At least 1 shareholder
  • At least 2 directors (must be under the oversight of such number of nonexecutive directors as the BMA considers appropriate given the nature, size, complexity and risk profile of the licensed undertaking)
  • Senior representative approved by the BMA who will have reporting obligations to the BMA and who maintains an office in Bermuda

Taxation

  • No corporate income tax, personal income tax, VAT, withholding tax on dividends / interest / royalties;
  • No capital gains tax (both corporate and individual);
  • No net wealth/worth tax.

Accounting & audit requirements 

Licensees must:

  • Prepare annual audited financial statements or accounts in respect of all transactions and balances relating to their business;
  • Not later than four months after the close of its financial year, provide the BMA with a copy of its audited financial statements and auditor's report;
  • Appoint local auditor, prior to appointing licensees must submit written particulars of the auditor to the BMA for approval.

Secretary - Local corporate services provider/secretary is required with access to books and records of the company

Registered office - Head office in Bermuda is required from which the licensee's digital asset business is directed and managed (presence of senior executives, holding meetings of the board of directors, making operational decisions)

Cybersecurity Program and Cybersecurity Report 

  • Licensees must demonstrate a comprehensive cybersecurity program that is commensurate to the nature, scale and complexity of its business and will be expected to have a written cyber security policy which is reviewed at least annually;
  • An external audit of its cybersecurity program must also be conducted on an annual basis;
  • Licensees must file with the BMA an annual prudential return and cybersecurity report within four months of the end of their financial year.

Fulfilment of the minimum criteria:

  • The “controllers” (managing directors, CEOs, shareholder controllers (owning or controlling more than 10%) and persons in accordance with whose instructions or directions the applicant in accustomed to acting (shadow directors)) must be “fit and proper”
  • The business must be conducted in a prudent manner (taking into account any failure to comply with the provisions of DABA, AML/ATF requirements, Codes of Practice issued by the BMA and international sanctions measures), including a requirement for the maintenance of minimum net assets of $100,000 or such other amount as the BMA may direct taking into account the nature, size and complexity of the licensed undertaking)
  • The business must have in place appropriate insurance to cover inherent risks or such other risk mitigation measures as the BMA may approve
  • Maintenance of adequate accounting records, control systems and policies and procedures and implementation of appropriate corporate governance policies
  • The business of the licensed undertaking must be effectively directed by at least two directors and under the oversight of such number of nonexecutive directors as the BMA considers appropriate given the nature, size, complexity and risk profile of the licensed undertaking
  • The position of the licensed undertaking within the structure of any group to which it may belong should be such that it will not obstruct the conduct of effective consolidated supervision

Company name

  • Language: English
  • Letters: From Roman alphabet

N.B.

  • Company name is restricted to be identical or similar that of an existing company.

In order to obtain a license, the following steps will be carried out:

  • Collection of documents satisfying the application, KYC and DD requirements
  • Registration of the proposed name of the company
  • Incorporation of the Bermuda Co.
  • Adopting board and shareholder resolutions
  • Filling license application to the BMA’s Assessment and Licensing Committee (the “ALC”):

- Preparing the application forms

- Reviewing the business plan and other documents forming part of the application

- Liaising with authorities in respect of the attendance and review of applications

In order to obtain license, Offshorelicense will fill all necessary application forms and also acquire apostilled corporate documents. 

For that reason, please provide us with the following documents.

  • Notarized copy of valid passport (of each Shareholder and Director)

  • Notarized copy of proof of address (ex. utility bill of each Shareholder and Director)

  • A cover letter providing an executive summary of the application and highlighting how the minimum licensing criteria for the relevant class or category of digital asset business is satisfied

  • A copy of the applicant's anti-money laundering and anti-terrorism financing policies and procedures

  • Information in respect of:

  •  - Corporate shareholders/owners, including:

  • Most recent audited financial statements;

  • Copies of any regulatory filings; and

  • Background information.

  • - Individual shareholders/owners, including:

  • Personal declaration forms;

  • Bank references of ultimate beneficial owners; and

  • Net worth statements (for individual owners).

  • A copy of the applicant's proposed cybersecurity program, including policies and procedures related to hot and cold customer private key storage

  • A description of how the BMA will have access to a node or other arrangement allowing it to monitor digital asset transaction records

  • An acceptance letters from the applicant's auditor and senior representative, and the curriculum vitae of the senior representative

  • The applicant's head office address
  • A declaration from an officer of the applicant that the applicant is aware of and will abide by the code of practice
  • Detailed Business plan

N.B.

  • If documents are not in English, the certified translation of it must be provided.
  • BMA has discretion to require additional information/documentation and, in rare instances, may defer or decline the application, which can further delay the process.
  • If the application is in respect of a Class M license (or "sandbox"), the additional information is also required.