By YOURI KEMP
Tribune Business Reporter
The deputy prime minister yesterday hailed new legislation as "expanding the playing field" for the Bahamian financial services industry into the digital assets and technology space.
Branding the Digital Assets and Registered Exchanges (DARE) Bill 2020 as "a bold piece of legislation", K Peter Turnquest told the House of Assembly during its second reading that the legislation will create the regulatory platform for the sector and its clients to exploit financial technology (Fintech) solutions such as cryptocurrencies and digital ledgers (blockchain).
"By establishing the legal foundation for a new industry, the Bill expands the playing field for financial services activity in this country, potentially creating new businesses, providing expansion opportunities for existing financial services providers and corporate services providers to grow their businesses into the digital space, as well as for new fintech operators to establish themselves in The Bahamas for their operations, or to work with firms already in The Bahamas," Mr Turnquest said.
"In fact, the Commission has had direct, specific and sustained expressions of interest in the regulation of digital assets in this jurisdiction since 2018 from both local and international entrepreneurs. In some instances, I understand, these were from relatively significant digital assets businesses."
He added: "Among the potential business, the Bill facilitates the registration of digital token exchanges and the provision of services related to digital token exchanges. It provides for the regulation of digital assets-based payment service businesses. It also embraces the provision of distributed ledger technology platforms for the exchange and transfer of digital assets.
"It also provides for registration for the provision of financial services related to the creation, issuance or sale of digital tokens and other digital assets. The opportunities for Fintech entrepreneurs are immense - potentially involving development of asset tokens, such as stable coins; distributed ledger technology-based payment systems; new digital tokens and coins and ensuing business funding or capital raising options through initial token offerings."
Mr Turnquest said the Bill meets Financial Action Task Force (FATF) requirements, with regard to meeting anti-money laundering and counter-terrorism financing standards, as well as the relevant principles of the International Organisation of Securities Commissions (IOSCO).
"I think it is important to note here that in establishing the regulatory perimeter for digital assets and digital assets business, the Bill does not incorporate digital currency, such as the Sand Dollar digital currency, which the Central Bank of The Bahamas launched in October," Mr Turnquest said.
"Virtual currency tokens are included in the scope of the Bill, and defined as a digital representation of value which can be digitally traded and functions as a medium of exchange, unit of account or store of value. However, the definition limits these virtual assets to having a cryptographic value, and specifically excludes them from having legal tender status or carrying any security or guarantee in any jurisdiction.”
The DARE Bill "does not seek to regulate the underlying technology itself," Mr Turnquest said, adding: "There has been growing local and international interest from digital asset creators and service providers for legal and regulatory certainty in The Bahamas for some years.
"As a result, the Securities Commission set out on a path of diligent research in 2018 to develop the legislative and regulatory framework. This included benchmarking the legal and regulatory approaches deployed by leading jurisdictions in the digital assets space, industry and public consultation, and careful attention to and analysis of developing international standards and best practices impacting regulation of the digital assets space.”