The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The Securities Commission’s top executive has foreshadowed the roll-out of more digital asset regulations as it begins focusing on “investment protection” in the cryptocurrency space.

Christina Rolle, the Commission’s executive director, speaking at the FTX Crypto Bahamas conference, said it was the regulator’s role and mandate to bring “integrity” to the market as a result of the huge growth in cryptocurrencies worldwide.

“When we started this journey, we saw that the market was in need of clarity,” she added. Ms Rolle said the “journey” towards digital assets regulation in The Bahamas was “different” than in many other countries, adding: “We began around 2017, and began to see interest from the market in looking for a regulatory home.

“It was at that time that I refer to the industry creating a regulatory race, and so in 2018, I think it was at an IOSCO [International Organisation of Securities Commissions] conference that it dawned on me that we need to start looking at this space in earnest to develop the regulatory framework. And when I say looking at the space in earnest, if you can imagine the conversation among securities regulators really was around when it comes to security, and how you treat crypto as a security.”

Ms Rolle said “benchmarking” cryptocurrencies, and understanding what regulators and the private sector both wanted, has been a major issue. “So we developed the legislation with that in mind, but we realised that there were a couple of areas that we wanted to focus on,” she added.

“And so those areas are, particularly, digital asset businesses such as exchanges, custodians, all of those types of digital asset businesses, and then we want to focus on the distribution of tokens and how the token can be registered for distribution. So those were things we knew how to do.”

The Bahamas’ Digital Assets and Registered Exchanges Act was passed in 2020, but Ms Rolle added: “There are some things in the space that have evolved since 2020. We have just begun to learn more about stable coins, and stable coins have evolved to a point where we would really need to start addressing the investor protection issues.

“Issues such as valuations, disclosures, financial reporting, these types of things, we also see the need to address the De-Fi (decentralised finance) generally. These are issues that are unique to the space. So those are the things that are up next for us. So we’re looking at how we will adjust the framework to adapt to those.”

De-Fi is an umbrella term for the part of the crypto business that is geared toward building a new, Internet-native financial system, using blockchain to replace traditional intermediaries and trust mechanisms.

“If you really look at the way a lot of the regulatory frameworks have been developed thus far, a lot of them already addressed consumer protection. So I think the next thing is investment protection issues,” Ms Rolle said.

“So issues around custody and how the custodian uses a client’s crypto assets, whether they’re lending them out, whether they get staking, the regulators are now going to have to understand the implications of these issues, which is quite different from the securities market, and how to adapt to address defence and protection concerns with these types of issues.”