The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE SECURITIES Commission’s top executive yesterday said the proposed “screening” of licensees’ digital asset wallets will bring The Bahamas’ “in step with global best practice” and ensure they are being used properly.

Christina Rolle, the regulator’s executive director, told Tribune Business that the its draft ‘wallet information collection and screening policy’, which was released last Thursday for consultation and feedback with the digital assets and wider Bahamian financial services industry, is focused on facilities operated by licensees rather than those of their private clients.

She explained that the proposal will impose an obligation on Digital Assets and Regulated Exchanges (DARE) Act licensees to provide information on their own wallets - the assets they contain, where they were sourced from and what they will be used for - when three specific events or circumstances occur.

These are the initial application to be licensed and registered in The Bahamas; within ten days of a “material change” that retires or alters a specific wallet, including the transfer of assets between wallets; and when annually affirming “the completeness and currency” of records submitted to the Securities Commission.

All information will be kept confidential and not disclosed by the Securities Commission other than via a court Order, to law enforcement or to other regulators via established legal and co-operation mechanisms.

Ms Rolle told this newspaper that the proposed policy is designed to ensure all Bahamas-based DARE registrants and licensees are using their digital asset wallets for the specific purposes which they have previously disclosed to the Securities Commission.

“It’s very straightforward,” she said. “This is really the trend that the regulation of digital assets is moving in. Some jurisdictions have already implemented it. This is just the next step in digital assets regulation.

“What we are really concerned with is the operating wallets of licensees and registrants, not the private wallets of their clients. What is happening with the regulation, the Commission is not only able to monitor activity but have the ability to scan what licensees and registrants are using their wallets for so that the use aligns with the activities that were disclosed.

“And also whether there are being wallets being used in-jurisdiction outside the activities known to the Commission,” Ms Rolle added. “This is a trend, and regulators are moving more and more to introducing it. It’s in step with where regulation has advanced.

“We want to regulate our digital assets market sector in accordance with best practices globally, and this is one of the best practice tools for regulation.” The Securities Commission said that, while feedback has yet to be submitted given the proposal’s relative infancy, she does not anticipate major opposition or non-compliance.

“I don’t anticipate non-compliance on the issue at all. The issue is too straightforward for that,” she explained. “I’m interested to hear and see what licensees’ thoughts will be on this. I imagine the feedback will be relatively neutral. That’s my suspicion.”

The proposed wallet policy stipulates that the Securities Commission will collect information for specific purposes, namely the “assessment of applications for licensing or registration, including source of funds analysis” plus for ongoing risk-based supervision that may involve blockchain analysis. Other purposes involve the examination of licensees and registrants, and to allow the Bahamian regulator to fulfill and discharge all its legal obligations.

“Wallet information shall not be used for any purpose other than those stated, and shall be held as confidential regulatory information subject to the Commission's confidentiality obligations,” the Securities Commission’s proposed policy states.

“Disclosure outside the Commission occurs only through lawful gateways, including with the express consent of the person to whom the information relates, to the Financial Intelligence Unit and domestic law enforcement, and to foreign regulatory counterparts under the Commission's co-operation arrangements.

“Screening under this policy is a supervisory activity. A screening result is not, of itself, a finding against a licensee, registrant or applicant. The Commission will put material adverse indications to the person concerned and provide them with an opportunity to respond before drawing supervisory conclusions from them.”

However, a failure to provide wallet information under the Securities Commission’s new policy, as well as supplying inaccurate and incomplete details plus failing to affirm their veracity, could expose a DARE licensee to “supervisory and enforcement consequences”.