The introduction of a comprehensive custody framework by DARE 2024 guarantees the accessibility and preservation of digital assets for clients.
The Digital Assets and Registered Exchanges Act 2024 has marked a significant advancement in the regulation of digital assets in the Bahamas.
The Securities Commission of The Bahamas announced this new legislation on July 30, 2024, which represents a significant improvement over its prior, the DARE Act of 2020.
In an effort to tackle the swiftly evolving cryptocurrency markets and digital assets, DARE 2024 implements extensive reforms.
Although the 2020 Act established the foundation for the regulation of digital assets in the Bahamas, the new legislation substantially broadens the scope and depth of regulation.
The new act’s expanded scope of activities is one of the most significant alterations. The primary concentration of DARE 2020 was on digital asset exchanges and initial coin offerings. DARE 2024 now incorporates a broader array of digital asset activities.
The original legislation did not expressly address the following: advisory and management services, digital asset derivatives, and staking services.
There has also been substantial improvement in the treatment of digital asset exchanges. These platforms are required to comply with more rigorous investor and consumer protection measures under DARE 2024.
This implies a more comprehensive approach than the 2020 Act, as it includes robust systems and controls requirements to enhance the integrity and security of transactions.
The introduction of a comprehensive framework for digital asset custody is a significant addition to DARE 2024.
The new legislation fully encompasses custodial wallet services, mandating the accessibility of digital assets and instituting other provisions to safeguard client interests, despite the fact that the 2020 Act presumably touched on custody to some extent.
Perhaps one of the most innovative features of DARE 2024 is its approach to staking, a concept that was likely not addressed in the 2020 legislation due to its more recent prominence in the crypto ecosystem.
The new act introduces a disclosure regime that is unparalleled in its scope, encompassing the operation of staking pools as a business and client assets, for the purpose of staking digital assets.
The treatment of stablecoins has also undergone a substantial transformation. DARE 2024 establishes exhaustive requirements for their issuance, custody, and management, as well as a distinct definition.
It is important to note that the new act prevents the issuance of algorithmic stablecoins, which is indicative of a more cautious approach to this contentious digital asset.
DARE 2024 also introduces new disclosure and financial reporting requirements, as well as fit and proper standards for digital asset issuers.
This implies a more stringent approach to the verification and ongoing supervision of issuers in comparison to the 2020 Act.
The new legislation also addresses a number of areas that were likely not addressed in the original act, such as the categorization of non-fungible tokens, liquidity and reporting requirements, and restrictions on proof-of-work mining.
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