The Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 (the “ICO Act”) became operative on 9 July 2018 and the underlying Companies and Limited Liability Company (Initial Coin Offering) Regulations 2018 (the “ICO Regulations”, together with the ICO Act, the “ICO Legislation”) were published on 10 July 2018.
The ICO Legislation governs all aspects of offering digital assets to the public in or from Bermuda. A digital asset covers anything that exists in binary format, including all forms of cryptocurrencies, digital coins and tokens issued in connection with an Initial Coin Offering (an “ICO”), which themselves are fundraising mechanisms similar to Initial Public Offerings, or IPOs, except that tokens, rather than shares, are issued.
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In a recent announcement, the Premier of Bermuda, David Burt, who is also Minister of Finance, made it clear that his intention is for a “new class of bank” to come to Bermuda, with legislation on the way to create new services to cater to Bermuda-based FinTech companies. This was due to the island’s fledgling FinTech sector facing “understandable resistance” from banks, as their business model “does not fit the mould of what we have come to know as Bermuda’s traditional model.”
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Hot on the heels of the Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 (the “ICO Act”), which seeks to introduce a statutory framework for initial coin offerings (“ICOs”) and has now passed both the House of Assembly and the Senate, comes the tabling of the Digital Asset Business Act 2018 (the “DAB Act”).
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During April 2018, the Government of Bermuda tabled the Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 (the “ICO Act”), introducing a statutory framework for initial coin offerings (“ICOs”). By implementing this new legislation, the Bermuda Government is hoping to lay the foundation for the jurisdiction to become a leading global blockchain and ICO centre. The ICO Act regulates offerings of ‘digital assets’, which are meant to capture all of the various categories of digital coins and tokens (whether they be utility, securitized, equity or otherwise) being issued as ICOs and via token sales. The purpose of the ICO Act is to only regulate those ICOs and token sales which are public crowd funding or similar type projects. It is not intended to regulate either private sales or those which are engaged in the business of pure virtual currency issuances. Digital asset offerings will be conducted in accordance with the requirements of published regulations as well as ongoing supervision and compliance requirements, including AML/ATF.
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The recent Budget announcement by the Bermuda government included one significant policy proposal which has the power to provide a welcome stimulus to the Bermuda economy over the course of the coming years. The Premier, also Minister of Finance, David Burt, indicated that a relaxation of the business ownership ‘60:40 rule’ was to be implemented to boost investment by non-Bermudians.
For those not familiar with this rule, Bermuda companies fall into two principal categories:
(i) local companies, which are usually incorporated by Bermudians to trade primarily in Bermuda; and
(ii) exempted companies, which are usually incorporated by non-Bermudians for the purpose of conducting business outside of Bermuda.
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