The Bahamas intends to strengthen cryptocurrency laws that were tainted by the failure of the FTX exchange in November 2022, as per the media release made on Tuesday. Sam Bankman-Fried and his cryptocurrency exchange FTX were based in the Bahamas, which had previously approved the Digital Assets and Registered Exchanges Act (DARE) in 2020.
As per the document, it is mandated that “operators of a digital asset exchange must ensure the systems and controls used in its activities are adequate and appropriate for the scale and nature of its business.” According to the agency, the changes would include more activities which includes a disclosure rule that would be applied to the practice of staking, which entails putting up coins in exchange for incentives to help run blockchains.
The Securities Commission stated in a consultation paper that the legislation is being modified in part “in light of lessons learned during the so-called ‘crypto winter’ of 2022” as well as from benchmarking against regions like the European Union, Hong Kong, and New York.
Reflecting on the agent’s statement, “The bill provides the ability for the commission to prescribe additional activities as digital-asset businesses, as necessary.” The proposed law is open for public comment until May 31.
According to Christina Rolle, executive director of the Securities Commission of the Bahamas (SCB), the recent bill, which contains provisions on stablecoins, proof-of-work mining, and cryptocurrency staking, may become “among the most advanced pieces of digital asset-legislation in the world.”
During her first interview after the FTX collapse, Rolle claimed when the DARE Act was passed that they were either going to have to forcibly fit it into a regulatory framework or were going to have prohibited a crypto player from coming into our jurisdiction.
The DARE Act worked alongside banking regulations that have been in place since the late 1970s and data privacy regulations that have been in existence for ten years, which enabled the Bahamas to become a global leader in internet services and offshore banking.
It competes fiercely in the financial services sector and takes pleasure in being a pioneer, similar to other island nations in the area. In 2020, the nation introduced the Sand Dollar, the first operational digital money issued by a central bank.
Bankman-Fried has been charged with fraud after the collapse and has denied the allegations against him after being accused of stealing company cash to spend on opulent homes. The current management of FTX has criticised the inadequate governance that existed during his tenure, and they are now embroiled in a drawn-out court battle with the Bahamas over jurisdiction.
Following the abrupt demise of terraUSD last year, it will also introduce a “new and comprehensive regulatory framework for stablecoins” that aims to fix their value to other assets such as fiat money. It will also cover crypto services like advice, derivatives, and crypto staking, as well as non-fungible tokens (NFTs), which are classified as financial assets.
As the nation’s economy aspired to become a hub for cryptocurrencies, Bankman-Fried relocated to the Bahamas. As he waits for his US trial, he is now out on bail and residing in Palo Alto, California, with his parents, both of whom are law professors. In response to accusations of a lengthy fraud at FTX, he has entered a not guilty plea.