NASSAU, BAHAMAS — Prime Minister Philip Davis emphasized yesterday that the Securities Industries Bill (2024) and the Digital Assets and Registered Exchanges Bill (2024) signify crucial strides in fortifying the country’s regulatory framework for financial services and investments, aiming to enhance fairness and transparency while promoting sustainable economic growth.
During the debate in Parliament, Prime Minister Dvais noted that the amendments will allow the Securities Commission of The Bahamas to maintain its position as a world-class regulator, inspiring investor confidence in the Bahamas’ financial services sector and capital markets.
“As a result of our efforts, The Bahamian public will reap the economic benefits of increased investor confidence. The Securities Commission of The Bahamas continues to exemplify excellence as a regulator operating at the highest international standards,” said Davis.
The Securities Industries Bill (2024) replaces the Securities Industries Act (2011), marking a comprehensive overhaul and modernization. The Bill empowers the Commission with expanded access to records for investigations and strengthens governance oversight, including separating the roles of Chairman and CEO. It also introduces a new regulatory framework for derivatives trading and recognizes digital assets as securities, subjecting them to capital market regulations. The Bill enhances the Commission’s enforcement capabilities, including issuing directives and referring matters for criminal charges when necessary.
“There are also now instances in which the Commission has independent authority through administrative action to address non-compliance with regulations by administering automatic fines, issuing orders to cease and desist non-compliant activities, access information to assess suspected non-compliance, and directly address breaches in anti-money laundering and counter-terrorism regulations,” said Prime Davis.
He added: “To further enhance the Commission’s ability to bring about fair outcomes for all parties, the legislative updates include penalties related to any authorized parties found to be engaging in tipping off the subject of an investigation about particulars of that investigation, which is an offense that will lead to a fine of up to fifty thousand dollars, a prison sentence of up to three years, or both. The Commission is also further empowered to manage systemic risk in capital markets. This includes situations that can bring about distress to investors, issuers, and clients and situations that erode public confidence in the integrity of capital markets or impair the orderly functioning of capital markets. Through this, the Commission is authorized to obtain necessary information and issue directives to mitigate these risks and protect the interests of all parties.”
The Bill also establishes the Commission’s oversight in winding up licensees and registrants, including approval to initiate the process and setting reporting standards. It introduces provisions for compensation to safeguard registrants and clients affected by bankruptcy, insolvency, or winding-up procedures. Upon full implementation, the Securities Industries Bill (2024) will markedly enhance the capabilities of the Securities Commission of The Bahamas for future achievements.
The Digital Assets and Registered Exchanges Bill (2024), under the purview of the Securities Commission, builds upon the initial Act implemented in December 2020, which officially recognized and authorized Digital Assets and related activities in The Bahamas. The goals of the Digital Assets and Registered Exchanges Act (DARE Act) are to safeguard investors and consumers, ensure compliance with international AML/CFT/CPF standards for digital assets activities, and effectively manage systemic risks associated with their regulation.
Davis noted that the legislation was celebrated around the world as an example of comprehensive, protective, flexible, and balanced law-making that attracted the interest of many of the world’s largest players within the digital assets sector.
“Today, we host a number of crypto, blockchain, and other digital asset-based enterprises and exchanges that have moved here precisely because of our excellent digital assets regulations, along with our local financial services expertise, and, of course, our sun, sand, sea, and culture. Of course, as the first iteration of a law to regulate a sector that even major jurisdictions like the US have failed to regulate, adjustments are necessary. There were inevitable bumps along the road. Some of these were the product of the inherent volatility and unpredictability of a still-growing and evolving and emerging industry,” said Prime Minister Davis.
He added: “The digital assets sector of today looks completely different from the sector did three and a half years ago when the DARE Act was first introduced. Where there have been issues and challenges, we have taken note, learned, and developed solutions to ensure that we continue to lead the way.”
Davis noted that the Bill expands upon the existing Act to include a wider range of digital asset activities.
“We discussed the trade of derivatives under the Securities Industries Bill, and now, under the DARE Bill, we make room for digital assets derivative services. This Bill also provides regulatory oversight for digital asset advisory and managerial services. To provide for a greater degree of flexibility and agility moving forward, this Bill allows for the Commission to identify additional activities as digital assets businesses. This allows for the regulatory framework to be applied to new applications that have not yet entered mainstream use, or even those that haven’t been invented yet. The Commission can now quickly account for industry changes and innovations,” said Davis.
The Bill includes provisions for comprehensive systems and controls tailored to the scale of business operations. It also establishes regulations for digital wallet services, facilitating receipt, storage, and transfer of digital assets. The framework enhances protections for digital asset holders, mandating operators to maintain systems ensuring consistent client access to these assets. A notable feature of the Bill is its disclosure requirements for digital asset staking. Staking involves investing digital assets in a blockchain to support a cryptocurrency, yielding returns. The agreement details, including terms, duration of staking, and earned rewards, must now be disclosed, bolstering transparency and regulatory oversight.
Davis stated: “Additionally, as the use of stablecoins increases, we also see a need to regulate the use and exchange of stablecoins within our jurisdiction. These coins are essentially cryptocurrencies with a value pegged to another asset, such as a fiat currency or other commodity held in reserve. We now have a working statutory definition of stablecoins and have made way for the formal registration of stablecoins, as well as the forms of reserve assets accepted to back up the value of these coins. There is a requirement for the issuer of stablecoins to provide information related to how the process works, the reserve assets used, investment policies, and other pertinent details, as well as the requirement for an auditor to conduct quarterly reports and annual reviews.”
