Regulatory environment of cryptocurrencies in Bahamas
Cryptocurrency has been a hot topic of discussion globally, with various countries and regulatory bodies grappling with the challenges and opportunities it presents. In the Bahamas, the government has taken steps to regulate the use of cryptocurrencies in the country.
Bahama’s sand dollar
The Bahamas has been relatively progressive in its approach to cryptocurrency regulation, recognizing the potential benefits that it can bring to the country’s economy. In 2019, the Central Bank of the Bahamas announced that it would be launching a digital version of the Bahamian dollar, known as the Sand Dollar. The Sand Dollar is a blockchain-based digital currency that is backed by the Bahamian dollar and is designed to be used as a means of payment within the country. The Sand Dollar was officially launched in October 2020, making the Bahamas one of the first countries in the world to have a central bank digital currency (CBDC) in circulation. The launch of the Sand Dollar is seen as a significant step towards the country’s goal of becoming a leader in the adoption and use of digital currencies.
The Central Bank of the Bahamas has taken a proactive approach to regulating cryptocurrencies in the country, with the aim of ensuring that they are used safely and securely. In 2020, the bank issued guidelines for the regulation of digital assets, which set out the requirements for entities that provide services related to cryptocurrencies. Under the guidelines, businesses that provide services related to cryptocurrencies, including exchanges, wallet providers, and other intermediaries, are required to obtain a license from the Central Bank of the Bahamas. The license application process involves a rigorous review of the applicant’s business operations and compliance with the bank’s requirements.
The guidelines also require licensed entities to implement robust anti-money laundering (AML) and counter-terrorist financing (CTF) measures. This is in line with international best practices and is aimed at preventing the use of cryptocurrencies for illegal activities such as money laundering and terrorism financing.
In addition to the regulation of digital assets, the Securities Commission of the Bahamas (SCB) is also responsible for regulating initial coin offerings (ICOs) and other crypto-related securities offerings. The SCB has issued guidelines for the regulation of ICOs, which require issuers to provide detailed information about the offering and the underlying assets.
If you are interested in obtaining a Virtual Assets Service Provider (VASP) license in the Bahamas, here are the steps you need to follow:
- Understand the requirements: The Central Bank of The Bahamas has set out specific requirements that must be met by applicants for a VASP license. These requirements include having a physical presence in the Bahamas, complying with anti-money laundering and counter-terrorism financing regulations, and having adequate systems and controls in place to manage the risks associated with virtual assets.
- Submit an application: Once you have familiarized yourself with the requirements, you can submit an application for a VASP license to the Central Bank of The Bahamas. The application must include detailed information about your business, including its ownership structure, management team, and compliance policies and procedures.
- Pay the application fee: Along with your application, you will need to pay a non-refundable application fee of $5,000.
- Wait for approval: After submitting your application, you will need to wait for the Central Bank of The Bahamas to review and approve it. The bank may request additional information or clarification during the review process.
- Obtain the license: If your application is approved, you will be issued with a VASP license, which will allow you to provide virtual asset services in the Bahamas.
- Maintain compliance: Once you have obtained your VASP license, you will need to ensure that you maintain compliance with the Central Bank of The Bahamas’ regulations. This includes regularly reporting on your operations and complying with anti-money laundering and counter-terrorism financing requirements.
What the government is anticipated to do.
In 2022, Central Bank of The Bahamas issued a Public Consultation on the Digital Assets Guidelines, which is believed to build a strong foundation for any future guidelines for the Government to ensure that digital assets are used safely and securely within the country. The proposed requirements outline the regulatory expectations surrounding the governance, risk management, acceptable forms of engagement, prudential treatment and reporting requirements for supervised financial institutions (“SFIs”) involved in or planning to engage in digital asset business activities. The deadline for commenting on these proposals was on February 27, 2023.
The future guidelines and policies will likely set out the requirements for entities that provide services related to digital assets, including exchanges, wallet providers, and other intermediaries. These requirements will likely include obtaining a license from the Central Bank of The Bahamas, complying with anti-money laundering and counter-terrorism financing regulations, and having adequate systems and controls in place to manage the risks associated with digital assets, aimed at creating a safe and secure environment for the use of digital assets.
Overall, the regulation of cryptocurrencies in the Bahamas is aimed at creating a safe and secure environment for the use of digital currencies, while also supporting innovation and growth in the sector. The government’s proactive approach to regulation is likely to encourage the development of new crypto-related businesses and investment opportunities in the country.
the Bahamas has taken a progressive approach to the regulation of cryptocurrencies, recognizing their potential benefits while also ensuring that they are used safely and securely. The launch of the Sand Dollar and the issuance of guidelines for the regulation of digital assets are significant steps towards the country’s goal of becoming a leader in the adoption and use of digital currencies. The regulation of cryptocurrencies in the Bahamas is likely to encourage innovation and growth in the sector, while also protecting consumers and preventing the use of cryptocurrencies for illicit activities.
It’s worth noting that obtaining a VASP license in the Bahamas can be a complex and time-consuming process. It’s important to ensure that businesses have a thorough understanding of the requirements and that the businesses have the necessary resources and expertise to comply with the regulations. Working with Manimama’s team will definitely help businesses to ensure a smooth process. We understand that our clients are focused on growing, and we are committed to helping them achieve their goals while managing legal risks. Contact us today to learn more about our services and how we can help you achieve your business objectives.
Author: Ganna Voievodina, a licensed attorney,
СЕО and co-founder of Manimama Legal & Growth Agency