The Bahamas has taken a significant step forward in digital asset regulation with the passage of the Digital Assets and Registered Exchanges Act 2024.

What Happened: This new legislation, announced by the Securities Commission of The Bahamas on July 30, 2024, represents a substantial evolution from its predecessor, the DARE Act of 2020.

DARE 2024 introduces sweeping reforms designed to address the rapidly changing landscape of digital assets and cryptocurrency markets.

While the 2020 Act laid the groundwork for regulating digital assets in the Bahamas, the new legislation significantly expands both the scope and depth of regulation.

One of the most notable changes is the broadened scope of activities covered under the new act.

DARE 2020 focused primarily on initial coin offerings and digital asset exchanges. DARE 2024 now encompasses a wider range of digital asset activities.

These include advisory and management services, digital asset derivatives, and staking services – areas that were not explicitly covered in the original legislation.

The treatment of digital asset exchanges has also seen significant enhancement. Under DARE 2024, these platforms must adhere to more stringent investor and consumer protection measures.

This includes robust systems and controls requirements to bolster the integrity and security of transactions, suggesting a more comprehensive approach compared to the 2020 Act.

A major addition in DARE 2024 is the introduction of a comprehensive framework for digital asset custody.

While the 2020 Act likely touched on custody to some degree, the new legislation brings custodial wallet services fully under its purview, mandating accessibility of digital assets and introducing other provisions to protect client interests.

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Perhaps one of the most innovative aspects 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 establishes a first-of-its-kind disclosure regime for staking digital assets, covering both client assets and the operation of staking pools as a business.

The treatment of stablecoins has also seen a significant overhaul.

DARE 2024 provides a clear definition and establishes comprehensive requirements for their issuance, custody, and management.

Notably, the new act prohibits the issuance of algorithmic stablecoins, reflecting a more cautious approach to this controversial type of digital asset.

DARE 2024 also introduces fit and proper standards for digital asset issuers, along with new disclosure and financial reporting requirements.

This suggests a more rigorous approach to vetting and ongoing supervision of issuers compared to the 2020 Act.

The new legislation also addresses several areas that were likely not covered in the original act, including the categorization of non-fungible tokens, liquidity and reporting requirements, and restrictions on proof-of-work mining.

The prohibition of privacy token issuance is another new addition, reflecting evolving concerns in the crypto space.

Christina Rolle, Executive Director of the Securities Commission, emphasized that DARE 2024 “represents a new standard in digital asset regulation.”

This statement, coupled with the comprehensive nature of the new legislation, suggests that while DARE 2020 was groundbreaking for its time, DARE 2024 represents a significant leap forward in terms of regulatory sophistication and coverage.

What’s Next: The broader implications of these legislative advancements will be a key topic of discussion at Benzinga’s Future of Digital Assets event on Nov. 19.

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