Bahamas Bolsters Crypto Regulation with DARE Act 2024 in Wake of FTX Collapse
The Bahamas has taken a significant step in strengthening its position as a leader in digital asset regulation with the passage of the Digital Assets and Registered Exchanges Act, 2024 (DARE 2024). This new legislation, announced by the Securities Commission of The Bahamas, comes in the aftermath of the FTX cryptocurrency exchange collapse and aims to address the evolving landscape of digital assets and cryptocurrency markets.
DARE 2024 builds upon its 2020 predecessor, introducing comprehensive reforms designed to enhance investor protection and promote responsible innovation. Christina Rolle, Executive Director of the Securities Commission, stated that the new framework “represents a new standard in digital asset regulation” and demonstrates the country’s commitment to robust risk management.
Key features of DARE 2024 include an expanded scope encompassing a wider range of digital asset activities, such as advisory services, digital asset derivatives, and staking services. The legislation also imposes more stringent requirements on digital asset exchanges, including enhanced investor and consumer protection measures and stricter systems and controls requirements.
One of the most notable aspects of DARE 2024 is the introduction of a robust custody framework, which brings custodial wallet services under regulatory oversight and enhances the protection of client interests. This move appears to address issues highlighted by the FTX collapse, where customer funds were allegedly commingled with corporate assets.
The Act also introduces a first-of-its-kind disclosure regime for staking services, requiring providers to disclose key information about the staking process, expected rewards, and potential penalties. Additionally, DARE 2024 establishes a comprehensive stablecoin framework, defining stablecoins and regulating reserve assets while prohibiting algorithmic stablecoins – likely a response to the Terra/LUNA collapse in 2022.
Other notable provisions include enhanced investor protection measures for digital asset issuers, standards addressing conflicts of interest, and restrictions on privacy token issuance and proof-of-work mining.
The Bahamas’ move to update its digital asset regulation comes as the country seeks to maintain its competitiveness as a financial center while addressing the risks exposed by recent industry failures. By aligning with international best practices and recommendations from global standard-setting bodies, DARE 2024 aims to strike a balance between fostering innovation and safeguarding investors in the rapidly evolving crypto landscape.
