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In the fall of 2021, the FTX exchange moved operations to the Bahamas, a move the Prime Minister described as “proof that we are headed in the right direction.”
However, the island nation’s laws were found wanting as the exchange stole billions from investors. Its new law seeks to prevent another FTX implosion.
Known as the Digital Assets and Registered Exchanges Act 2024 (DARE Act 2024), it encompasses several aspects, from token issuance and custody to stablecoins and staking.
The new bill is a revision of the DARE Act 2020, a law implemented four years ago and which was cited as the reason FTX moved from Hong Kong to the island nation. It was one of the first comprehensive frameworks for the digital asset industry. However, to attract virtual asset service providers (VASPs) and promote innovation, the Act had a light touch on most issues, and FTX fully exploited these loopholes.
The Bahamas has learned, and according to the Securities Commission, the new Act will address the evolving digital asset landscape with comprehensive reforms.
“DARE 2024 represents a new standard in digital asset regulation and is a testament to our commitment to robust risk management,” says director Christina Rolle.
Rolle took over at the securities watchdog in January 2015. As such, she was at the helm as the country brought in FTX and was tasked with regulating it and ensuring it complied with the first DARE Act. But as several days of gruelling cross-examination of CEO Sam Bankman-Fried and other top officials revealed, the exchange was moving investor funds from one entity to another at will and investing in whatever shiny project tickled their fancy.
Rolle believes that with the revised DARE Act, the country will be tougher on crime without sacrificing innovation.
“We have created a framework that not only focuses on investor protection but also encourages responsible innovation, positioning The Bahamas at the forefront of digital asset regulation globally.”
One of the provisions under the new Act is that VASPs must segregate user funds from their own unless they have ‘explicit client consent.’ This provision would have prevented the collapse of FTX and the loss of billions of dollars as SBF and cronies couldn’t access user funds.
The new Act also addresses robust and secure systems, a disclosure regime for staking services, stablecoin issuance and management and conflict of interest.
Watch: It’s time for regulation to enable blockchain growth
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