Bermuda: Lex Mundi - Global Token Sales Guide

Last Updated: 8 August 2018
Article by Steven Rees Davies
Most Read Contributor in Bermuda, July 2018

1. What, if any, are the regulations applicable to token sales, aka initial coin offerings (“ICOs”).

The Bermuda Government has introduced legislation to govern ICOs in and from within Bermuda. The Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 (ICO Act) was recently passed by both the House of Assembly and the Senate, and has since received Royal Assent.  All that remains for the ICO Act to become effective is for the Minister to publish a notice in the Gazette.  This is expected to occur simultaneously with ancillary regulations that are expected to be issued during July 2018.

The Bermuda Government has also introduced the Digital Asset Business Act (DABA) which is intended to establish a licensing and governance regime for any person providing services to the public in the digital asset sector. Whilst DABA does not require an ICO to be licensed in itself, it does require those service providers that are integral to the effective operation of an ICO in or from within Bermuda to be licensed.

2. Identify the applicable federal, provincial, state regulatory agency/agencies that have asserted or may assert jurisdiction over ICOs.

ICOs have been designated as Restricted Activities under Bermuda legislation, which requires all persons seeking to conduct an ICO to first obtain the consent of the Minister of Finance (Minister). The Minister will establish and appoint a FinTech Advisory Committee (FAC), who will assist the Minister in assessing ICO applications for consent. The Minister and the FAC may also issue a Code of Conduct to provide guidance on duties and requirements of persons affected by the ICO Act. In addition, the Registrar of Companies is empowered to impose civil penalties on companies that do not comply with the requirements of the ICO Act.

The DABA licensing regime will be regulated by the Bermuda Monetary Authority (BMA).

3. Who is subject to the regulatory regime?

Any person conducting an ICO in or from within Bermuda is subject to the ICO Act and ancillary regulations. Any person offering digital asset business services in or from within Bermuda will be subject to the DABA licensing regime and ancillary regulations.

4. What regulations, if any, are applicable to sales of securities tokens v. utilities tokens? 

The ICO Act does not differentiate between a securities token and a utilities token.

An ICO is defined as “an offer by a company to the public to purchase or otherwise acquire digital assets”.

Digital assets are defined as “..anything that exists in binary format and comes with the right to use it and includes a digital representation of value that

a. is used as a medium of exchange, unit of account, or store of value and is not legal tender, whether or not denominated in legal tender;

b. is intended to represent assets such as debt or equity in the promoter;

c. is otherwise intended to represent any assets or rights associated with such assets; or

d. is intended to provide access to an application or service or product by means of blockchain;

but does not include:

e. a transaction in which a person grants value as part of an affinity or rewards program, which value cannot be taken from or exchanged with the person for legal tender, bank credit or any digital asset; or

f. a digital representation of value issue dby or on behalf of the publisher and used within an online game, game platform, or family of games sold by the same publisher or offered on the same game platform;”.

5. Is the Government expected to (further) regulate ICOs and what is the timing of any proposed regulation?

The Government of Bermuda is expected to issue ancillary Regulations to compliment and bolster the ICO Act during July 2018. This is intended to give greater certainty to and to provide more detail for the purposes of compliance with the ICO Act. It will also set out the Government fees that will be applicable to each ICO conducted in or from within Bermuda. The DABA regulations are expected to be issued and operation by September 2018.

6. Have there been any ICOs in your jurisdiction? If so, how are they normally structured?

Yes, but to date these have been prior to the introduction of the ICO Act and so do not follow any of the new requirements.

7. Describe, briefly, your assessment of the Government’s current attitudes/activities, including enforcement trends and recent developments.

The Bermuda Government is pro-actively seeking to attract technology companies to Bermuda, with a specific focus on ICOs and digital asset businesses using blockchain technology. Their focus has been to establish a regulatory environment that protects the public whilst fostering and encouraging innovation. Simultaneously with the ICO Act and DABA the Government of Bermuda has established a task force to consider and implement an electronic ID system for Bermuda. More details on this project will be forthcoming in the next few months.

8. Describe the sanctions for non-compliance with the relevant regulations.

Any person conducting an ICO in or from within Bermuda without the Minister’s consent or who [knowingly] makes or authorises a [material] untrue statement to be made in an ICO offer document commits an offence and shall be liable (i) on summary conviction to a fine not exceeding USD50,000 or imprisonment for a period of one year or both, or (ii) on conviction on indictment to a fine not exceeding USD250,000 or imprisonment for a period of five years or both. There are also civil liabilities for loss of damage sustained by reason of any untrue statement contained in an ICO offer document.

Under DABA the BMA may impose civil penalties on any person that breaches the requirements or prohibitions imposed not exceeding USD10,000,000, and/or publish a statement to this effect. The BMA also has the power to apply for injunctions against persons who it reasonably believes will contravene or will, where such has already occurred, continue to contravene DABA.

9. Other important/notable information.

There are many important and notable aspects to this new legislation which will only be increased as the ancillary regulations, Code of Conduct and other materials and guidance notes are published. There is too much to include in a Guide of this nature. Readers are recommended to seek specific advice on matters or clients that are affected by this new legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Steven Rees Davies
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions