The Bahamas To Introduce Tougher Crypto Rules After FTX Fiasco
The Bahamas is gearing up to tighten its crypto regulations in a bid to protect investors after FTX founder Sam Bankman-Fried’s crypto empire — largely based in the nation— was swiftly wiped out last November.
Stiffer Crypto Regulation Incoming Following FTX Collapse
Months after the implosion of FTX put the Bahamas on the spot, the Caribbean nation is preparing to impose more stringent regulations on crypto assets, as per an April 25 statement from the Securities Commission of the Bahamas (SCB).
The laws, packaged in the Digital Assets and Registered Exchanges (DARE) bill, including expanding the definition of digital assets businesses, measures on stablecoins, proof-of-work mining, as well as covering crypto services such as advice, derivatives, and crypto staking.
Under the new rulebook, “operators of a digital asset exchange must ensure the systems and controls used in its activities are adequate and appropriate for the scale and nature of its business.”
The Bahamas, which passed crypto laws previously dubbed the Digital Assets and Registered Exchanges Act in 2020, was home to Bankman-Fried and his once multi-billion-dollar digital asset exchange FTX, which went under last year. FTX’s new CEO John Ray III has since accused the Bahamian government of directing unauthorized access to the exchange to obtain digital assets that should be under the control of FTX.
Moreover, Bankman-Fried was also accused of using corporate funds to purchase luxury penthouses in the island nation. The disgraced CEO has pleaded not guilty to charges brought against him for his role in the astonishing FTX collapse, and his criminal trial is set to take place in October.
Ms. Christina Rolle, Executive Director of the Securities Commission of The Bahamas, noted that once passed, the proposed DARE legislation would become “among the most advanced pieces of digital asset legislation in the world and will align with The Bahamas’ commitment to facilitating development and innovation in a well-regulated environment.”
Bahamas Prohibits Algorithmic Stablecoins
In order to prevent another crypto disaster, the Bahamas’ regulator is also banning the issuance of algorithmic stablecoins in response to last May’s collapse of TerraUSD.
As you can recall, the blowup of the Terra ecosystem, which stemmed from the depegging of UST from the U.S. dollar, ignited a deep downturn that obliterated investors’ funds and also undermined the reputation of the entire cryptocurrency sector. It also triggered a domino effect that saw many other prominent crypto-focused firms experiencing liquidity problems or filing for bankruptcy protection.
Specifically, the upcoming regulation will introduce “a new and comprehensive regulatory framework for stablecoins” whose value is tied to the United States dollar or another stable asset.
Public consultation for the new bill will run until May 31, and the regulator hopes it will become law by the end of the second quarter.
Bitcoin, which has steadily climbed about 70% since the start of 2023, was trading hands at a price of $29,728.28 at press time.
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