Bahamas Passes Crypto Law
YEREVAN (CoinChapter.com) — The Bahamas has introduced the Digital Assets and Registered Exchanges Act 2024 (DARE 2024), targeting issues that led to the failures of FTX and Terraform Labs. This new regulation focuses on digital asset custody, staking services, and stablecoin oversight.
Bahamas Official Gazette – DARE 2024 Announcement. Source: Official Gazette of The Bahamas New DARE 2024 Law Enforces Asset Separation and Staking Transparency”
DARE 2024 requires businesses to keep customer assets separate from their own and other non-client assets. This separation is crucial to prevent the kind of asset mixing that contributed to the collapse of FTX. At FTX, commingled funds allowed Alameda Research to access customer assets, which led to significant financial turmoil. The incident resulted in former CEO Sam Bankman-Fried being convicted of fraud and sentenced to 25 years in prison.
The law also imposes strict disclosure requirements on companies offering staking services. Businesses must clearly explain the staking process, potential rewards, and any risks involved. Staking involves locking up cryptocurrency to support network operations, with the possibility of earning rewards. By mandating transparency, the law aims to ensure that customers understand the terms and risks associated with staking.
Bahamas Implements Strong Stablecoin and Digital Asset Regulations
DARE 2024 includes a detailed framework for stablecoin regulation. It mandates that stablecoin providers disclose their reserve assets and bans algorithmic stablecoins. This regulation follows the collapse of Terraform Labs’ UST stablecoin in 2022, which lost its value and caused significant market disruption. The new law seeks to prevent such instability by ensuring that stablecoins are adequately backed and transparent.
The act expands the definition of “digital asset activities” to include staking services and establishes standards for managing conflicts of interest in third-party relationships. This comprehensive approach aims to cover all significant aspects of the digital asset industry, providing a robust regulatory framework.
These regulations, implemented by The Bahamas Securities Commission, are part of the country’s effort to strengthen oversight and protect consumers in the rapidly evolving cryptocurrency market.
Bahamas Unveils DARE Act 2024 – Media Release. Source: Securities Commission of The Bahamas, Media Release
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