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The Companies and Limited Liability Company (Initial Coin Offering) Amendment Act, 2018 (the “ICO Act”), which amends both the Bermuda companies and limited liability company legislation, came into force on 9 July 2018, providing a framework for the regulation of initial coin offerings in Bermuda. ICO Regulations1, expanding on certain requirements under the ICO Act, have also been published.
The ICO Act regulates offerings of ‘digital assets’, a term that applies to all categories of digital coins and tokens (whether they be utility, securitized, equity or otherwise) being issued as ICOs and via token sales. The purpose of the ICO Act is to only regulate those ICOs and token sales which are public crowdfunding or similar type projects. It does not regulate either private sales or those which are engaged in the business of pure virtual currency issuances. Such businesses, as well as those operating digital asset exchanges, e-wallets and similar structures, will be regulated by the Digital Asset Business Act, which has passed into law and is expected to come into operation shortly.
Under the ICO Act, an ICO will be treated as a restricted business activity that will require the consent of Bermuda’s Minister of Finance prior to an offering being made to the public (an “ICO offering”). A FinTech Advisory Committee will be appointed to assist with initial reviews of applications and to ensure that they meet certain minimum criteria regulations.
A company wishing to launch an ICO can incorporate within the typical timeframe of 24 to 48 hours using Bermuda’s usual incorporation procedures. However, it will not be able to commence its ICO offering without first obtaining the Minister’s approval. As part of that process, the applicant must provide a copy of the draft ICO offering document and any other documents required by the Minister. Note that the Minister may, if he deems necessary, impose appropriate conditions on the applicant or on its ICO.
The minimum criteria which should be included in the application for consent are matters such as:
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Bermuda ICO Legislation & Regulations Take Effect
1 The Companies (Initial Coin Offering) Regulations, 2018 and the Limited Liability Company (Initial Coin Offering) Regulations, 2018, together the ‘ICO Regulations’