Technological developments have been accelerating at an unprecedented pace in Asia - the first region of the world to grapple with the global COVID-19 pandemic and the challenges of a post-crisis recovery. As social distancing becomes the new normal for many countries in the region, the shift away from manual, paper-driven processes which require physical interaction towards remote digitisation is likely to become a permanent feature of doing business. This particularly impacts traditionally less digitised business-to-business processes which, in many Asian businesses, require physical interaction. The advancement of 5G technology is expected to further accelerate digitisation of the economy as a whole.
Offshore jurisdictions such as Bermuda, the Cayman Islands and the British Virgin Islands have, in recent years, been positioning themselves as technology hubs. As the global pandemic continues, further reforms have been introduced in these jurisdictions.
Cayman Islands - Virtual Asset (Service Providers) Bill
The Virtual Asset (Service Providers) Bill, 2020 (Bill) was gazetted on 28 April 2020 and aims to promote the use of new technology and innovative enterprise in the Cayman Islands while complying with newly adopted international standards set by the Financial Action Task Force (FATF). The Bill seeks to put in place a registration and licensing regime for virtual asset service providers (VASPs) under the supervision of the Cayman Islands Monetary Authority (CIMA).
The Bill defines a "virtual asset" as a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes, but does not include digital representations of fiat currencies. It defines "virtual asset service" as the business of providing one or more of the following services or operations:
(a) exchange between virtual assets and fiat currencies;
(b) exchange between one or more other forms of convertible virtual assets;
(c) transfer of virtual assets;
(d) virtual asset custody service; or
(e) participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset.
All VASPs would be subject to various general obligations in a number of areas, including anti-money laundering obligations, data protection and cyber security obligations, and the obligation to file annual accounts with CIMA and obtain the prior approval of CIMA for any issuance of virtual assets. The Bill provides exemptions for certain existing licensed activities and a new regulatory sandbox.
The Bill seeks to create a registration and licensing regime that is comprehensive and robust and which, in some ways, exceeds the requirements of some other leading financial centres, such as the UK's FATF-compliant framework. The Bill is still in the consultation phase and therefore potentially subject to change. The referenced Law was gazetted on 25 May 2020, but is not yet in force. We will continue to watch this space.
Bermuda - Digital Asset Issuance Act
The Digital Asset Issuance Act 2020 (Act) became operative on 6 May 2020.
The Act seeks to make provision for the Bermuda Monetary Authority (BMA) to regulate persons carrying on an offer of digital assets via a digital asset issuance and for the protection of the interests of digital asset acquirers or potential digital asset acquirers. This formalises the previous practice of the application and approvals process being overseen by an independent group of advisors to the Minister of Finance.
The Act also makes consequential amendments to the Bermuda Monetary Authority Act 1969, Companies Act 1981, Digital Asset Business Act 2018 and Banks and Deposit Companies Act 1999, and revokes the Companies (Initial Coin Offering) Regulations 2018 and Limited Liability Company (Initial Coin Offering) Regulations 2018 (except that such revocation shall not apply to any application made before or during the transitional period under the Companies Act 1981 or the Limited Liability Company 2016 by a company or limited liability company for registration by the Registrar of Companies under either statute for authority to issue an initial coin offering).
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