Bermuda financial regulator announces legislation for crypto custodial services

Bermuda Monetary Authority (BMA) released its draft of the legislation on the crypto custodial services. The document titled “Digital Asset Custody Code of Practice” aims to clarify Bermuda’s regulatory position in terms of compliant and secure storage of cryptocurrency, as well as protection of clients’ assets. The document covers an array of topics, from business management and technology issues to transaction handling, incident reporting, keys generation, and also operating hot and cold storage.

Among the solutions to ensure a higher level of security and protection to crypto custody clients, BMA suggested that a Digital Asset Business (DAB) must store clients’ assets separately from their own. Additionally, DABs would be also required to take other measures to protect assets belonging to their clients, including but not limited to establishing a trust with a qualified custodian and indemnity insurance.

According to Moad Fahmi, the BMA’s senior advisor of financial technology, the authority’s main goal in releasing the draft legislation is to ensure a “healthy digital asset ecosystem,” which will encourage involvement by “quality players” to further drive growth to the whole financial ecosystem of Bermuda.