Bermuda DABA: Digital Asset Business Act Licensing Guide

Overview

Bermuda’s Digital Asset Business Act 2018 (DABA) was one of the earliest purpose-built digital asset business licensing regimes in the world. Enacted by the Bermuda Parliament and supervised by the Bermuda Monetary Authority (BMA), DABA creates a licensing framework for businesses that provide digital asset services — exchanges, custodians, stablecoin issuers, and digital asset fund managers — with the legal certainty and regulatory substance required by institutional counterparties.

Bermuda’s advantages are well-understood in the offshore financial industry: English common law legal system, sophisticated judiciary, no corporate income tax, deep insurance and reinsurance infrastructure, and BMA supervision with a strong international reputation. The combination of DABA’s licensing framework and Bermuda’s existing financial centre ecosystem has made it the offshore jurisdiction with the most credible digital asset regulatory framework — ahead of Cayman Islands (which has been slower to develop comparable regulation) and the British Virgin Islands.

Primary Regulator: BMA

The Bermuda Monetary Authority (BMA) is Bermuda’s integrated financial regulator, responsible for banking, insurance, investment business, and — under DABA — digital asset businesses. The BMA is internationally recognized as a rigorous but commercially sophisticated regulator; its insurance supervision is granted “equivalence” recognition by EU regulators, reflecting its alignment with international supervisory standards.

The BMA’s approach to digital asset business licensing applies the same risk-based, principles-led supervisory philosophy that has governed its insurance and banking supervision — demanding governance, capital, and compliance standards, but with genuine engagement with innovative business models.

DABA Licensing: Class F License

DABA establishes a tiered licensing regime. The Class F (Full) License is the primary authorization for digital asset businesses intending to provide services on a commercial basis to third parties. Class F activities include:

• Issuing, selling, or redeeming virtual coins, tokens, or any other form of digital asset
• Operating as a payment service provider using a digital asset (including money transmission)
• Operating a digital asset exchange
• Providing custodial wallet services
• Operating as a digital asset derivatives exchange or clearing house

Capital requirements: The BMA applies risk-based capital requirements. Minimum initial capital for most Class F licensees falls between USD 250,000 and USD 500,000, with higher requirements for businesses with systemic risk profiles or large client asset holdings.

In addition to minimum capital, Class F licensees must maintain:

• A minimum liquidity ratio appropriate to their business model
• A capital adequacy ratio satisfying BMA’s risk-weighted assessment
• Client asset segregation — client digital assets must be held separately from corporate assets, with BMA-approved custody arrangements

Class M (Modified) License: A lighter-touch alternative for businesses that operate under another jurisdiction’s regulation (e.g., a US-regulated entity also serving Bermuda customers) or for limited-scope operations. Lower capital requirements but restricted operational scope.

Authorization Process and Timeline

DABA authorization requires submission to the BMA of:

1. Detailed business plan including financial projections (three years)
2. AML/CFT program documentation
3. Technology architecture and cybersecurity documentation
4. Fit-and-proper assessments for all beneficial owners (>10%), directors, and senior managers
5. Evidence of minimum capital contribution
6. Compliance officer and MLRO appointment documentation

Timeline: The BMA’s standard processing time for complete Class F applications is three to nine months, depending on business complexity and the BMA’s existing caseload. Applicants with complex business models (involving novel asset types, cross-border operations, or affiliated regulated entities) should plan toward the longer end of this range.

The BMA provides pre-application meetings for significant applicants — a commercially valuable opportunity to identify potential issues before formal submission and to establish a working relationship with the BMA supervisory team.

Digital Asset Issuance: ICO Regime

DABA is complemented by the Digital Asset Issuance Act (DAIA), which governs the public offer of digital assets in or from Bermuda. DAIA requires:

• Registration with the BMA before any digital asset issuance to the public
• A detailed offering document (white paper) meeting BMA content requirements
• Ongoing disclosure obligations post-issuance

For security tokens (digital assets that constitute securities), Bermuda’s Investment Business Act 2003 applies in addition to DABA, requiring investment business licensing for dealing, arranging, and managing security tokens.

Tokenized Fund Structures

Bermuda is a major fund domicile — particularly for hedge funds — and has extended its fund regulatory framework to tokenized alternative investment funds. The Investment Funds Act 2006 covers collective investment schemes, including those using DLT for unit registration and transfer. Tokenized fund units issued under Bermuda law benefit from the same legal certainty as traditional fund units, with transfer on a DLT register being legally effective under Bermuda law where the fund’s constitutional documents designate DLT as the register.

The combination of Bermuda fund law and DABA digital asset business licensing provides a coherent structure for tokenized alternative funds seeking offshore domiciliation with regulated infrastructure.

AML/KYC Requirements

Bermuda DABA licensees are subject to the Proceeds of Crime Act 1997 and the Anti-Money Laundering and Anti-Terrorist Financing Regulations 2008, as updated. Key obligations:

• CDD: Full KYC at onboarding; simplified CDD for lower-risk circumstances; EDD for PEPs and high-risk jurisdictions
• Ongoing monitoring: Risk-based transaction monitoring; periodic review of customer profiles
• Travel Rule: Bermuda has implemented FATF Travel Rule requirements for digital asset service providers
• STR reporting: Filed with Bermuda’s Financial Intelligence Agency (FIA)
• Sanctions screening: OFAC, UN, and Bermuda national designations

Compliance Checklist: Bermuda Tokenization Operations

• Apply for Class F DABA license from BMA; prepare USD 250,000–500,000 minimum capital and three-year financial projections
• If publicly offering digital assets: register under DAIA and prepare BMA-compliant offering document
• If offering security tokens: obtain Investment Business Act 2003 authorization for dealing/arranging/managing
• Implement AML/CFT program per Bermuda AML Regulations: CDD, EDD, transaction monitoring, FIA STR reporting
• Implement FATF Travel Rule for digital asset transfers
• Establish Bermuda legal entity (exempted company); register with Bermuda Registrar of Companies
• Appoint locally-qualified compliance officer and MLRO
• For tokenized funds: structure under Investment Funds Act 2006; confirm DLT register mechanism recognized under fund constitutional documents
• Engage BMA pre-application meeting for complex business models

Authority References

• BIS — Offshore digital asset regulatory frameworks
• FCA — Cryptoassets international comparison

For Bermuda vs. Cayman Islands comparison for tokenized fund domiciliation, see the Licensing Matrix. For DABA terminology, see the Regulatory Encyclopedia. For offshore tokenized fund platform analysis, see Platform Benchmarks.