New frontiers in fintech and cryptos

By Steven Rees-Davies and Fiona Chan, Appleby
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Bermuda has always been a competitive offshore jurisdiction, and new developments in fintech and an innovative approach to provisional liquidation keep it ahead of the curve

The Asia-Pacific region has seen a surge of fintech start-ups, service providers, suppliers, investors, consumers and other stakeholders in recent years. Many business sectors have experienced innovative and disruptive technological developments at varying degrees. Trends in the fintech sector have progressed from an early focus on blockchain and distributed ledger to artificial intelligence (AI), cryptocurrencies and initial coin offerings (ICOs), as well as security token offerings and the setting up of crypto platforms and internet banks, etc.

Steven Rees-Davies
Partner, Corporate
Appleby in Bermuda
Tel: +1 441 298 3296

It has become clear throughout the advancement of financial innovation in Asia that a sound legal and regulatory regime in which businesses can operate is key to success. When fintech first emerged, a number of jurisdictions rushed to position themselves as the technology and innovation hub in the region. However, only those jurisdictions with well-developed legislation are able to maintain their leading position. Bermuda is a prime example of this.

Bermuda is a leading international financial centre with a long history of providing pragmatic financial and professional services to the (re)insurance, investment fund, asset management and trust sectors, which are supported by a world-class advisory and financial services infrastructure. In more recent years, Bermuda has expanded its offering to international businesses through the innovative and forward thinking introduction of a legal and regulatory framework designed to govern and regulate ICOs and the digital asset business and insurtech sectors (regime).

The regime sets out expected standards of disclosure for ICOs, a dual licensing system (including sandbox) for anyone seeking to provide digital asset business services in or from Bermuda, and both a sandbox regime and innovation hub for the insurtech sector.


It is of particular note that the ICO regime governs all types of coin and token offerings, whether or not they are deemed utility tokens, securities or otherwise anywhere else in the world, which allows for certainty of treatment for issuers no matter what form their coin or token takes. It also provides a level of credibility that the issuer has received the permission of the applicable minister to conduct the offering following completion of a thorough application process.

Fiona Chan
Partner, Corporate
Appleby in Hong Kong
Tel: +852 2905 5760

ICOs are regulated under the Companies Act 1981 and the Limited Liabilities Act 2016. The ICO legislation strikes a balance between market integrity and consumer protection.

Only companies registered under the Companies Act and Limited Liabilities Act, and that have ministerial consent, are permitted to issue ICOs in or from within Bermuda.

ICOs are treated as a restricted business activity requiring prior consent from the minister. To assist with the vetting of applications, a fintech advisory committee assists in the review of each application and makes recommendations to the minister.

Once consent is received, a company must publish an ICO offer document in electronic form. Subject to specific statutory exemptions, a company is required to file the document with the Bermuda Registrar of Companies.

ICO issuers must also have appropriate procedures in place to ensure that they verify the identity of the participants in the ICO and also ensure that all confidentiality, privacy and disclosure of information obligations are complied with by the issuer under Bermuda law.

Companies conducting an ICO must establish procedures to comply with local AML/ATF requirements including but not limited to participant due diligence.

Digital asset business

The Digital Asset Business Act (DABA) introduced a two-class licensing system that includes a class M licence, which allows for a proof-of-concept stage in order to test new products, services and technologies. The legal and regulatory requirements that the applicants request can be modified for the duration of the class M licence.

DABA regulates all digital asset business carried on, in or from within Bermuda and provides that a person cannot carry on digital business unless they are licensed or fall within an exempt category. “Digital Asset Business” is defined as the business of providing any or all of the following activities to the general public:

  1. Issuing, selling or redeeming virtual coins, tokens or any other form of digital asset;
  2. Operating as a payment service provider business utilizing digital assets, which includes the provision of services for the transfer of funds;
  3. Operating an electronic exchange;
  4. Providing custodial wallet services; and
  5. Operating as a digital asset services vendor.

The BMA regulates digital asset business conducted in or from Bermuda. There are two classes of digital asset business licence that may be applied for under the DABA. These are:

  1. Class F licence, under which the applicant shall be licensed to provide a digital asset business; or
  2. Class M licence (the regulatory sandbox), under which the applicant shall be licensed to provide restricted digital asset business for a defined period determined by the BMA, which may be extended upon application to the BMA.

Anti-money laundering and anti-terrorist financing (AML/ATF) legislation and regulation in Bermuda are based on recommendations promulgated by the financial action task force (FATF).

Any company conducting digital asset business must comply with applicable AML/ATF requirements. Adoption of a comprehensive AML/ATF framework is integral to the conduct and licensing of digital asset business in Bermuda.


Bermuda has long been at the forefront of providing innovative solutions in the insurance industry and boasts the largest insurance-linked securities (ILS) and captive sectors in the world. Leveraging Bermuda’s reputation as a centre of excellence for innovation in a sound regulatory environment, the BMA has launched two parallel innovation tracks: the insurance regulatory sandbox (IR sandbox) and an innovation hub, both initially targeted at insurance technology (insurtech) companies.

The IR sandbox is a regulated environment established by the BMA in which companies can test new technologies and offer innovative products and services to a limited number of customers in a controlled environment, and for a limited period of time.

Some of the benefits of the sandbox include providing a safe and transparent environment for companies to test their innovations, giving the BMA the opportunity to work together with the company before new products are released to market, increasing efficiency by reducing the amount of time and cost for products to reach market, and reducing the cost of regulatory uncertainty for start-ups.

The sandbox is available for entities registered, or proposing to become registered, under section 4 (insurer) or section 10 (insurance intermediaries) of the Insurance Act 1978, as amended.

Upon approval of concept, the company will be assigned a temporary licence and will be allowed to operate within the sandbox. Upon completion of the proof-of-concept phase, the company must submit a final report to the BMA on the outcomes of the testing. After review of the report and approval for the company to commence operations outside of the sandbox by the BMA, the company will be issued a licence in accordance with the company’s business model and existing insurance licence regime (as outlined above).

The innovation hub is a platform for exchanging ideas and information; it facilitates dialogue between the BMA and market participants. This space is intended for activities that are not directly regulated by the BMA, or where a company is still developing its thoughts and ideas and not yet prepared for proof of concept, and is therefore not ready to apply for entry into the sandbox.


The Bermuda government has made remarkable progress in a very short period of time in establishing a world-renowned digital asset-specific regulatory and legislative ecosystem in which technology companies, whether launching ICOs, offering digital asset business services or insurance technology solutions, have certainty and credibility in their business dealings.

The government has also introduced cross-departmental policies to streamline the process for establishing technology companies in Bermuda, as well as attractive immigration policies and payroll tax relief to give immediate economic benefit to people establishing their technology business in Bermuda, which further shows its commitment to supporting international businesses serious about developing this fast growing sector. Many fintech businesses in Asia have recognized the distinctive features of the Bermuda regime.

BermudaAPPLEBY Hong Kong office
2206-19 Jardine House,
1 Connaught Place, Central, Hong Kong
Tel: +852 2523 8123 Fax: +852 2524 5548


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