New law addresses issues from FTX and Terraform Labs collapses, enhancing transparency and security in digital asset custody, staking services, and stablecoins.
The Bahamas has taken a significant step to regulate the cryptocurrency industry by enacting the Digital Assets and Registered Exchanges Act 2024 (DARE 2024). This new law aims to address the issues that led to the collapses of major crypto firms like FTX and Terraform Labs.
One of the key components of DARE 2024 is the introduction of stringent regulations for digital asset custody. Under this new law, businesses are required to maintain separate and insulated procedures for client assets. This means that companies must ensure that customer funds are kept distinct from their own operational funds. The goal is to prevent the misuse of customer funds and provide a higher level of security for investors.
DARE 2024 also establishes a comprehensive disclosure regime for staking services. Staking, a process where crypto holders lock up their assets to support network operations in exchange for rewards, has become increasingly popular. However, it also carries risks. The new law mandates that businesses offering staking services must provide clear and detailed information about the risks and rewards involved. This transparency is intended to help investors make informed decisions.
Another significant aspect of DARE 2024 is the establishment of a stablecoin framework. Stablecoins are digital currencies pegged to stable assets like the US dollar to minimize price volatility. The new law includes a ban on algorithmic stablecoins, which are backed by other cryptocurrencies rather than traditional assets. This ban aims to reduce the risk of instability and ensure that stablecoins remain reliable and secure for users.
Overall, the Digital Assets and Registered Exchanges Act 2024 is designed to enhance transparency and security in the crypto industry. By implementing these regulations, the Bahamas aims to prevent the kind of financial disasters that occurred with FTX and Terraform Labs. The new law is a proactive measure to protect investors and maintain the integrity of the digital asset market.
