The Bahamian parliament has greenlighted new crypto legislation to prevent another FTX from recurring.
Following the crash of the Bahamian crypto exchange, FTX, global regulators have geared up to enact new rules to prevent financial fraud. On Tuesday, the Bahamian regulators approved the Digital Assets and Registered Exchanges Act 2024 (DARE), which outlines how businesses will adapt to the changes in the financial sector.
Bahamas Enact New Crypto Rule
Before the official launch of FTX, the Prime Minister of the Island state, Phillip Davis, promised to introduce a comprehensive framework for digital assets. The minister assured the Bahamian residents of implementing new crypto rules.
The prime minister stated that the DARE 2024 Act will clearly define stablecoin regulations and outline the consumer protection measures for virtual asset service providers.
Since then, the Island country has been working to launch the DARE 2024 to accelerate the crypto industry’s growth. Under the new rule, the regulators have addressed the mistake the FTX made when operating in the Bahamas.
To avoid the recurrence of another FTX, the Bahamian regulators urge the virtual assets service providers to maintain proper procedures that separate digital assets from business operations.
Scope of the DARE Act of 2024
Also, DARE outlines different classes of digital assets and the roles of management services. The new crypto rule defines complex crypto terms such as digital asset derivatives and staking services.
With the new rule, the crypto exchange will be required to clearly outline the staking process, including the assets to be staked, the rewards expected, and the penalty the customers might face for violating the staking agreement. According to the report, staking is holding crypto in a particular network to earn rewards.
Moreover, as the crypto industry becomes the primary target for hackers, the DARE Act outlines the measures VASPs should adhere to ensure consumer protection. The crypto exchanges are urged to implement stringent rules and control measures to shield their customers from exploitative activities.
Also, the new provision requires the crypto exchanges to prepare their financial report accordingly to conform with the law. The provision offers a comprehensive framework for stablecoin and restricts the issuance of algorithmic fiat-backed crypto assets.
Bahama Seeks to Become Global Leader in Regulating Crypto
A statement from the executive director of the Securities Commission, Christina Rolle, states that the Bahamas seeks to become the global leader of digital assets with clear regulation.
The commissioner explained that the DARE 2024 Act focuses on the responsible use of innovation while ensuring consumer protection. The new crypto rule demonstrates Bahamian regulators’ commitment to strengthening digital asset risk management practices.
Revisiting the FTX saga, the executive noted that the crypto exchange plunged most investors to liquidity, after it wiped out millions of customers’ funds. Following the collapse of FTX, the investors lost confidence in crypto, fearing that the industry would not recover.
The damages caused by the Bahamian crypto exchange exposed the top-level management to legal charges.
A few months ago, Judge Lewis Kaplan ordered the former FTX chief executive Sam Bankman Fried to serve a 25-year imprisonment and settle $11 billion civil penalties for his contribution to the crypto exchange and sister company Alameda Research. Bankman and his team were accused of misappropriating company funds and violating federal law.
The FTX collapse exposed crypto exchanges such as Genesis, Galaxy Digital, BlockFi, Wintermute, and Crypto.com to the financial crisis. Months after the liquidation of FTX, Terraform Labs stablecoin UST depegged from the dollar.
On-chain data shows that UST dipped from $0.65 to $0.30, wiping nearly $11 billion of its market capitalization. The instability of UST dragged Terraform Labs token LUNA to a cold blood bath.
The report shows that before the collapse of the Terra ecosystem, LUNA was ranked the fourth largest crypto asset with a market cap reaching $40 billion. The collapse of UST attracted the attention of regulators to supervise the less volatile crypto asset.
The US Treasury Secretary Janet Yellen urged the regulators to consider regulating stablecoin to avoid the recurrence of the Terra disaster.
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