Centralized exchange in Bermuda
Order-book exchange that takes custody of user assets and matches trades between users.
CEX is conditionally permitted in Bermuda with a local entity, subject to AML obligations and high licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- High
- Last updated
- 2026-07-13
AML Obligations
- DABA-licensed exchanges must comply with the Proceeds of Crime (AML/ATF Financing) Regulations 2008 (bm.licensing.additional-proceeds-of-crime-amlatf)
- Customer KYC/CDD required as part of DABA licensing conditions and BMA supervision (bm.enforcement.entity-bittrex-global-limited-in)
- Travel Rule obligations (FATF Recommendation 16) apply to withdrawals — DABA-licensed VASPs must transmit originator and beneficiary information for all virtual asset transfers
- Suspicious transaction reporting (STR) to the Financial Intelligence Authority (FIA) under POCA regulations
- Ongoing monitoring and record-keeping obligations under BMA supervision
- AML/ATF violations: up to 2 years imprisonment and/or US$750,000 fine; BMA civil penalty up to US$10 million per failure (bm.enforcement.amlatf-violations-eg-poca-regulations)
Key Restrictions
- Must obtain a DABA license (Class T, M, or F) from the Bermuda Monetary Authority before operating (bm.licensing.digital-asset-business-act-daba)
- Digital assets must be segregated from the operator's proprietary assets — per DABA requirements and Custody Code of Practice; non-compliance was the basis of the Bittrex enforcement action (bm.enforcement.violation-non-compliance-with-daba-requirements)
- Companies incorporated inside or outside Bermuda may apply, but economic substance rules apply (bm.licensing.digital-asset-business-act-daba)
- Public offerings of new digital assets require separate DAIA permission from BMA (bm.licensing.digital-asset-issuance-act-daia)
- No explicit security-token carve-out — all tokens are 'digital assets' under DABA section 3 (bm.licensing.no-explicit-security-token-carve-out)
- Minimum net asset requirements apply to each license class (Class T, M, F) (bm.licensing.digital-asset-business-eg-issuingsellingredeeming)
- Client disclosure rules and cybersecurity standards must be met per supporting rules (bm.licensing.supporting-rules-2018-digital-asset)
Key Risks
- Bittrex Global enforcement demonstrates that BMA aggressively enforces custody segregation rules — non-segregation of assets led to investigation, winding-up, and ongoing litigation (bm.enforcement.entity-bittrex-global-bermuda)
- Custody of user assets in omnibus wallets without proper segregation is a known enforcement trigger with liquidation risk
- Fines up to US$10 million for DABA breaches and up to US$250,000/unlicensed activity with imprisonment of up to 5 years (bm.enforcement.fines-up-to-us10000000-for)
- Economic substance requirements may impose operational cost and payroll obligations in Bermuda
- Regulatory perimeter uncertainty: tokens that resemble securities may trigger additional BMA securities-listing approval (bm.licensing.security-like-tokens-tokenized-securities-eg)
- BMA is actively updating rules (2025 custody segregation consultations); regulatory landscape may shift
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
Digital Asset Business Act (DABA, 2018): Establishes licensing for "digital asset businesses" (broadly defined to include exchanges, trading, custody, issuance, stablecoins, and more) conducted in or from Bermuda; applies to entities incorporated inside or outside Bermuda.
Digital Asset Issuance Act (DAIA): Issuer-specific regime.
Supporting rules (2018): Digital Asset Business (Cybersecurity) Rules, (Client Disclosure) Rules, (Prudential Standards) (Annual Return) Rules.
No explicit "security token" carve-out: All tokens are "digital assets" under DABA section 3, including security, utility, payment, and NFT tokens.
Digital asset businesses in Bermuda (e.g., issuing, selling, redeeming tokens, exchanges, wallets, payment services) require licensing under the Digital Asset Business Act (DABA), with Class T (sandbox), Class M (modified), or Class F (full) licenses available. However, the stated minimum net assets of $100,000 and fees ($1,000 for Class T, $2,266 for Class M/F) are likely outdated; current evidence shows a Class F license has been actively issued and stablecoin/stellar blockchain initiatives are underway, indicating regulatory evolution that may have altered these specific requirements.
Additional: Proceeds of Crime (AML/ATF Financing) Regulations 2008 for anti-money laundering.
Evidence fact bm.enforcement.entity-bittrex-global-bermuda not found (may have been renamed).
Violation: Non-compliance with DABA requirements and Bermuda Monetary Authority Digital Asset Custody Code of Practice (2019), including segregation of digital assets in the "Andromeda Omnibus Wallet"; also AML/ATF and KYC issues.
Fines up to US$10,000,000 for DABA breaches or non-compliance with BMA directions.
Fines up to US$250,000 and/or 5 years imprisonment for unlicensed digital asset business.
AML/ATF violations (e.g., POCA Regulations): Up to 2 years imprisonment and/or US$750,000 fine; BMA civil penalty up to US$10 million per failure.
Regulator: Bermuda Monetary Authority (BMA).
Digital Asset Business Act 2018 (DABA): Core licensing framework.
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- high
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — a centralized exchange may operate in/from Bermuda only under a DABA Class T/M/F license from the BMA, with mandatory asset segregation, AML/ATF compliance under POCA regulations, and separate DAIA authorization for any new token public offerings, and must meet economic substance rules.
Questions this verdict aims to answer
- What exchange / VASP license applies?
- What custody segregation rules apply to user assets?
- What market-conduct and listing rules apply?
- What travel-rule obligations apply on withdrawals?