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Bermuda’s Virtual Currency Business Act: Analysis of Key Points

Bermuda has crafted a groundbreaking 90-page law that seeks to etch a formal regulatory framework onto the traditionally opaque easel of cryptocurrency regulation[1]. This proposed law, called the Virtual Currency Business Act (“VCB Act”) is designed to attract cryptocurrency entrepreneurs to Bermuda by mapping out a comprehensive regulatory framework that allows for innovation without the weight of uncertainty as to whether regulations will drastically change down the line. The VCB Act passed through the House of Commons in the United Kingdom on April 27th and is currently pending approval by the Senate.


[1] “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 1” Bermuda Monetary Authority, Apr 2018.

Highlights of the Virtual Currency Business Act:

Through its various statutes, the VCB Act aims to reshape Bermuda’s cryptocurrency space and create an institutionalized regulatory regime for all Virtual Currency Businesses in Bermuda. The foundational underpinnings of the VCB Act are discussed below. 

What qualifies as a Virtual Currency Business?

The VCB Act defines Virtual Currency Businesses as those that[1]:

1. Issue, sell, or redeem virtual coins, tokens, and/or other forms of virtual currencies;

2. Operate as payment services utilizing virtual currencies;

3. Operate as electronic exchanges for cryptocurrencies;

4. Provide custodial wallet services, such as digital Bitcoin wallets; or,

5. Operate as virtual currency service vendors.

What does not qualify as a Virtual Currency Business? Third Party Exemptions from the VCB Act

Businesses exempt from this regulation are those that[2]

1. Contribute connectivity software or computer power to a decentralized virtual currency, or a protocol governing the transfer of the digital representation of value (Bitcoin Farms, VPN Software, Third-Party Server Hosts, etc.);

2. Provide data storage or security services for a Virtual Currency Business, while not involved in the Virtual Currency Business themselves or on-behalf of others (Information Security consultants, off-site data storage/backup, etc.); or,

3.  Use virtual currencies exclusively within their own organization, such as cryptocurrency software companies.

This shows that Bermuda does not seek to stifle innovative software development in the cryptocurrency industry, as it allows virtual currency developers to be exempt from regulations so long as they keep their work exclusively in-house. These definitions place responsibility on Virtual Currency Businesses while reducing the regulatory burden on the businesses supporting their back-end operations.

Tiered Licensing Regime

One of the core statutes of the VCB Act is its tiered licensing structure, which establishes that all Virtual Currency Businesses must possess either a Class M License or Class F License in order to operate[3].

Class M License

Class F License

  • Temporary license for fixed period determined by the Bermuda Monetary Authority (the “Authority”)
  • Businesses with less industry experience and/or less established business concepts
  • Functions as an intermediate step towards gaining a full Class F license
  • Subject to limits on business volume
  • Required to disclose license class to customers
  • Full, permanent license
  • Given to Virtual Currency Businesses that are well established in the crypto industry
  • Required to disclose license class to customers



This tiered licensing structure creates opportunity for cryptocurrency startups by establishing a trial period in which they can explore business concepts while working iteratively with the Authority to ensure they are in compliance with Virtual Currency Business regulations. After this trial period, businesses are able to apply for a permanent, Class F license. This creates ample guidance for new businesses, which traditionally must navigate opaque regulations on their own, running the risk that after months of operating, they could abruptly be shut down or deemed non-compliant by regulators. Accordingly, Bermuda aims to be a transparent and welcoming environment for Fintech entrepreneurs who are attracted to the idea of developing their new and evolving cryptocurrency businesses within a validating regulatory and compliance framework.

Head Office Mandate

In order to ensure that the VCB Act’s statutes, such as its tiered licensing provision, benefit Bermuda directly, all Virtual Currency Businesses must maintain a head office in Bermuda.  The business must be directed and managed from this head office. It is thus expected that all senior executives, defined as those in top-level management positions, work from the head office and maintain permanent places of residence in Bermuda. This ensures all businesses working under the regulations of the VCB Act are truly “Bermuda based”.  This would also set a new precedent for Bermuda[4], which in the past has served as a tax haven for corporations to receive tax breaks without any substantial business presence in Bermuda. The requirement to keep all Virtual Currency Businesses Bermuda-based underscores the VCB Act’s goal of making Bermuda a desired cryptocurrency business location.

Customer Protection

The VCB Act seeks to build and attract a large customer base for these newer businesses by establishing controls that protect customers against inherent cryptocurrency risks. As a result, Virtual Currency Businesses must[5]:

•           Provide certain disclosures in order to create transparency for potential customers and investors. Specifically, they must disclose to the public their license class (M or F) and whether or not they have insurance against the loss of customer assets arising from theft, including cyber theft;

•           Have adequate cybersecurity and crisis management programs. In connection with this, they must file annual cybersecurity reports with the Authority discussing the integrity of their electronic systems and their cybersecurity protocols; and,

•           Take measures to protect customer assets in case the firm becomes insolvent. They can do this by maintaining a surety bond or indemnity insurance for customer assets, or by placing these assets in a trust. This is similar to the Securities Investor Protection Corporation (“SIPC”) coverage for brokerage firms in the U.S., which likewise insures assets of brokerage customers in the case of insolvency.

In this way, the traditional “anything goes” attitude of cryptocurrency investment is mitigated. It is no longer the case that risk of asset loss due to provider failure is the price one pays for investing in cryptocurrencies. These provisions aim to build customer trust in cryptocurrency investment, thus cultivating demand for new cryptocurrency businesses.

Senior Representative

The VCB Act leverages much of Bermuda’s existing Anti-Money Laundering requirements in order to ensure that Virtual Currency Businesses are continually in compliance with regulations once they have been licensed. This includes annual on-site examinations as well as prudential returns to the Authority that consist of audited financial statements, internal controls audit reports, and transactional data[6].

  To further strengthen the line of communication between Virtual Currency Businesses and the Authority, each business must appoint a senior representative to act as a liaison between the business and the Authority[7]. This representative, who must be approved by the Authority, is responsible for visiting the Virtual Currency Business routinely and updating the Authority on day-to-day business changes. They must maintain an office in Bermuda and have a physical presence on the island that is commensurate to the Virtual Currency Business’ size and complexity[8]. Furthermore, the senior representative is to report back to the Authority whether the Virtual Currency Business is: complying with Authority directives; appears to be in danger of becoming insolvent; and, has undergone any material business changes.

  This continues the VCB Act’s trend towards ensuring that the Authority monitors and supervises these businesses on a regular basis, as opposed to once or twice a year. We see this collaborative, supervisory approach presents both during the licensing process, in which new businesses work through two tiers of licensing, as well as after the licensing process, when businesses appoint representatives to regularly report back to the Authority.

Business Developments since the VCB Act’s Introduction:

Since the VCB Act was introduced in April, many businesses have already chosen to invest in Bermuda’s emerging cryptocurrency industry. Some noteworthy examples:

➔        Binance, one of the world’s largest cryptocurrency exchanges, invested $15M in Bermuda blockchain startups in April[9];

➔        Shyft, an app for swapping work shifts, agreed to invest $10 million into blockchain technology education and economic development in Bermuda in May[10];

➔        Omega One, an agency brokerage firm for cryptocurrencies, has announced it is opening its head office in Bermuda; and[11],

➔        Ovis Communications, a Turkey-based cryptocurrency venture, has announced that it is establishing a presence in Bermuda, finding the Island’s cryptocurrency regime to be straightforward[12].


Summary of Key Statutes:





Tiered Licensing

  • Class M temporary license for startups
  • Class F full license for established businesses


Allows startups to innovate during a trial period while providing them with ample regulatory guidance. 

Head Office

  • All Virtual Currency Businesses must be directed and managed from a Head Office in Bermuda

Ensures that all businesses benefiting from the regulation are truly Bermuda based. This underscores the VCB Act’s objective to fortify Bermuda’s emerging cryptocurrency industry.

Customer Protection

  • Customer disclosures
  • Virtual Currency Businesses must have sufficient cybersecurity and crisis management programs
  • Virtual Currency Businesses must insure customer assets in case of insolvency

The VCB Act aims to concurrently attract cryptocurrency entrepreneurs and cultivate a customer base by protecting customers from the risks of cryptocurrency investment.

Senior Representative

  • Each Virtual Currency Business must appoint a senior representative who is to regularly report back to the Authority about the status of the business

This continues the VCB Act’s push toward creating more involvement between the Authority and Virtual Currency Business and helping to ensure ongoing compliance.



We thus see that the VCB Act implements several unique statutes in order to set a straightforward framework for cryptocurrency regulation. By instituting a licensing process, Bermuda ensures that all potential Virtual Currency Businesses participate in this new regulatory regime by working closely with the Authority to help ensure they are in compliance. For ongoing compliance, the VCB Act steps outside of traditional measures and sets a standard for the appointing of a senior representative who is to regularly report back to the Authority. The VCB Act thus pushes for greater involvement between the Authority and each Virtual Currency Business. Concurrently, the VCB Act implements standards for customer protection.

We will continue to monitor the statutes of this regulation.                                                    


[1] “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 1.2.2” Bermuda Monetary Authority, Apr 2018.

[2] “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 2.11” Bermuda Monetary Authority, Apr 2018.

[3] “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 2.12.3” Bermuda Monetary Authority, Apr 2018.

[4] “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 2.21” Bermuda Monetary Authority, Apr 2018.

[5]  “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 2.18” Bermuda Monetary Authority, Apr 2018.

[6] “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 1.7” Bermuda Monetary Authority, Apr 2018.

[7] “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 2.19” Bermuda Monetary Authority, Apr 2018.

[8] “BERMUDA VIRTUAL CURRENCY BUSINESS ACT 2018, Part 2.19” Bermuda Monetary Authority, Apr 2018.

[9] “Binance, Bermuda Ink $15 Million Crypto Investment Agreement.” CoinDesk, CoinDesk, 27 Apr. 2018, www.coindesk.com/binance-bermuda-ink-15-million-crypto-investment-agreem....

[10]  “Bermuda Signs MOU With Shyft Network.” Bernews, 16 May 2018, bernews.com/2018/05/bermuda-signs-mou-with-shyft-network/.

[11] Kent, Jonathan. “Crypto Firm Omega One to Open Bermuda Office | The Royal Gazette:Bermuda International Business.” The Royal Gazette, 22 May 2018, www.royalgazette.com/international-business/article/20180521/crypto-firm....

[12] “Ovis Plans To Establish Presence In Bermuda.” Bernews, 2 July 2018, bernews.com/2018/07/ovis-establishes-bermuda-prescence/.

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