Bermuda island‘s number one financial watchdog—the Bermuda Monetary Authority (BMA) has recently released a publication which consisted of a draft regulation for virtual currency custodial services. The regulation was called the Code of Practice for Digital Asset Custody and it entails rules and guidelines required to guarantee safe management of crypto assets owned by customers.
The Bermuda Monetary Authority (BMA)
With the duties of the BMA centered on preventing financial crime in general, the regulator has made sure to draft the new Code of Practice in such a way, that there exists a wider and secured space for investment which will both attract foreign businesses and protect local investors.
The code of conduct also addresses incident reporting, transaction handling, key generation, and security issues in respect to cold and hot storage of assets both business and technology wise. Also, the regulations are expected to assure prudence in the way business is being handled.
The Senior Advisor on financial technology for BMA, Moad Fahmi also praised the drafted code as progressive.
He said that:
“The code complements the extensive body of rules for Digital Asset Businesses. We view custody as an important part of a healthy digital asset ecosystem – one that will encourage quality players to contribute positively to our financial system,”
He further explained the framework was built “with the aim of making sure that the core objectives of financial regulation are respected.” These objectives include “protecting consumers, ensuring the stability of our institutions and maintaining integrity and confidence in financial markets –with a focus on maintaining the highest standards of AML/ATF,”
Separation of Customer’s Assets
In addition, some of the regulations are aimed at preventing security violations in the crypto world. Example of such incidents is the one that affected Mt. Gox crypto exchange whereby it wasn’t clear whether the former Chief Executive Officer embezzled client’s money or used the company’s revenue inappropriately.
According to BMA’s regulations, a company’s assets must be separated from customer’s assets for security purposes.