The Central Bank of The Bahamas (CBOB) has released a discussion paper proposing how it intends to regulate digital assets. This includes initial coin offerings as part of efforts to eliminate the alleged threat of tax evasion, fraud and money laundering. However, when regulation eventually comes, it is likely that only a state-issued cryptocurrency will be supported.
Only State-Sanctioned Digital Assets Likely to Be Allowed
“The bank seeks to enhance the sector’s competitiveness without compromising the integrity or international reputation of The Bahamas, or undermining the financial safety of Bahamian households,” said the CBOB in a statement released Nov. 7. “These considerations are consistent with international best practices.”
CBOB lent support to the international regulatory convention approach, which classifies virtual currencies as ‘crypto-assets’ rather than ‘cryptocurrencies’, “as (this) clearly distinguishes between central bank-issued fiat currency and private sector products such as bitcoin or ripple.”
Under the proposed framework, the island nation is to amend the Payments Instrument (Oversight) Regulations of 2017 “to ensure comprehensive coverage of both Bahamian dollar and foreign currency denominated crypto payments instruments.”
The financial regulator plans to limit the range of digital assets which institutions like commercial banks may transact while banning any direct convertibility between the local fiat unit – or a even a state-backed crypto-asset – and forex-denominated cryptocurrencies. Noting the decision is in line with existing exchange control laws, CBOB warned:
It is likely that only central bank sponsored digital currencies, or payments instruments fully backed by central bank issued currencies or deposits will be eligible for issuance by payment services providers.