Prime Minister Davis’s Contribution to the Securities Industries Bill (2024) and the Digial Assets and Registered Exchanges Bill (2024)

Madam Speaker:
I rise today, as always, on behalf of the beautiful and industrious people of Cat Island, Rum Cay, and San Salvador, as we roll out yet another major legislative update as part of our status quo-changing agenda.

The Securities Industries Bill (2024) and the Digital Assets and Registered Exchanges Bill (2024) represent critical steps forward, as well as the strengthening of our regulatory framework for financial services and investments to enhance fairness and transparency and promote sustainable economic growth.

Through these amendments, we will maintain the Securities Commission of The Bahamas’ position as a world-class regulator, inspiring investor confidence in our financial services sector and capital markets.

As a result of our efforts, The Bahamian public will reap the economic benefits of increased investor confidence.

The Securities Commission of The Bahamas continues to exemplify excellence as a regulator operating at the highest international standards.

Through the work of the Commission, we protect investors and those who use related services from unfair, imprudent, and illegal practices.

The Commission oversees regulations to promote fair and efficient capital markets and protect our systems and people from financial crimes like money laundering, fraud, and insider trading. 

Given the scale and scope of our financial services and capital markets ecosystem, and given the limited manpower and resources at hand, the Commission, under the leadership of Executive Director Christina Rolle, should be applauded for its efforts to successfully maintain The Bahamas’ leading position.

Their small but skilled team monitors our capital markets, ensuring the timely, fair and accurate disclosure of information while also serving as a safeguard against systemic abuses. They are charged with reviewing all financial and corporate services in The Bahamas, detecting any issues that arise, and taking the appropriate actions to protect the interests of clients and investors. In cases where securities are offered to the public, it is the Securities Commission that regulates and reviews this process to protect investors.

When there are issues encountered, it is up to the Commission to take action on those who fail to comply with our laws and regulations on behalf of the public.

And, of course, where there is a need to reform certain aspects of our legislative and regulatory regime, the Securities Commission of The Bahamas takes the lead on guiding this process.

That brings us to the Bills before us today.

Thanks to the diligent work of the Securities Commission of The Bahamas, led by Christina Rolle, the Attorney General’s Office, and a broad cross-section of local stakeholders, we have two bills before us that will empower the Commission to maintain our regional and world-leading status.

Both bills before us have undergone extensive public consultation, during which feedback from our top legal, investment, capital markets, and financial services minds was incorporated to ensure that we would have the most modern, progressive legislative regime that promotes best practices for the industry. 

Madam Speaker:

The Securities Industries Bill (2024) repeals and replaces the Securities Industries Act (2011). It is a comprehensive overhaul and modernization of the current Act, ensuring that our laws will reflect the present and future needs of the Securities Commission.

The elements of the existing Act that are still compliant with international standards and best practices are maintained, while identified areas of improvement are addressed, ensuring alignment with global standards and strengthening the effectiveness of the Commission in pursuing its objectives.

The resulting legislation represents the most comprehensive and agile legislative undertaking to empower the Securities Commission to date. 

Thanks to these changes, we will continue our record of compliance with the International Organization of Securities Commissions Objectives.

We will also retain our “largely compliant status” with all 40 of the Financial Action Task Force’s 40 Recommendations.

This Bill fully establishes the Commission’s broad ability to access records and request information for investigations. Within this Bill, the governance structure providing oversight for public issuers is strengthened, including the requirement to separate the roles of Chairman and CEO.

A major update introduced by this Bill is a new regulatory approach to overseeing the trade of derivatives for every registered firm, counterparty, or other persons participating in the trade of derivatives. This is significant, as it establishes the expanded possibilities for derivatives markets as we promote new ways of investing and doing business within our borders.

Another major aspect of this Bill is the ability of the Commission to recognise digital assets as securities, bringing these digital assets under the Act. Upon being declared a security, a digital asset will fall under the same laws and regulations as other capital market instruments. This change complements the Digital Assets and Registered Exchanges Act, further strengthening the supervisory role of the Commission in relation to digital assets like cryptocurrencies.

The Commission’s ability to enforce compliance and hold those in breach accountable will also be strengthened. The Commission has express authority to issue directives beyond the scope of merely investigating matters. And parties are compelled to comply with these directives.

As a part of its expanded administrative authority, the Commission is authorised to refer matters to the Commissioner of Police and the Director of Public Prosecution in situations in which criminal charges are appropriate.

There are also now instances in which the Commission has independent authority through administrative action to address non-compliance with regulations by administering automatic fines, issuing orders to cease and desist non-compliant activities, access information to assess suspected non-compliance, and directly address breaches in anti-money laundering and counter-terrorism regulations. 

To further enhance the Commission’s ability to bring about fair outcomes for all parties, the legislative updates include penalties related to any authorised parties found to be engaging in tipping off the subject of an investigation about particulars of that investigation, which is an offence that will lead to a fine of up to fifty thousand dollars, a prison sentence of up to three years, or both.

The Commission is also further empowered to manage systemic risk in capital markets. This includes situations that can bring about distress to investors, issuers, and clients,  and situations that erode public confidence in the integrity of capital markets or impair the orderly functioning of capital markets. Through this, the Commission is authorised to obtain necessary information and issue directives to mitigate these risks and protect the interests of all parties.

Among other highlights of the Bill is the establishment of the Commission’s supervisory capacity for any matters related to the winding up of licensees and registrants, including approvals to begin the wind-up process and the required reporting standards.

Compensation can also now be required to protect registrants and clients who will suffer a loss as a result of bankruptcy, insolvency, or winding-up procedures.

Once fully implemented and integrated, the Securities Industries Bill (2024) will represent a significant step forward in equipping the Securities Commission of The Bahamas for future success.

Madam Speaker:

The other Bill before us today, also falling under the purview of the Securities Commission of The Bahamas, is the Digital Assets and Registered Exchanges Bill (2024).

It is well known that The Bahamas’ Digital Assets and Registered Exchanges regime is among the world’s best. Once again, this is a testament to the excellence of our local legal, regulatory, and financial services minds who have positioned us at the forefront of this rapidly growing sector.

In December 2020, the first iteration of this Act came into effect, formally recognising and permitting Digital Assets and related activities in The Bahamas. 

The goals of the Digital Assets and Registered Exchanges Act (or DARE Act for short) were to protect investors and consumers, ensure that digital assets activities were in compliance with international AML/CFT/CPF standards, and manage and mitigate systemic risks inherent to the regulation of digital assets.

The legislation was celebrated around the world as an example of comprehensive, protective, flexible, and balanced law-making that attracted the interest of many of the world’s largest players within this sector.

Today, we host a number of crypto, blockchain, and other digital asset-based enterprises and exchanges that have moved here precisely because of our excellent digital assets regulations, along with our local financial services expertise, and, of course, our sun, sand, sea, and culture.

Of course, as the first iteration of a law to regulate a sector that even major jurisdictions like the US have failed to regulate, adjustments are necessary. There were inevitable bumps along the road. Some of these were the product of the inherent volatility and unpredictability of a still-growing and evolving and emerging industry.

The digital assets sector of today looks completely different from the sector did three and a half years ago when the DARE Act was first introduced. Where there have been issues and challenges, we have taken note, learned, and developed solutions to ensure that we continue to lead the way.

The Bill before us today represents the result of that process to strengthen our framework as we repeal and replace the 2020 Act with new and improved DARE legislation.

This Bill expands upon the existing Act to include a wider range of digital asset activities. For example, we discussed the trade of derivatives under the Securities Industries Bill, and now, under the DARE Bill, we make room for digital assets derivative services. This Bill also provides regulatory oversight for digital asset advisory and managerial services.

To provide for a greater degree of flexibility and agility moving forward, this Bill allows for the Commission to identify additional activities as digital assets businesses. This allows for the regulatory framework to be applied to new applications that have not yet entered mainstream use, or even those that haven’t been invented yet. The Commission can now quickly account for industry changes and innovations.

Among the provisions of this Bill is the requirement for comprehensive systems and controls that are appropriate for the scale of business being conducted.

There are also regulations for those providing related digital wallet services enabling users to receive, hold, and send digital assets. There will be a comprehensive framework for the providers of digital asset and digital wallet services, which includes expanded protections for those who have digital assets stored in these wallets, including requiring operators have systems in place to ensure their clients have consistent access to these assets.

One of the most innovative aspects of this Bill is its first-of-its-kind disclosure requirements for the staking of digital assets. Staking is essentially making a fixed investment of your digital assets in a particular blockchain that puts it to work to strengthen the associated cryptocurrency. In exchange, you receive returns on the amount you staked. All of the critical details related to the staking agreement, like the terms, the length of time the assets are staked for, and the interest or rewards earned, must now be verified and disclosed. 

This adds an additional layer of transparency to these arrangements and ensures that the regulator is aware of the details of the agreements.

Additionally, as the use of stablecoins increases, we also see a need to regulate the use and exchange of stablecoins within our jurisdiction. These coins are essentially cryptocurrencies with a value pegged to another asset, such as a fiat currency or other commodity held in reserve.

We now have a working statutory definition of stablecoins and have made way for the formal registration of stablecoins, as well as the forms of reserve assets accepted to back up the value of these coins. There is a requirement for the issuer of stablecoins to provide information related to how the process works, the reserve assets used, investment policies, and other pertinent details, as well as the requirement for an auditor to conduct quarterly reports and annual reviews.

These are just a few of the highlights from what will be the new and improved DARE Act as we position The Bahamas to be a leading jurisdiction for the exchange and use of digital assets, and financial services in general.

Madam Speaker:

The two Bills we are debating today represent progress on several fronts.

We’ve made changes that will strengthen confidence in our capital markets and promote investments and economic growth.

We’ve enhanced financial services as our second-largest industry and strengthened our ability to comply with the highest international transparency standards. We’ve made our digital assets regime even more robust with greater protections for investors and clients.

And we have embraced the future by embracing change, not only to address our needs for today, but to make room for where we see global financial systems and capital markets headed in the future.

These changes are essential to ensuring that we position ourselves for growth.

We are global leaders in financial services precisely because we never rest on our laurels. It was The Bahamas that launched the first Central Bank Digital Currency in the world. We were the first country to research the economic value of seagrass meadows and will now monetise Blue Carbon Credits by the end of next year as a result of our world-leading research. 

And we boast a world-leading, updated regulatory regime and legislative framework for investments, capital markets, financial services, and digital assets.

It is this innovative streak that will enable use to solve our biggest problems.

We live in a time when banks are closing branches throughout our archipelago. Thanks to our innovations, we have the framework in place to eventually serve the needs of unbanked populations.

In the face of global changes in financial services, thanks to the two bills before us, we will now have modern, efficient, and agile systems that are more responsive than ever and will continuously adapt and grow to keep pace with the rapidly changing environment of 21st-century innovation.

We are making progress on all fronts, and we have every intention of keeping the momentum going.

Madam Speaker:

The Securities Industries Bill (2024) and the Digital Asset and Registered Exchanges Bill (2024) have my full, unbridled support as key components in our wider plan to drive investments and economic growth.

Madam Speaker:

We acknowledge that over the past two decades, our financial services industry has undergone significant changes, often to the detriment of its workforce. With these bills, we are pivoting to address the demands of a new era and create opportunities for displaced financial services professionals.

Thank you.