On 9 April 2026, the BMA released a consultation paper ('Consultation Paper'), which builds on the Stakeholder Letter issued on 30 March 2026, and provides additional context and information regarding the proposed regulatory framework for asset tokenisation. The proposed framework is structured into two complementary levels:
- a legal and regulatory architecture that aims to provide clarity and certainty for each tokenised asset class; and
- bespoke requirements tailored to the various entities engaged in asset tokenisation activities.
The industry and stakeholders have until 30 June 2026 to provide comments on the Consultation Paper.
Proposed legal and regulatory architecture
A central feature of the Consultation Paper is the BMA's proposed adoption of a "substance over form" regulatory approach. Under this framework, tokenised assets and tokenisation-related activities would generally be regulated according to their underlying legal, economic and functional characteristics rather than the technology used to create or distribute them. The BMA’s view is that activities posing the same risks should be subject to the same regulatory treatment.
The Consultation Paper indicates that the BMA does not currently intend to introduce a separate standalone tokenisation regime. Instead, the BMA proposes targeted legislative and regulatory amendments across existing financial services frameworks (such as the Investment Business, Investment Funds, Digital Asset Issuance and Digital Asset Business legislative frameworks) and in order to clarify the treatment of tokenised financial assets, harmonise regulatory requirements and reduce ambiguity across multiple regulatory regimes.
For example, where previously a token could be considered both a digital asset and an investment for the purposes of the Investment Business Act 2003 ('IBA') (such as a tokenised share or security), it was necessary for an entity to operate within a safe harbour and ensure that no more than 25% of gross revenue was derived from the investment activity, otherwise an additional IBA licence would be required. Going forward, it is proposed that an entity proposing to deal with 'tokenised investments' will be able to elect whether it wants to be licensed under DABA (for a more digital asset native structure) or the IBA (traditional asset structure) and will not be required to have both licenses.
Tokenised investments encompass both 'digital twins' (digital representations of off chain assets) and 'native tokens' (where the token and asset are the same thing – all on chain). Both are captured, which is an indication of how the BMA is encompassing distributed ledger technology ('DLT') and smart contract governance.
The Consultation Paper also contemplates clarifying a number of legal definitions and concepts relevant to tokenised assets. These include the treatment of tokenised shares, debt instruments and fund interests, as well as broader considerations relating to ownership rights, custody arrangements and the legal characterisation of digital representations of traditional financial assets.
Enhancements for tokenized funds
The existing framework under the Digital Asset Business Act 2018 ('DABA') covers tokenisation adequately but the interaction between DABA and other licensing regimes that could be triggered by a tokenisation structure is being simplified to prevent additional licensing. It has always been the case that a tokenised fund will not require an additional DABA license.
The Investment Funds Act 2006 will be amended to enable the fund register to be tokenised and exist purely on chain providing legal certainty for DLT based ownership records and disclosure rules are being updated to reflect additional DLT based risks.
It is proposed that the exemption from DABA licensing requirements will be extended to investment managers that manage funds where ownership interests are tokenised as well as where they manage tokenised assets within the fund (and a mirrored equivalent exemption would be available for managers of crypto tokenisation platforms). Funds that are self custodying digital assets can apply for a waiver from the requirement to appoint a third-party custodian subject to complying with the Digital Assets Custody Code of Practice.
Tokenised funds and fund administrators will not be required to comply with the Digital Assets Issuance Act 2020 and no authorisation will be required to conduct a public issuance of digital assets.
It is also proposed that Bermuda licensed fund administrators will no longer be required to seek an additional DABA license to maintain tokenised registers or manage smart contracts.
Proposed compliance obligations and due diligence for tokenisers
The Consultation Paper details the proposed due diligence, asset verification and legal framework requirements for Primary Tokenisers (issuers) and Secondary Offerors (exchanges and other trading venues). This obliges due diligence to be undertaken on the underlying assets and the tokenisation structure (including for a trading venue conducting due diligence on the primary tokeniser's disclosures, third-party audits and regulatory reports). These will be proportionate so that due diligence on listed securities for example would be simplified. Primary tokenisers should maintain 1:1 reserves. There are requirements for bankruptcy remoteness in the structures and clear contractual rights for token holders. Legal assessments on cross border assets would be required.
The BMA recognises that the value proposition of tokenised assets is significantly enhanced through liquidity and accessibility, which often necessitate distribution across multiple blockchain networks and trading venues. Restricting tokenised assets to specific chains or permissioned networks could lead to market fragmentation, limiting the efficiency and liquidity benefits that tokenisation aims to deliver. Therefore, the BMA does not, in principle, oppose the distribution of tokenised assets across different blockchain environments, including permissionless networks, provided appropriate safeguards are implemented. In permissioned networks, controls may be implemented at the protocol level, where the consensus mechanism itself enforces compliance requirements. In permissionless networks, compliance controls are typically applied at the token level through smart contracts. Some implementations may utilise a hybrid approach, with controls distributed across multiple layers of the stack.
The Consultation Paper contemplates that token standards in the most commonly used tokens will incorporate compliance through technical specification, commonly known as 'compliance embedded' standards. These should enable the programmatic enforcement of regulatory requirements including:
(i) identity verification mechanisms that validate eligibility;
(ii) transfer restrictions based on investor qualifications;
(iii) AML/ATF sanctions and other jurisdictional limitations;
(iv) configurable compliance rules that can adapt to evolving regulatory requirements; and
(v) remediation mechanisms allowing for appropriate regulatory intervention when necessary.
The Consultation Paper contemplates proposals around the necessary risk management frameworks that need to be in place which have been thoughtfully considered taking into account the inherent and specific risks associated with tokenisation structures.
Conclusion and next steps
The proposed regime demonstrates Bermuda's commitment to positioning itself as a global hub for digital asset businesses and to remain at the forefront of digital asset regulation.
The BMA has invited comments on the Consultation Paper from the industry and stakeholders by 30 June 2026, after which the BMA will consider feedback and determine next steps.
Please reach out to our contacts below if you wish to discuss further.
