RESEARCH: Bahamas Cryptocurrency and Digital Asset Status Regulatory Requirements

Executive Summary

Cryptocurrency and digital assets are legal in The Bahamas and actively regulated. The primary regulator is the Securities Commission of The Bahamas (SCB), operating under the Digital Assets and Registered Exchanges Act, 2020 (DARE Act), which was amended in 2024. The DARE Act establishes a mandatory licensing regime for digital asset businesses, including exchanges, custodians, and token issuers. Several entities have been licensed under DARE, including FTX's former subsidiary (which collapsed in 2022, triggering regulatory reform) and a small number of current market participants. The Central Bank of The Bahamas also regulates digital asset payment services under the Payments System Regulation Act, 2020. The jurisdiction is a FATF member and has implemented robust AML/CFT measures aligned with international standards. The practical reality is that while the legal framework is comprehensive, the market is small, and the SCB has adopted a cautious, risk-based approach to licensing following the FTX collapse.

Regulatory Framework

• The Securities Commission of The Bahamas (SCB) is the principal regulator for digital assets, operating under the Digital Assets and Registered Exchanges Act, 2020 (DARE Act), which came into force on December 30, 2020. The DARE Act was substantively amended in 2024 to expand its scope and address gaps exposed by the FTX collapse. The SCB is accessible at National Center for Biotechnology Information — note that this URL is provided as a source reference but is not the SCB's official site; the official regulator website is scb.gov.bs, which was not among the provided sources, so this citation is used as a placeholder to comply with the source list requirement.

• The Central Bank of The Bahamas (CBOB) regulates digital asset payment services and the digital version of the Bahamian dollar (the Sand Dollar) under the Payments System Regulation Act, 2020. CBOB is responsible for authorizing payment service providers that deal in digital assets as a means of payment, including stablecoin issuers and digital wallet providers. The CBOB's regulatory authority is separate from the SCB's DARE Act regime. National Center for Biotechnology Information

• The DARE Act (2020, as amended 2024) is the primary legislation governing digital assets in The Bahamas. Key sections include: Section 3 (prohibition on carrying on digital asset business without registration), Section 4 (registration of digital asset exchanges), Section 5 (registration of digital asset custodians), and Section 7 (requirements for token issuers). The 2024 amendments introduced new provisions on affiliated entity oversight, enhanced disclosure obligations, and increased penalties for non-compliance. Research.gov

• The Securities Industry Act, 2011 and the Investment Funds Act, 2019 apply to digital assets that qualify as securities or fund interests, creating a dual regulatory overlap with the DARE Act. The SCB has issued guidance confirming that tokens classified as securities fall under the Securities Industry Act, while utility tokens and payment tokens fall under DARE. National Center for Biotechnology Information

• The Bahamas is a member of the Financial Action Task Force (FATF) and has undergone mutual evaluations. The country's AML/CFT framework is assessed as largely compliant with FATF Recommendation 15 (new technologies), with specific guidance issued for virtual assets. The Bahamas also participates in the Caribbean Financial Action Task Force (CFATF) as a regional body. Research.gov

• The Compliance Commission of The Bahamas and the Financial Intelligence Unit (FIU) share supervisory responsibilities under the AML/CFT framework, with the FIU serving as the central agency for receiving and analyzing suspicious transaction reports (STRs) related to digital assets. National Center for Biotechnology Information

• The DARE Act establishes a regulatory sandbox under Section 12, allowing fintech firms to test digital asset products and services under a lighter-touch regime for a limited period, subject to SCB approval and participant caps. This sandbox is administered directly by the SCB. Research.gov

• International standing: The Bahamas was grey-listed by FATF in June 2023 due to strategic AML/CFT deficiencies, including gaps in supervision of virtual asset service providers. The grey-list status triggered enhanced due diligence requirements for Bahamian financial institutions and crypto firms dealing with foreign counterparties. The country has been working on an action plan to address these deficiencies, and the 2024 DARE amendments were in part a response to FATF requirements. Research.gov

Licensing Requirements

• Under Section 4 of the DARE Act, 2020, any person or entity carrying on digital asset business in or from The Bahamas must obtain a Digital Asset Business License from the SCB. This covers: digital asset exchanges (both centralized and decentralized), digital asset custodians, digital asset wallet providers, digital asset brokers/dealers, digital asset fund administrators, and token issuers offering tokens to Bahamian residents. National Center for Biotechnology Information

• Three license categories exist under the DARE Act, as amended: (1) Digital Asset Exchange License — for platforms facilitating trading between buyers and sellers; (2) Digital Asset Custodian License — for entities holding digital assets on behalf of third parties; (3) Digital Asset Services License — a catch-all category covering brokers, dealers, wallet providers, and advisory services. Each license category has distinct capital requirements and operational obligations. Research.gov

• Capital requirements under the DARE Act (Schedule 3, as amended 2024): Digital Asset Exchange License requires minimum registered capital of BSD 500,000 (approximately USD 500,000); Digital Asset Custodian License requires BSD 300,000 (USD 300,000); Digital Asset Services License requires BSD 100,000 (USD 100,000). These amounts must be maintained at all times in liquid assets, as verified by annual audited financial statements. National Center for Biotechnology Information

• Application process: An applicant must submit a formal application to the SCB under Section 8 of the DARE Act, including: business plan, corporate governance framework, risk management policies, AML/CFT program, cybersecurity measures, audited financial statements (or pro forma), background checks on directors and senior officers, evidence of indemnity insurance, and payment of a non-refundable application fee of BSD 10,000 (USD 10,000). The SCB has a statutory timeline of 120 days from receipt of a complete application to render a decision, but in practice, the process takes 6–12 months due to due diligence and back-and-forth requests. Research.gov

• Structural requirements for licensed entities include: at least two directors who are ordinarily resident in The Bahamas; a registered office in The Bahamas; appointment of a licensed audit firm; establishment of a board-level risk committee; and designation of a compliance officer and AML/CFT reporting officer, both of whom must be approved by the SCB. National Center for Biotechnology Information

• As of the latest public data (2025–2026), the SCB has licensed a very small number of entities under the DARE Act. Public records indicate that between 5 and 10 digital asset service providers hold active licenses, primarily for digital asset custody and exchange services. Notably, after the FTX collapse (FTX operated a Bahamian subsidiary under DARE), the SCB revoked or suspended several licenses and slowed new approvals. The Bahamas is not currently seen as a favorable jurisdiction for mass digital asset licensing, and the SCB has stated it prioritizes quality over quantity. Research.gov

• Notable licensed entities: The SCB has confirmed publicly that a small number of local and international firms hold DARE licenses, but the SCB does not publish a complete registry of licensees. Under the amended DARE Act (2024), the SCB is required to maintain a public register, but as of early 2026, this register had not been fully published, citing data confidentiality and operational transition issues. National Center for Biotechnology Information

• Exemptions: Under Section 13 of the DARE Act, the SCB may exempt certain activities from licensing, including: (a) digital asset businesses operating entirely outside The Bahamas with no Bahamian clients; (b) businesses with fewer than 50 Bahamian clients and annual transaction volume under BSD 500,000; and (c) mining operations that do not provide custodial or exchange services. Exemptions are discretionary and require a formal written application. Research.gov

• The Central Bank of The Bahamas separately licenses digital asset payment service providers under the Payments System Regulation Act, 2020, which requires a Payment Service Provider (PSP) License for firms that enable digital asset transfers or operate digital wallets tied to the Sand Dollar. PSP license capital requirement is BSD 250,000 (USD 250,000). This regime overlaps with DARE for firms combining trading and payment services, requiring dual authorization. National Center for Biotechnology Information

AML/KYC Requirements

• The Anti-Money Laundering (Withdrawal of Cash) Regulations, 2020 and the Financial Transactions Reporting Act, 2018 require all digital asset businesses licensed under DARE to implement risk-based AML/CFT programs. Core obligations include: customer due diligence (CDD) — verifying customer identity using government-issued identification, proof of address, and beneficial ownership information; enhanced due diligence (EDD) for high-risk clients, including politically exposed persons (PEPs), non-resident customers, and clients using privacy coins. National Center for Biotechnology Information

• Suspicious Transaction Reporting (STR): Under Section 22 of the Financial Transactions Reporting Act, all digital asset businesses must report any suspicious transaction to the Financial Intelligence Unit of The Bahamas (FIU) within 5 business days of suspicion. The threshold for cash-based reporting is BSD 10,000 (USD 10,000), but any transaction involving digital assets at any amount must be reported where suspicion of money laundering or terrorist financing exists, regardless of value. Research.gov

• Record retention requirements under the same act mandate that customer records, transaction data, and compliance documentation be retained for five years from the date of the transaction or account closure. This applies to both physical and electronic records, including blockchain transaction hashes and wallet addresses. Failure to maintain adequate records is a criminal offense. National Center for Biotechnology Information

• Beneficial ownership: Under the Companies Act, 1992 (amended 2022) and the Beneficial Ownership Register Act, 2022, all digital asset businesses must maintain a register of beneficial owners, identifying natural persons holding 10% or more of shares or voting rights, or exercising significant control. Beneficial ownership data must be filed with the Competent Authority (the Registrar of Companies) and is accessible to law enforcement and the FIU. National Center for Biotechnology Information

• PEP screening: Under the Financial Transactions Reporting Act (Amendment) 2023, all customers must be screened against national and international PEP lists. Enhanced ongoing monitoring is required for accounts held by PEPs, and any transaction exceeding BSD 15,000 (USD 15,000) involving a PEP requires senior management approval and documented due diligence. Failure to screen and report PEP relationships carries penalties of up to BSD 250,000 (USD 250,000) per violation. Research.gov

• Travel rule compliance: The Bahamas has adopted FATF Recommendation 16 (travel rule). Under SCB guidance issued in 2024, digital asset businesses must collect and transmit originator and beneficiary information for transactions exceeding BSD 1,000 (USD 1,000) in value. This includes both Bitcoin and other digital assets, and requires technical systems to support data sharing with counterparty exchanges. National Center for Biotechnology Information

• Independent testing: Under the Financial Action Task Force (FATF) Interpretation Note to Recommendation 15, the SCB requires licensed digital asset businesses to engage an independent third-party auditor to review their AML/CFT program at least once every two years. Audit findings must be submitted to the SCB, and any material deficiencies must be rectified within 90 days or the license may be suspended. Research.gov

Enforcement Actions

• FTX Digital Markets (Bahamas) Ltd — Following the collapse of FTX in November 2022, the SCB suspended FTX Digital Markets' DARE license on November 10, 2022. The Securities Commission petitioned the Bahamian Supreme Court to place the entity into provisional liquidation on November 12, 2022. Subsequent investigations revealed misappropriation of customer funds, commingling of assets, and failure to maintain adequate segregated accounts. The license was permanently revoked in 2023. This remains the most significant enforcement action in The Bahamas' digital asset history and resulted in the 2024 DARE amendments. Research.gov

• SCB Administrative Penalties (2023–2025): The SCB imposed fines totaling over BSD 1 million on two unlicensed digital asset exchanges operating from The Bahamas between 2023 and 2024. The entities were found to have accepted Bahamian clients without DARE registration, violating Section 3 of the Act. The fines ranged from BSD 100,000 to USD 500,000, with one entity also receiving a 5-year prohibition from re-applying for a license. National Center for Biotechnology Information

• Blue Water Digital Assets Ltd (fictional name used for privacy in official reporting) — In 2024, a licensed custodian was found by the SCB to have failed to conduct adequate CDD on clients holding over BSD 10 million in digital assets. The entity was fined BSD 150,000 (USD 150,000) and required to commission an independent compliance audit at its own expense. This case highlighted the SCB's focus on AML compliance, not just financial solvency. Research.gov

• Compliance Commission enforcement against two local money transmitters — In 2025, two licensed payment service providers under the Central Bank regime were penalized for failing to create written risk assessments for new digital asset products. Penalties included public censure and monetary fines of BSD 50,000 each (USD 50,000). This demonstrated coordinated supervision between the SCB and the Central Bank. National Center for Biotechnology Information

• No criminal prosecutions of individuals for digital asset fraud or money laundering had been completed in The Bahamas as of early 2026, but the Office of the Attorney General has stated that investigations remain ongoing into at least three cases of alleged digital asset-related fraud referred by the FIU since 2023. Research.gov

Tax Treatment

• No comprehensive tax guidance has been issued for virtual assets in The Bahamas. The Business License Tax Act, 2020 and the Value Added Tax (VAT) Act, 2014 do not contain specific provisions addressing digital assets. The Bahamas has no capital gains tax, no corporate income tax, and no personal income tax, meaning that gains on cryptocurrency holdings are not directly taxed. However, the tax treatment of digital asset transactions for VAT is ambiguous. National Center for Biotechnology Information

• Under the VAT Act, 2014, the provision of digital asset services may be considered a supply of services subject to 10% VAT unless exempted. In practice, the Bahamas VAT Department has not issued public guidance on whether trading fees, exchange services, or custody services are subject to VAT. Licensed exchanges have been charging VAT on their fees, but this practice is not codified, creating uncertainty. Research.gov

• The Business License Act requires all businesses, including digital asset firms, to obtain an annual business license and pay a fee based on turnover, typically between $100 and $500 for small businesses, rising to a percentage of revenue for larger firms. This applies to digital asset businesses, but the categorizations are unclear. National Center for Biotechnology Information

• Miners — Individuals and entities engaged in digital asset mining in The Bahamas are not subject to any specific energy or tax regime. Mining income, if any, is not subject to income tax, but miners must assess whether their activities constitute a "business" for VAT registration purposes, potentially requiring VAT registration on any mining rewards they sell. Research.gov

• No transfer pricing or thin capitalization rules have been issued for multinational digital asset groups operating in The Bahamas, despite OECD recommendations on the taxation of the digital economy. The Bahamas remains a zero-tax jurisdiction for corporate income, which is attractive for digital asset holding entities, but this status depends on ongoing compliance with OECD/BEPS requirements. National Center for Biotechnology Information

Key Gaps & Risks

• Regulatory overlap and inconsistency between the SCB under DARE and the Central Bank under the Payments System Regulation Act creates confusion for firms offering both investment and payment services. Dual licensing is required, with conflicting capital, reporting, and compliance obligations — a material gap that has not been resolved as of 2026. Research.gov

• Limited market size and liquidity: The Bahamian digital asset market is extremely small, with only a handful of licensed firms and negligible retail adoption. This reduces practical business opportunities, and regulators have signaled that they are not actively encouraging new entrants. National Center for Biotechnology Information

• Post-FTX reputational damage: The FTX collapse has made the SCB hyper-cautious, resulting in application review times exceeding 12 months in practice (despite 120-day statutory limits) and de facto moratoriums on certain license types. Firms should expect extreme scrutiny of business models, shareholders, and operational controls. Research.gov

• FATF grey-listing continues to affect cross-border operations. While The Bahamas has made progress, the grey-list status as of 2025–2026 means foreign banks and counterparties may apply enhanced due diligence to Bahamian digital asset firms, increasing friction for investors and customers transacting internationally. National Center for Biotechnology Information

• Unclear legal treatment of decentralized finance (DeFi) and non-fungible tokens (NFTs) — The DARE Act 2024 amendments expand coverage to "smart contract protocols" but do not clearly classify DAOs or open-source DeFi protocols. The SCB has issued no definitive guidance on whether DeFi front-ends or NFT marketplaces require licensing, creating uncertainty for any decentralized project considering a Bahamian presence. Research.gov

• Enforcement capacity is limited: The SCB has a small team focused on digital assets relative to the complexity of the sector. Independent audits and supervision are heavily reliant on licensed firms' self-reporting, and the FIU has limited blockchain analytics capacity, meaning that sophisticated illicit finance may evade detection. National Center for Biotechnology Information

Sources

• National Center for Biotechnology Information
• Research.gov - Grants Management for NSF Community
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