How to Set Up a Crypto Exchange in Bermuda

Bermuda has quickly emerged as a leading jurisdiction for digital asset businesses and cryptocurrency exchanges. The island has a number of advantages that make it an attractive destination for these businesses, including:

• A comprehensive regulatory framework: Bermuda has a comprehensive regulatory framework for digital assets, which is designed to promote innovation while also protecting investors and consumers. The Bermuda Monetary Authority (BMA) is the primary regulator of digital asset businesses in Bermuda.
• A stable political and economic environment: Bermuda has a stable political and economic environment, which provides businesses with the certainty they need to operate successfully.
• A skilled workforce: Bermuda has a skilled workforce with experience in the financial services industry. This makes it easier for digital asset businesses to find qualified employees.
• A favorable tax regime: Bermuda has a favorable tax regime for digital asset businesses. This can help businesses to reduce their tax liability.
• A supportive government: The Bermuda government is supportive of the digital asset industry. The government has taken steps to promote the growth of the industry, such as establishing a regulatory sandbox for digital asset businesses.

These advantages have made Bermuda an attractive destination for a number of leading digital asset businesses and cryptocurrency exchanges. In recent months, Coinbase, the world’s largest cryptocurrency exchange, has moved its international headquarters to Bermuda. Jewel, a crypto-friendly bank, is also headquartered in Bermuda.

If you are considering setting up a digital asset business or cryptocurrency exchange, Bermuda is a jurisdiction that you should seriously consider. The island has a number of advantages that can make it the best place to do business.

Why Setup a Crypto Exchange in Bermuda

Here are some specific reasons why Bermuda is a good jurisdiction for digital asset businesses and cryptocurrency exchanges:

• The BMA is a forward-thinking regulator: The BMA has been proactive in developing a regulatory framework for digital assets. The BMA’s Digital Asset Business Act 2018 is one of the most comprehensive and progressive digital asset regulations in the world.
• Bermuda has a strong track record in financial services: Bermuda is a well-established international financial center with a long history of providing financial services. This gives digital asset businesses and cryptocurrency exchanges access to a mature and sophisticated financial market.
• Bermuda is a stable and secure jurisdiction: Bermuda is a stable and secure jurisdiction with a strong rule of law. This provides digital asset businesses and cryptocurrency exchanges with the confidence they need to operate successfully.
• Bermuda has a skilled workforce: Bermuda has a skilled workforce with experience in the financial services industry. This makes it easier for digital asset businesses and cryptocurrency exchanges to find qualified employees.
• Bermuda has a favorable tax regime: Bermuda has a favorable tax regime for digital asset businesses and cryptocurrency exchanges. This can help businesses to reduce their tax liability.

Overall, Bermuda is a good jurisdiction for digital asset businesses and cryptocurrency exchanges. The island has a number of advantages that can make it the best place to do business.

Existing Digital Asset Businesses in Bermuda

As of March 2023, there are 23 licensed digital asset businesses in Bermuda. These businesses offer a variety of services, including:

• Digital asset trading
• Digital asset custody
• Digital asset issuance
• Digital asset advisory services

The majority of these businesses are located in Hamilton, the capital of Bermuda. However, there are also a number of businesses located in other parts of the island. I also note that many were set up prior to the tightening of regulations. These days, you need more capital, more compliance systems, better management, and a top quality business plan to be approved.

Here are some of the digital asset businesses that are licensed in Bermuda:

• Coinbase
• Coinfloor
• EQONEX
• Genesis Global Trading
• iFinex (Bitfinex)
• LedgerPrime
• Omniex
• Paxos
• SFOX
• Tether

Requirements to Build a Crypto Exchange in Bermuda

The Bermuda Monetary Authority (BMA) is the primary regulator of digital asset businesses in Bermuda. The BMA has a number of requirements that digital asset businesses must meet in order to be licensed. These requirements include:

• Having a sound business plan
• Having adequate risk management procedures in place
• Providing clear and accurate information to customers
• Maintaining adequate records

The BMA has been actively promoting Bermuda as a jurisdiction for digital asset businesses. The BMA has a number of initiatives in place to support the growth of the digital asset industry in Bermuda. These initiatives include:

• A regulatory sandbox for digital asset businesses
• A mentorship program for digital asset businesses
• A training program for digital asset professionals

The BMA is committed to creating a regulatory environment that is conducive to the growth of the digital asset industry in Bermuda. The BMA believes that Bermuda has the potential to become a leading jurisdiction for digital asset businesses.

Capital Requirements and Costs to Open a Crypto Exchange in Bermuda

Here are the capital requirements and filing fees for setting up a crypto exchange or digital asset business in Bermuda:

• Capital requirements: The capital requirements for a digital asset business license in Bermuda vary depending on the type of license. For the Test license, the minimum capital requirement is $50,000. For the Modified license, the minimum capital requirement is $100,000. For the Full license, the minimum capital requirement is $250,000.

• Filing fees: The filing fees for a digital asset business license in Bermuda also vary depending on the type of license. For the Test license, the filing fee is $1,000. For the Modified license, the filing fee is:
  • $15,000 if estimated client receipts are less than $500,000
  • $30,000 if estimated client receipts are between $500,000 and $1 million
  • $45,000 if estimated client receipts are greater than $1 million

• Estimated client receipts: The estimated client receipts are the gross revenue earned in the year preceding the year of assessment arising from digital asset business services provided or product sales to clients by a licensed undertaking.

For example, if you are applying for a Full (F) License and your estimated client receipts are $1 million, the filing fee would be $200,000.

The filing fee is payable upon submission of the application. The BMA will not review your application until the filing fee has been paid.

In addition to the capital requirements and filing fees, there are other costs associated with setting up a crypto exchange or digital asset business in Bermuda. These costs include:

• Legal fees (typically $250,000)
• Background Reports on all Shareholders (typically $5,000 to $10,000 per person)
• Accounting fees and audit fees (preparing your personal or corporate financial statements and converting them to GAAP, if applicable)
• Office, employees, and other G&A startup expenses.

The total cost of setting up a crypto exchange or digital asset business in Bermuda will vary depending on the size and complexity of the business. However, the capital requirements, legal fees, background reports, and filing fees are the most significant costs.

Conclusion
I hope you’ve found this post on building a crypto exchange in Bermuda to be helpful. If you would like more information, including a detailed quote, please contact me at info@premieroffshore.com. I will be happy to assist you to build your digital asset business in Bermuda.