The Bahamian regulatory body of cryptocurrencies, the Securities Commission, plans to strengthen the country’s crypto regulations following the collapse of FTX, which had its headquarters based in the Bahamas. This includes a prohibition on algorithmic stablecoins and privacy tokens.
More Supervision After the Failure
In November 2021, FTX, with a valuation of over $30 billion, encountered severe liquidity issues and was unable to fulfill customer withdrawal requests. The exchange filed for bankruptcy protection and invoked huge investor losses. This event caused many to call for stricter cryptocurrency regulations to lower the chances of similar situations in the future. According to Bloomberg, the Bahamas plans to implement new legislation requiring digital asset businesses to report their activities, as well as stricter supervision of digital currency exchanges.
The proposed regulations will also require users to disclose their process of pledging coins to support blockchain operations, a practice known as staking. Ban on algorithmic stablecoins and privacy tokens will also be enforced by the Securities Commission of the Bahamas.
The regulator’s decision to amend cryptocurrency regulations is not solely in response to the FTX debacle. The authorities of the European Union, Hong Kong, and New York have also recently displayed intentions to protect crypto users by tightening regulatory frameworks. Residents of the Bahamas can provide feedback on the proposed rules until May 31, 2022.
The Bahamas: SBF’s Short-Lived Paradise
FTX moved its headquarters from Hong Kong to the Bahamas in September 2021, dubbing it a crypto hub. However, the collapse of the exchange, along with rumors of lavish parties thrown by the former CEO, Sam Bankman-Fried, left a dark stain on the island.
Bankman-Fried, who currently resides in his parents’ California home awaiting fraud charges, was arrested in his Bahamas residence nearly a month after the fall of FTX. He was subsequently extradited to the United States, where he will face a trial at the start of October.