Bermuda is positioning itself as a regulatory pioneer by transitioning toward a fully on-chain national economy, partnering with major crypto exchanges like Coinbase and Kraken to create a new model for how digital assets integrate into everyday financial infrastructure. In January 2026, Prime Minister David Burt announced at the World Economic Forum in Davos that the island nation would pursue this ambitious shift, backed by partnerships with Circle and Coinbase. The move reflects years of groundwork in digital asset regulation and represents a fundamental rethinking of how exchanges and governments can collaborate on blockchain-based financial systems.

Why Is Bermuda Taking This Approach?

For Bermuda, the transition to an on-chain economy addresses practical challenges facing the island. Lower transaction costs, improved access to dollar-denominated payments, and the ability to keep economic value circulating locally are the primary drivers. As an international offshore financial center with a small population, Bermuda has unique advantages: its size makes it easier to test and roll out digital asset infrastructure at scale, and its existing reputation for financial innovation creates natural appeal to crypto companies seeking regulatory clarity.

The government has deliberately chosen to work with regulated private-sector financial companies rather than building technology infrastructure itself. This approach leverages the expertise and resources of established players in the crypto exchange and stablecoin space, reducing the burden on public institutions while accelerating deployment.

What Regulatory Framework Makes This Possible?

Bermuda's success rests on a comprehensive legal foundation built over nearly a decade. The country introduced the Digital Asset Business Act (DABA) and the Digital Asset Issuance Act (DAIA) beginning in 2018, establishing clear rules for crypto exchanges, token issuers, and decentralized finance (DeFi) protocols. The Bermuda Monetary Authority (BMA) licenses and supervises these entities, with far-reaching supervisory and enforcement powers to issue regulations, codes of practice, and guidance.

The regulatory framework covers several key areas:

• Exchange Licensing: The BMA licenses crypto exchanges under Class F sandbox regulations, allowing fully operational companies like Coinbase and Kraken to test, launch, and scale activities in a regulated environment.
• Custody Standards: In 2024 and 2025, the BMA issued detailed rules clarifying custody standards for digital assets, requiring licensed businesses to safeguard customer assets according to strict prudential standards.
• Stablecoin Oversight: The framework recognizes stablecoins as a distinct category of digital assets, with requirements for full reserve backing in high-quality liquid assets and redemption rights for holders.
• Consumer Protection: DABA requires licensed businesses to conduct operations in a "prudent manner," with additional protections including a draft code of practice for digital asset custody.
• DAO Recognition: The Bermuda Business Development Agency established a DAO Working Group to draft law reform proposals giving legal recognition and certainty to decentralized autonomous organizations.

Which Exchanges Are Operating in Bermuda?

Several major crypto platforms have established operations or partnerships in Bermuda under this regulatory framework. Coinbase and Kraken are both active participants in the government's on-chain economy initiative. Payward, the parent company of Kraken, has a partnership focused on expanding tokenized financial products for institutional investors. Circle, a stablecoin issuer, is a core partner in the digital dollar initiative. Bitcoin Suisse International holds dual approval under DABA and the Investment Business Act to provide regulated digital asset management and investment advisory services from the island.

These partnerships demonstrate how exchanges and fintech companies are willing to invest in jurisdictions that offer regulatory clarity. Rather than operating in legal gray zones, these firms can build compliant infrastructure that serves both retail and institutional customers with confidence.

How Does Bermuda's Approach Compare to Global Exchange Regulation?

Bermuda's model stands in sharp contrast to the regulatory fragmentation affecting exchanges elsewhere. In the European Union, the Markets in Crypto-Assets Regulation (MiCA) took full effect on July 1, 2026, requiring all exchanges serving European users to hold proper authorization under a single EU-wide framework. This created significant disruption: Binance, the world's largest crypto exchange, failed to secure MiCA approval before the deadline and had to restrict services to EU users. Bybit adapted by creating a regulated EU subsidiary, while KuCoin faces ongoing compliance pressure.

Bermuda's approach differs fundamentally. Rather than imposing restrictions on existing exchanges, the framework actively invites them to participate in building a digital economy. The government treats exchanges not as threats to be contained but as essential infrastructure partners. This collaborative model may offer lessons for other jurisdictions struggling to balance innovation with consumer protection.

What Role Do Stablecoins Play in Bermuda's Vision?

Stablecoins are central to Bermuda's on-chain economy. The government has long recognized their potential for everyday payments and is developing a Digital Bermuda Dollar in partnership with the Stellar Development Foundation. Unlike a central bank digital currency (CBDC), which the government previously ruled out, the Digital Bermuda Dollar will be a stablecoin that complements the traditional financial sector. Banks will hold the fiat reserves backing the digital tokens and provide local custody, creating a hybrid system where digital and traditional finance coexist.

The Bermuda Commercial Bank has already demonstrated that a fully compliant, lower-cost stablecoin system is technically feasible for everyday payments. This proof of concept strengthens the government's case that an on-chain economy is not theoretical but achievable.

How to Understand Bermuda's Custody and Consumer Protection Standards

For users and investors evaluating exchanges operating in Bermuda, understanding the custody and protection framework is essential. The BMA's requirements ensure that customer assets are safeguarded according to strict standards:

• Cold Storage Requirements: Licensed exchanges must maintain the majority of customer crypto assets in cold storage, offline and protected from cyber threats, with detailed rules governing how these assets are managed and audited.
• Insurance Coverage: Exchanges operating in Bermuda must maintain commercial crime insurance covering hot, warm, and cold storage assets, similar to protections offered by major US exchanges like Coinbase, which maintains a $320 million insurance policy.
• Redemption Rights: For stablecoin-based systems, customers have explicit redemption rights, meaning they can exchange digital tokens for fiat currency at any time, reducing counterparty risk.
• Prudential Standards: The BMA enforces detailed prudential standards requiring exchanges to maintain adequate capital, conduct regular audits, and implement robust cybersecurity practices.
• AML and Anti-Terrorist Financing: Bermuda has established long-standing reputation as an international financial center with strict anti-money-laundering (AML) and anti-terrorist financing requirements that apply to all licensed digital asset businesses.

What Does This Mean for the Future of Crypto Regulation?

Bermuda's experiment offers a potential blueprint for other jurisdictions. Rather than viewing crypto exchanges as regulatory problems to be solved through restriction, the island has positioned them as economic engines. By providing legal certainty, clear custody standards, and a path to compliance, Bermuda is attracting the infrastructure and talent that other regions are pushing away.

The contrast with Europe is instructive. MiCA created a single regulatory standard but also triggered major exchanges to exit or restructure operations, disrupting user access and fragmenting liquidity. Bermuda's approach, by contrast, invites participation and rewards compliance with operational clarity. As other jurisdictions grapple with how to regulate crypto, Bermuda's model of collaborative regulation, transparent custody standards, and stablecoin integration may influence policy decisions globally.

The success of Bermuda's on-chain economy will depend on sustained government commitment, continued participation from major exchanges, and the ability to scale digital infrastructure beyond pilot programs. If the model works, it could demonstrate that crypto exchanges and governments need not be adversaries, but partners in building financial systems that are both innovative and protective of consumer interests.