On November 5, 2025, the Bermuda Monetary Authority (BMA) published a discussion paper on the growing relevance of tokenisation to various global institutions. The Authority notes in the paper:
"Asset tokenisation… is gaining significant attention globally from prominent international organisations… underscoring the need to understand the far-reaching implications of tokenisation, including its risks and opportunities."
In the documentation, the BMA goes on to highlight its intention to rewrite the rulebook in anticipation of the systemic shift brought by tokenisation. In fact, the Authority announced the start of a comprehensive consultation program to assess the need for new rules, updated definitions, and clearer supervisory expectations in the asset tokenisation space.
Rewriting the Playbook for Tokenised Assets
The Authority believes that the necessary foundations for a proper regulatory regime are already in place. In fact, the Authority wrote, citing the Digital Asset Business Act (DABA) of 2018, Bermuda's digital asset framework already provides the legal basis for tokenisation by classifying it as a regulated digital asset business activity."
Yet, the regulator notes that existing laws do not capture the actual rights and obligations when assessing the risks of on-chain assets. Every other cycle, the crypto space adds more functionality that exceeds the original vision of digital assets as payment tokens and crypto commodities.
For instance, the rise in tokenised bonds, fund shares, commodities, and even reinsurance contracts to global investors prompted the BMA to re-examine its existing policies and whether they need to be changed.
The regulator also speaks of a dual licensing conundrum, in which tokenised assets may fall under both digital-asset and investment legislation. The Authority noted that:
"Tokenised investments will inherently qualify as 'digital assets' under [DABA]… However, depending on their specific features, they may also simultaneously qualify as 'investments' under the Investment Business Act."
Overlapping regulations could create unnecessary complexity and even duplication. And as such, the BMA is seeking to determine whether to:
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Introduce specialised and simplified licensing for tokenised structure
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Expand and redefine investment categories
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Create more direct parameters for providers of tokenisation services
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Guide on the distinction and treatment of digital twins and on-chain assets.
Yet, even as the framework continues to evolve, the BMA intends to "focus on the substance rather than the form of tokenised investments." This inherently means that the digital assets that come as tokens will be treated as financial instruments, regardless of whether they use blockchain or traditional registries.
On-Chain and Off-Chain Finance
The paper highlighted the need to distinguish between on-chain and off-chain finance for regulatory purposes. Since both assets, Digital twins and native tokens, have unique challenges, it is necessary to treat each of them separately.
"While tokenisation arguably exists along a spectrum with varying degrees of DLT integration, for the purpose of this DP, we will distinguish between two primary modes: off-chain (or digital twins) and on-chain (or native tokens)," the paper notes.
As per the paper, Digital twins are assets representing legal rights to real-world assets. While assets are traded on chain, they exist off-chain. Among assets falling into this category are financial instruments, real estate, funds, metals, and environmental credits. But oracles are needed if these assets are to be traded on-chain with accuracy.
BMA's paper actually notes that the "existing digital asset framework is sufficiently broad to encompass tokenisation activities." The paper further explains that native on-chain tokens live entirely on the blockchain, with their entire life cycle being on-chain.
The Re/Insurance Opportunity: A $2 Trillion Market Meets Blockchain
One of the largest markets in Bermuda, poised for a significant shift with tokenisation, is reinsurance. According to reports, the global reinsurance sector, now valued at $784 billion, is likely to reach $2 trillion over the next decade. Tokenisation brings the much-needed speed, precision, and liquidity, which are assets in the reinsurance space.
In 2025, Bermuda remains the global re-insurance hub with over 1200 registered insurers. Based on another report, "Member companies of the Association of Bermuda Insurers and Reinsurers (ABIR) reported a 10% year-over-year increase in premium written for 2024, along with an 8.5% rise in total equity."
The BMA discussion paper noted that Bermuda currently already recognises "innovative Insurer" Classifications that accommodate blockchain assets. The BMA believes insurance-linked securities should be given priority in modernising tokenisation.
The statement reads:
"Bermuda's established regulatory frameworks for innovative insurers (Classes IIGB, IILT, along with Sandbox classes IGB and ILT) and digital assets (DABA), combined with the Segregated Accounts Companies Act 2000 and Incorporated Segregated Accounts Companies Act 2019, have created a proven foundation for insurance tokenisation, with existing licensees successfully demonstrating and operationalising DLT-based insurance products supervised under bespoke prudential capital requirements."
The convergence between Bermuda's ILS sector and tokenisation opens more opportunities to enhance liquidity, reduce transaction costs, and expand access to insurance risks.
Risks, Cybersecurity, and the Path to Regulatory Clarity
Even while widely praising tokenised finance, the BMA also highlights the risks of this space. While proper tokenisation reduces operational friction and enhances transparency, it carries technological risks. Cyber threats like smart contract vulnerabilities and even oracle manipulation, to name a few.
The paper said tokenisation can "enable potential integration of features such as whitelisting, Know-Your-Client (KYC) gating and transfer controls directly into token architecture." Yet all mechanisms must still adhere to Financial Action Task Force standards.
Another issue with tokenisation is volatility amplification. Since assets are now available in markets 24/7, the volatility exposure increases.
What Experts Say
The BMA, while talking of the relevance of the discussion paper, said:
"Tokenisation can embed regulatory requirements directly into smart contracts, offering 'programmable compliance' that may enforce transfer restrictions, investor qualifications, reporting obligations, and disclosures."
Other experts also agree that Bermuda's new approach to tokenisation is a positive signal. When responding to a question about Bermuda's first tokenised bond, Steve Rees Davies, a partner at a legal service provider Carey Olsen, Bermuda, noted:
"It shows Bermuda's readiness for serious capital markets innovation. The issuance demonstrates how structured, governed digital debt can thrive under Bermuda law, paving the way for yield-generating stablecoins and hybrid digital securities backed by traditional assets."
JFSA Analysis on Bermuda Paradigm:
"Bermuda's digital asset legal and regulatory framework... successfully marries the principles-based and rules-based approaches... a fit-for-purpose regulatory blueprint, as pertains to asset tokenisation." Experts note its hybrid model balances flexibility with proportionality via tiered licensing.
Bermuda: Global Regulatory Leader of Tokenised Assets?
Tokenisation is going fast mainstream, with trillions of dollars' worth of assets potentially moving to digital ledgers in the near future. Bermuda's Monetary Authority sees the potential of tokenised assets and is already taking steps towards friendly regulation. Its discussion paper is not just a request for feedback; it marks a new phase in the modernisation of regulations.
For investors, Bermuda's move is a signal of regulatory and institutional clarity to come. Clearer regulations mean better investment channels and greater security on the way. Regulatory evolution adds a layer of confidence for investors.
Businesses will also benefit. Clarity in regulations allows them to gain exposure to tokenised assets without fear of regulatory scrutiny. This exposes enterprises to a whole new class of opportunities in tokenised assets. uCubed aims to help businesses and organisations navigate these tough and fast-evolving markets. They offer education, insights, research, and a technological foundation to stay ahead in this market.
