The Bermuda Monetary Authority has launched a sweeping review of how real-world assets should be tokenised and regulated on the island.

In a discussion paper published on November 5, the authority said tokenisation was now a priority for international bodies including the Organisation for Economic Co-operation and Development, International Organisation of Securities Commissions, Bank for International Settlements and the Financial Stability Board, and that Bermuda must ensure its own framework remained competitive and aligned.

The BMA noted that Bermuda’s digital-asset regime already covers tokenisation, but said the rapid expansion of new structures — ranging from tokenised investment funds to blockchain-based insurance products — may create regulatory uncertainty without more guidance. The consultation asks whether targeted updates, streamlined licensing or expanded definitions are needed.

“The goal is to ensure that regulatory developments are carefully tailored to support innovation while maintaining a ‘same risk, same regulatory outcome’ approach,” the paper stated, emphasising that the work is intended to “foster stability and promote a dynamic marketplace”.

A major focus is how tokenised investment products fit across multiple laws. Tokenised instruments may fall under both the Digital Asset Business Act and the Investment Business Act, which could create overlap and duplicate licensing requirements for firms. The authority asked whether the industry believes this dual approach “creates unnecessary duplication” and whether a single regime could effectively cover tokenised funds.

The paper also highlights a practical challenge for fund managers and administrators: 24/7 wallet-based trading may strain traditional processes such as end-of-day net asset value, transfer-agency work and reconciliation.

The BMA also signalled that tokenisation could reshape Bermuda’s insurance-linked securities market.

With existing classes such as Innovative Insurer General Business and Innovative Insurer Long-Term already supporting blockchain-based insurers, the authority is exploring how tokenised catastrophe bonds, collateralised reinsurance structures and new parametric products should interact with the current special-purpose insurer regime and Bermuda Stock Exchange listings. The framework aims to balance market innovation with investor and policyholder protection.

The paper goes beyond financial instruments, examining tokenisation of real estate, precious metals and environmental assets such as carbon credits.

For real estate, the BMA distinguishes between overseas property portfolios managed from Bermuda and the far more complex question of tokenising domestic property titles, which the authority said would require legal reforms and input from different government bodies.

For gold and other metals, the authority cautions that token trading takes place 24/7, risking price mismatches with traditional markets. Strong custody, audits, valuation practices and oracle systems would be critical.

Environmental assets present unique risks such as double counting, greenwashing and the challenge of verifying real-world emissions data. The BMA asks what safeguards could ensure reliability and prevent misuse.

As “universal wallets” emerge — capable of holding tokenised investments, insurance-linked tokens and stablecoins — the authority questions whether the sector is moving towards a platform-centric model. Under this approach, prudential and conduct risks may gather at the wallet or platform layer, rather than at the level of each individual financial product. The BMA asks whether the DABA regime should ultimately become the core supervisory perimeter for these activities.

Tokenisation introduces new risks in anti-money-laundering compliance, cybersecurity and financial stability. The authority notes the potential for programmable compliance — such as whitelist-only transfers and embedded Know Your Customer — but warns that tools must remain interoperable across regimes and consistent with Financial Action Task Force standards.

The paper sets out an extensive list of cyber-risks, from smart-contract vulnerabilities to bridge failures, oracle manipulation and insider threats.

The BMA warns that tokenisation may create liquidity mismatches if digital tokens appear more trade-able than the underlying assets, raising the risk of redemption runs.

The authority is inviting feedback from industry participants across all sectors, including investment managers, insurers, digital-asset firms, administrators and legal practitioners.

“Stakeholder input will play a critical role in ensuring that all relevant possibilities and risks are thoroughly examined,” the BMA wrote. A follow-up consultation paper will be published early next year, incorporating feedback and presenting more targeted proposals.

Responses must be submitted to fintech@bma.bm by January 9, 2026.