The Bermuda Monetary Authority (BMA) opens a consultation on a proposed guidance note governing the use of recognised stablecoins within Bermuda's insurance, insurance-linked securities (ILS) and investment fund structures, setting out a supervisory expectation that limited purpose insurers (LPIs), the class within which Bermuda captives are typically licensed, keep stablecoin exposure within 25 per cent of total statutory capital and surplus. Stakeholders have until 30 September 2026 to submit feedback. The proposed guidance applies to a defined set of eligible entities, including LPIs, Bermuda-regulated investment funds, ILS funds, insurance managers, agents, brokers, insurance marketplace providers and innovative intermediaries. Commercial insurers fall outside its scope, with any proposed stablecoin use by such entities to be considered separately under the applicable frameworks. The BMA frames the consultation against a wider shift in which stablecoins are moving from digital asset markets into institutional finance, supporting payment, settlement, treasury management, collateral mobility and liquidity. It cites the passage of the US GENIUS Act in July 2025, the implementation of the European Union's Markets in Crypto-Assets Regulation, and the introduction of stablecoin licensing frameworks in jurisdictions including Hong Kong and Singapore. Global stablecoin issuance exceeded US$300bn as of mid-2026, according to the Authority, with the market dominated by a small number of US dollar-pegged issuers. The guidance does not treat stablecoins as equivalent to fiat currency, cash, deposits or legal tender. Instead it sets out the factors the BMA would weigh in assessing whether a proposed arrangement is appropriate for a given entity, structure, counterparties and use case. Eligibility is not automatic, and recognition for one arrangement does not extend to all entities, sectors or use cases. A recognised stablecoin, for the purposes of the guidance, is defined by criteria including issuance with the intention of maintaining a stable value against a specified fiat currency, redemption at par no later than the close of the next business day under normal and stressed conditions, full one-to-one backing by segregated cash or cash equivalents free from encumbrance or rehypothecation, at least monthly independent attestation of reserves, and a primary purpose of payment, settlement, liquidity or treasury operations rather than speculation. Algorithmic, synthetic, unsecured, crypto-asset-backed, commodity-backed or materially under-collateralised stablecoins would not generally qualify. In assessing reserve quality, the Authority says it will have regard to standards including the permissible reserve assets set out under the US GENIUS Act. Permitted use cases set out in the proposed guidance include subscriptions into and redemptions from Bermuda investment funds, fund treasury and settlement operations, premium collection and claims payment by eligible entities, approved capital or surplus support subject to prudential limits, and approved settlement arrangements for parametric or digitally enabled insurance structures. Entities would be barred from using stablecoins for speculative investment, yield farming, staking, lending, unsecured decentralised finance activity, rehypothecation or leverage. The 25 per cent guideline is a supervisory policy position rather than a statutory cap, and the BMA states that a higher exposure may be approved through the applicable supervisory process. Any proposal above that threshold would need to be discussed with the Authority in advance, which may consider the quality of the stablecoin, the issuer and reserve framework, custody arrangements, liquidity and redemption analysis, claims profile, stress testing and the insurer's overall capital and surplus position. The guidance also addresses intercompany settlement within a captive group or fund structure, requiring such transfers to be subject to the same governance, AML/ATF, sanctions, custody, valuation and reporting controls as the underlying activity. The Authority's current position is that traditional restricted and unrestricted special purpose insurer (SPI) collateral structures should remain fiat-based, with any fund-level stablecoin use converted into fiat before deployment into an SPI collateral structure unless otherwise addressed through the applicable process. The guidance does not amend the existing SPI, Class IIGB or Class IILT frameworks, and does not authorise entities to issue, redeem, exchange or custody digital assets for the public, which would trigger separate licensing under the Digital Asset Business Act 2018 or the Digital Asset Issuance Act 2020. The proposed guidance sets governance expectations under which an entity's board and senior management would approve and document a stablecoin risk management framework covering use cases, risk appetite and limits, eligible stablecoins and blockchains, custody and wallet controls, AML/ATF and sanctions screening, valuation and reconciliation, liquidity and fiat fallback arrangements, and operational resilience. It also details expectations on custody and safeguarding, service provider due diligence, stress testing, and technology, blockchain, smart contract and oracle risk, alongside a requirement that entities engage their assigned BMA supervisor at an early stage. The Authority is seeking feedback on whether the proposed guidance is clear, proportionate and operationally workable, including on the eligibility criteria, the scope of use cases, exposure limits, ILS fund treatment, AML/ATF and sanctions controls, custody and safeguarding expectations, and the proposed supervisory notification process. Comments should be sent to the BMA by 30 September 2026.
