The Inside Scoop on Graduating from a Digital Asset Test License to a Modified License in Bermuda
There’s an old expression, “You get what you pay for” and it applies more than ever to digital asset companies’ licensing strategies across various jurisdictions. Bermuda isn’t the easiest country to get licensed to operate, but every licensee will agree that it is well worth the investment to benefit from the legal clarity and regulatory reputation that Bermuda has built over the years.
Bermuda’s thoughtfully structured digital asset regulatory framework offers a clear pathway from innovation to established market presence. As companies transition from a Class T (Test) License to a Class M (Modified) License under the Digital Asset Business Act 2018 (DABA), they undergo a critical evolution from supervised testing to demonstrable operational independence.
The journey from T to M License demands more than regulatory box-ticking—it requires establishing formal committees, expanding enterprise risk management capabilities, enhancing policies and procedures, developing head office functionality, and preparing for financial audits. Each step proves your company’s ability to operate with decreasing regulatory oversight while maintaining the highest standards of risk control.
Y Partners is excited to feature one of Bermuda’s most innovative DABA licensee’s journey from T to M license. Author, Michael Wynne, one of Bermuda’s top compliance experts, dives into the process offering a rare look under the hood of how the Bermuda’s Monetary Authority’s sandbox environment is helping set up fintech businesses for sustainable success in Bermuda’s prestigious digital asset ecosystem.
How Companies Move from a Bermuda T-Licence to an M-Licence
Michael Wynne is the Chief Compliance Officer at PV01 Capital Markets, a Bermuda-based digital asset company specialising in tokenised bonds. He has helped build compliance teams at top firms like Walkers and Deloitte in Bermuda, and has a strong track record of securing licences from the Bermuda Monetary Authority (BMA).
The Bermuda Licence Pathway for Digital Asset Companies
Since 2018, Bermuda has built one of the world’s most forward-thinking frameworks for digital assets businesses.
Under the Digital Asset Business Act 2018 (DABA), companies follow a clear licence pathway:
- Start with a Class T (“Test”) Licence
- Move to a Class M (“Modified”) Licence within about a year
- Graduate to a Class F (“Full”) Licence about two years after that
Here’s a quick breakdown:
- Class T Licence
A short-term licence (3–12 months) that lets companies test new products, services, or business models. The BMA monitors progress closely at this stage through the use of monthly key indicators.
- Class M Licence
A 12-month licence that gives companies time to grow and prove they can manage risks as they scale. The BMA’s supervision increases as it now begins its prudential, AML and Cyber on-site inspections.
- Class F Licence
A full licence with no expiry date. Companies must meet all the regulatory standards and are subject to regular supervision.
What the BMA Expects During the T-Licence Stage
Even though the T-Licence is a “testing” phase operationally, it’s not a soft start for compliance.
From day one, companies need robust Anti-Money Laundering (AML), Anti-Terrorist Financing (ATF), and cybersecurity processes in place.
It’s not just about ticking boxes — you must prove your systems work and can grow with the business.
The goal is to protect against financial crime, sanctions breaches, and cyber threats, with the wider objective of helping Bermuda remain a trusted global financial centre.
How to Move from a T-Licence to an M-Licence
To step up from a T-Licence to an M-Licence, companies need to show they can run independently and responsibly — with less help from the regulator.
This means building out a stronger Governance, Risk, and Compliance (GRC) setup.
Here’s what that looks like in practice:
- Set Up Formal Committees
Create committees to ensure key risks are being discussed and decisions are being taken that align with the wider strategy — the objective is to ensure that resources on the riskiest areas of the business.
- Expand the Enterprise Risk Management (ERM) Matrix
Expand this live document that lists all the company’s internal and external risks, what controls are in place, who owns the risks, and how you monitor them. Ensure that outcomes are embedded into new/existing processes.
- Improve Policies and Procedures
Where a risk is identified, clear policies and step-by-step procedures should be implemented to manage it. Track all your policies in a live register and clearly document where, and how, individual procedures and processes have been implemented within the business.
- Plan for Head Office Requirements
Set a clear plan for how your core functions — like compliance, finance, risk, and IT — will expand in Bermuda as the company scales.
- Prepare for a Financial Audit
You’ll need to engage a Bermuda-approved financial auditor, and make sure your financial systems and records are audit-ready well in advance.
Tailored Supervision Based on Your Business
As companies move to the M-Licence stage, the BMA adjusts its approach depending on the company’s “nature, scale and complexity”, meaning its business model, size, and risk profile.
This means expectations are flexible — but the key requirement is always to show that you’re running a prudent and well-managed business.
Why It Matters?
The T-to-M transition is about much more than ticking regulatory boxes.
It’s about building a company that can grow safely, manage risks smartly, and earn trust — from customers, partners, investors, and regulators alike.
Bermuda’s licensing model gives companies the structure and support they need to succeed, while maintaining the high standards that make Bermuda a world leader in digital asset regulation.
