A token issuer restructuring its group discovers that Bermuda offers something rare among offshore financial centers: a jurisdiction with no corporate income tax, no capital gains tax, no withholding tax on dividends, and no stamp duty on the transfer of digital assets. For businesses holding, issuing or trading tokens, that combination is structurally significant. The legal question is not whether Bermuda is tax-efficient on paper – it plainly is – but whether a business can build and sustain a structure there that withstands scrutiny from the jurisdictions where its founders live, its customers transact, and its banking relationships sit.
The tax treatment of tokens in Bermuda is governed by the absence of direct-tax legislation rather than by a dedicated crypto tax code. Bermuda imposes no tax on token gains, token income, staking rewards or token disposals at the entity level. What governs instead are the substance requirements under the Economic Substance Act, the regulatory perimeter set by the Bermuda Monetary Authority under the Digital Asset Business Act, and the interaction between Bermuda's zero-tax environment and the home-country rules of the jurisdictions where beneficial owners reside. This page maps that interaction and explains how a cross-border structure is built, stress-tested and maintained.
What is the tax baseline for token businesses in Bermuda?
Bermuda imposes no corporate income tax, no capital gains tax, no withholding tax on distributions, and no VAT or goods-and-services tax. Those four absences matter equally for a token issuer. Token sale proceeds, secondary trading gains, and staking rewards received by a Bermuda entity are not subject to Bermudian taxation. That position is settled and long-standing; it is not a concession or an exemption that can be withdrawn by administrative action.
The corollary is that Bermuda does not operate a tax-treaty network. Businesses relying on treaty access to reduce withholding taxes on cross-border payments – royalties, interest, dividends – cannot obtain that access through a Bermuda holding company. Where treaty protection matters for the group's cash flows, a parallel holding entity in a treaty jurisdiction is typically introduced above or below the Bermuda vehicle. In our cross-border practice, this is one of the first structural questions we work through with a new client: does the group's revenue profile require treaty access, and if so, where does the treaty-holding entity sit relative to the Bermuda issuer?
The Bermuda Monetary Authority supervises digital asset businesses under the Digital Asset Business Act, which creates a licensing regime for entities carrying on specified digital-asset activities from or within Bermuda. Tax neutrality and regulatory licensing are separate questions; both must be addressed in parallel.
CTA #1 – The zero-tax starting point is well understood. What most businesses miss is the interaction between Bermuda's substance rules and the home-country tax rules of the jurisdictions where founders and investors sit. Map your options with OBOLUS before the structure is set.
What does the Digital Asset Business Act mean for tax structuring?
The Digital Asset Business Act creates a licensing gate for any entity that carries on a digital asset business in or from Bermuda. Licensing is not the same as a tax obligation, but it is relevant to tax structuring for two reasons. First, a licensed entity must maintain a physical and operational presence in Bermuda sufficient to satisfy the Bermuda Monetary Authority's ongoing supervision requirements. That presence – local staff, local management, local board participation – is also the substance that supports the tax position. Second, an unlicensed entity that nevertheless manages token activities from Bermuda may be in regulatory breach, which undermines the legal coherence of the structure that the tax advisers are relying on.
We regularly advise clients who have built a Bermuda holding structure on the basis of legal advice that addressed only the tax dimension. When the regulatory layer is reviewed later, the business discovers that its activities require a licence, its local substance is insufficient, and the assumptions underlying its tax analysis are fragile. Correcting that after the fact is more expensive than building correctly at the outset.
The practical implication: a Bermuda token-issuing entity that is genuinely managed and controlled in Bermuda, with a licensed operating subsidiary where applicable, is on firm ground. A letterbox Bermuda company managed by founders who remain tax-resident in a high-tax jurisdiction is not.
How do Bermuda's economic substance requirements affect token structures?
Bermuda's Economic Substance Act requires entities carrying on certain "relevant activities" – which include holding company activity and intellectual-property holding, among others – to demonstrate adequate substance in Bermuda. For a token-issuing or token-holding company, the question is whether its core income-generating activities are directed and managed from Bermuda, and whether adequate employees and expenditures are present on the island to support that position.
The practical requirements vary by entity type and activity class. A pure holding company faces a lighter substance standard than an entity actively managing a token treasury, running a staking protocol, or directing a trading book. In our practice, we have seen regulators in the leading offshore hubs apply increasingly granular analysis to substance claims made by digital-asset businesses; Bermuda's own enforcement posture has moved in the same direction. Substance is not satisfied by a registered office address and a single local director with no meaningful involvement in the business.
For a founder-led token business, the typical substance model involves a local board majority with genuine decision-making authority, at least one locally based executive or manager with relevant expertise, and documented board minutes reflecting real deliberation on material decisions. Where the founder remains based elsewhere, the structure must demonstrate that the founder's involvement is advisory rather than managerial, and that the Bermuda entity's decisions are taken in Bermuda. That is a fact-pattern question, not a legal fiction.
Why does founder residency change the group's tax position?
Relocating personally to Bermuda without restructuring the underlying group does not change the group's tax position; it changes the founder's personal position only if the relevant home-country exit rules are satisfied. That distinction is critical and frequently missed.
A founder who remains tax-resident in Germany, France, the United Kingdom or the United States while directing a Bermuda token company from home may cause that company to be treated as tax-resident in the founder's home jurisdiction – under the "place of effective management" or "mind and management" rules that most developed-economy tax systems apply. The result is that the Bermuda entity's income becomes taxable in the founder's home jurisdiction, eliminating the structural benefit entirely.
Controlled foreign corporation (CFC) rules compound the risk. Many jurisdictions apply CFC rules that attribute undistributed income of a foreign low-tax company to its resident shareholders, regardless of whether any dividend is paid. For a token issuer accumulating gains in a Bermuda vehicle, CFC exposure in the founder's home jurisdiction can produce a current-year tax charge on the entire gain, even if no cash has been distributed.
We align founder residency with the holding structure and exit plan as a single integrated exercise, not as sequential decisions. Personal tax residency and corporate structure must be decided together. Addressing them in sequence – first building the Bermuda structure, then considering the founder's personal position – is the most common and most expensive mistake in this area.
Micro-matter: In a recent structuring matter, a token project had established a Bermuda entity as its primary issuer before seeking legal advice on the founder's personal position. The founder remained tax-resident in a G7 jurisdiction. Our review identified active CFC exposure on unrealised token gains and a potential place-of-effective-management challenge to the Bermuda entity's residence claim. We restructured the governance model, advised on the founder's personal exit timeline, and introduced a treaty-holding entity to manage the group's residual cross-border cash flows. The project's next token distribution was made on a structurally sound basis.
How are staking rewards and DeFi yields treated in Bermuda?
Staking rewards, liquidity-pool yields, and other protocol-level returns received by a Bermuda entity are not subject to Bermudian taxation. Bermuda imposes no income tax at the entity level, so the characterization question that matters in most jurisdictions – whether staking rewards are ordinary income, capital receipts, or something else – does not arise for Bermuda tax purposes.
The relevant questions for a cross-border structure are, first, whether the home-country rules of the entity's beneficial owners treat staking rewards as current income and, second, whether the entity's DeFi activities trigger licensing obligations under the Digital Asset Business Act. On the second point, the Bermuda Monetary Authority has taken a broad approach to the definition of "digital asset business": activities that involve providing liquidity to a protocol or operating a yield strategy on behalf of third parties may require licensing even where the technical form of the activity is automated.
In our cross-border practice, staking and DeFi strategies that are commercially significant – meaning they generate material revenue for the group – should be reviewed against both the licensing perimeter and the substance analysis before deployment. A staking revenue stream that is legally clean in Bermuda but taxable as ordinary income in the founder's home country under CFC or personal attribution rules does not produce the outcome the business expected.
What are the banking realities for a Bermuda token structure?
Bermuda has a functional banking sector with institutions that are accustomed to servicing international business companies and funds. Access to banking for a digital-asset business is not automatic, however. Banks in Bermuda – like banks across all major financial centers – apply enhanced due-diligence procedures to digital-asset clients, and the threshold of documentation required to open and maintain an account has increased materially across the sector in recent years.
The practical requirements typically include a detailed business plan, evidence of the regulatory position of the entity and its operating subsidiaries, AML/KYC program documentation, beneficial-ownership certification, and – for token issuers – a legal opinion or regulatory analysis of the token's characterization. Operators we advise routinely underestimate the banking onboarding timeline; planning a window of several months from initial approach to operational account is prudent.
Where Bermuda banking is not available or is insufficient for the group's treasury needs, the structure typically involves a Bermuda holding entity and an operating subsidiary in a jurisdiction with deeper digital-asset banking relationships – Singapore, Switzerland, the UAE, or the United Kingdom. The choice of operating jurisdiction for banking purposes has tax implications of its own, and those implications feed back into the holding structure design.
CTA #2 – If a prior structure was built without resolving the banking layer, or if an account relationship has been terminated, the structural reason is usually identifiable and the path forward is recoverable. Map your options with OBOLUS.
What is the process for establishing a Bermuda token structure?
Building a sound Bermuda token structure involves four sequenced workstreams: entity incorporation and governance, regulatory licensing assessment, substance establishment, and cross-border tax analysis. Each workstream depends on the others; running them in parallel, with coordination across all four, produces the fastest and most reliable outcome.
The incorporation of a Bermuda company is a relatively fast process by offshore standards, typically completing within a matter of weeks for a standard international business company. The more time-sensitive workstream is the regulatory assessment: the Digital Asset Business Act requires any entity that will carry on digital-asset activities from Bermuda to either obtain a licence or confirm that its activities fall outside the regulatory perimeter. That analysis requires a detailed review of the proposed activities and should be completed before the entity begins operations.
Substance establishment – hiring local staff, constituting a local board, identifying office space and local service providers – typically runs over a period of one to three months. Tax analysis of the interaction with the founders' home-country rules can begin in parallel with incorporation and should be complete before the first token issuance or distribution event.
A self-assessment checklist for a Bermuda token structure:
- Has the entity's planned activity been assessed against the Digital Asset Business Act licensing perimeter?
- Does the board have a local majority with documented, genuine decision-making authority?
- Has each founder's home-country CFC and place-of-effective-management exposure been assessed?
- Has the group's need for treaty access been evaluated and, where relevant, a treaty-holding entity introduced?
- Has the banking layer been mapped to the entity structure, with an operating-jurisdiction analysis included?
- Has a tax opinion or regulatory analysis been prepared for the token characterization in each distribution jurisdiction?
Which operator profile does a Bermuda structure suit?
Bermuda is not the right structural answer for every digital-asset business. Understanding which profile it serves best informs whether it belongs in your structure at all, and in what role.
Profile A – the token treasury company. A business that has completed a significant token sale and needs to hold and manage the treasury on a long-term basis, with founders who are prepared to genuinely relocate and establish Bermuda tax residency, is a strong fit. Bermuda's zero-tax environment, combined with genuine substance and the Digital Asset Business Act licensing regime, produces a defensible and efficient structure. The indicative process timeline from inception to operational readiness is typically several months, driven primarily by the substance establishment and banking workstreams. The key risk is the interaction with founders' home-country exit rules.
Profile B – the active trading or staking platform. A business running active trading, staking infrastructure, or DeFi strategies from Bermuda faces a higher substance threshold and a more complex licensing analysis. The structure can work, but requires more local operational investment and a more detailed regulatory dialogue with the Bermuda Monetary Authority. Where the business also serves customers in jurisdictions with their own licensing requirements – the EU under MiCA, Singapore under the Payment Services Act, the UK under the FCA regime – the Bermuda entity is typically one layer in a multi-jurisdictional structure, not the sole regulated entity.
Profile C – the early-stage issuer. A business at the pre-token stage considering where to domicile its issuing entity should evaluate Bermuda against other offshore and mid-shore options – the British Virgin Islands under the VASP Act, the Cayman Islands under CIMA's regime, or the ADGM under the FSRA framework. The choice turns on the activity profile, the anticipated investor base's jurisdictional requirements, the founders' personal tax positions, and the banking relationships the business needs. There is no single correct answer; the right jurisdiction is the one that best matches all four variables simultaneously.
Related at OBOLUS
- Tax & Cross-border Structuring for Digital Asset Businesses – how we design and stress-test holding structures across jurisdictions
- Crypto Holding Structure: Where the Legal Lines Are Drawn – the legal boundaries that determine whether a structure holds under scrutiny
- ADGM vs. AIFC: Where to License a Crypto Business – a comparative analysis of two leading mid-shore licensing hubs
About OBOLUS
OBOLUS is an independent digital-asset law boutique acting only for businesses. We advise exchanges, custodians, token issuers and funds on licensing across 70+ jurisdictions, on disputes and on-chain asset recovery across 25+ forums, and on the tax, banking and compliance structures that sit around them. Digital assets are the whole of our practice. We align founder residency with the holding structure and exit plan as a single integrated exercise – because personal tax residency and corporate structure must be decided together, not in sequence. Our disputes team coordinates freezing relief and on-chain tracing across leading common-law forums. To discuss your situation, contact info@oboluslaw.com.
FAQ
Where should a token-issuing entity be domiciled?
The right domicile for a token-issuing entity depends on four variables: the planned activity profile, the anticipated investor base's jurisdictional requirements, the founders' personal tax positions, and the banking relationships the business needs. Bermuda suits a treasury-holding or long-term issuer model where founders are prepared to establish genuine local substance and tax residency. Other offshore and mid-shore options – including the BVI, Cayman, and ADGM – suit different profiles. No single jurisdiction is correct for all businesses.
How are staking rewards taxed?
Staking rewards received by a Bermuda entity are not subject to Bermudian taxation. Bermuda imposes no corporate income tax, so the income-versus-capital characterization question does not arise at the Bermuda level. The material risk is that the founders' home-country rules – CFC regimes, personal attribution rules, or place-of-effective-management challenges – may cause staking income to be taxed in a higher-tax jurisdiction regardless of the Bermuda entity's clean position. Cross-border analysis is required before deploying material staking strategies.
Does remote working create tax residency risk?
Yes. A founder or senior manager who directs a Bermuda entity's business decisions from a foreign jurisdiction risks triggering place-of-effective-management rules, causing the Bermuda entity to be treated as tax-resident in that foreign jurisdiction. This is one of the most frequently encountered and most expensive structural errors in digital-asset holding structures. Managing it requires a genuine transfer of decision-making to Bermuda-resident directors, documented in real time, and a coordinated personal tax-residency plan for the founder.
By Lydia Brennan, Tax & Structuring Analyst – specialising in cross-border holding structures and the personal tax-residency interaction for token-issuing businesses.
This publication is general information about the law and does not constitute legal advice. It is not a substitute for advice tailored to your circumstances. OBOLUS accepts no liability for action taken or not taken on the basis of this material. For advice on your situation, contact info@oboluslaw.com.