Bermuda to become a major destination for cryptocurrency business

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Binance CEO Changpeng Zhao shakes hands with Bermuda Premier David Burt at a news conference on the island April 27, 2018, to announce Binance's investment in a Bermuda office. (Government of Bermuda)

By Caribbean News Now contributor

HAMILTON, Bermuda – The island of Bermuda with a population of just 70,000 people already known as a destination for insurance companies, and an international financial services centre is set on becoming a significant destination for cryptocurrency businesses.

In February, Signature Bank of New York announced it would provide business bank accounts to Bermuda-based crypto companies.

The premier of Bermuda, David Burt, said that effort and methodology has succeeded in attracting 70 companies so far to open Bermuda operations. “We want to make sure that companies in Bermuda can innovate in what they do using digital assets, so it’s important to have that regulatory framework so that they don’t go somewhere else that may have it.”

Bermuda created a blockchain task force in November 2017, primarily to “bring new business to the island, help boost GDP and create meaningful jobs, while helping to prepare our financial system and economy for the future,” Burt added.

This followed the crypto exchange Binance signed a deal to open a $10 million compliance centre in Bermuda in April 2018. Binance CEO Changpeng Zhao made his goals very clear, stating that “We want to ensure that Bermuda is the world’s number one place for regulation inside this space.”

In July, Bermuda implemented regulations to allow for fast approvals of initial coin offerings (ICO) that facilitated the issue of its first ICO licence to crypto company Uulala in October 2018 and, in December, the Bermuda Monetary Authority introduced a regulatory framework for all digital asset custody businesses.

“The people who are building serious business models behind blockchain have been building these things for two and three years. The growth opportunity is for companies to set up in Bermuda and use our unique regulatory framework. Our regulatory environment is rigorous, has challenging hurdles, and we say that’s a good thing because we want serious companies and institutional investors. We don’t necessarily want the wider scale that can cause reputational damage to our industry. The incentive we offer is regulatory clarity,” Burt said.

The Caribbean region is catching up to the new wave in its development and integration of the cryptocurrency businesses in a bid to enhance economic growth, ease of doing business and improve the quality of life.

In February 2019, the Eastern Caribbean Central Bank (ECCB) and the Barbados-based fintech company, Bitt Inc. (Bitt) signed a contract to conduct a blockchain-issued Central Bank Digital Currency (CBDC) pilot within the Eastern Caribbean Currency Union (ECCU).

The governor of the ECCB, Timothy Antoine, said, “It would be a game-changer for the way we do business.”

The new cryptocurrency will be distributed to financial institutions across the ECCU, is part of a broader strategic plan for the ECCB, to reduce paper currency by 50 percent by 2021, and to bring more stability to the region, boosting the economies of ECCU countries.

The central bank digital currency (CBDC) will be a “securely minted and issued” digital version of the Eastern Caribbean dollar (XCD). The digital EC dollar will be distributed and used by licensed financial institutions and non-bank financial institutions in the ECCU.

The pilot, which was poised to embark on the DXCD pilot from March 2019, will be executed in two phases: development and testing, for about 12 months, followed by rollout and implementation in pilot countries for about six months. As part of the pilot implementation, the ECCB will ramp up its sensitisation and education initiatives to facilitate active public engagement throughout all member countries.

“Not only will the digital dollar be the world’s first digital legal tender currency to be issued by a central bank on the blockchain, but this pilot is also a live CBDC deployment with a view to an eventual phased public rollout,” Antoine said.

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