Crypto business banking remains a challenge
Solving the challenge of banking services for some fintech and cryptocurrency businesses and investments remains a hurdle for Bermuda, even as the island attracts technology-based start-ups and has approved its first initial coin offering under new legislation.
While speaking about the successes the island has seen and his vision for the future, David Burt acknowledged the ongoing challenge of banking facilities being provided for companies in certain areas of the digital asset space.
He said: “There are challenges that exist; I don’t want to sugarcoat that. We have still not solved the banking problem. But I want Bermuda to solve the banking problem and we are taking steps. That is still a significant problem that exists.”
The Premier was speaking at the Liquidity Summit, a one-day conference that wrapped up two weeks of events that fell under the umbrella of the first Bermuda Innovation Sprint, hosted by Hub Culture.
A number of countries and jurisdictions, including Switzerland, Liechtenstein and Germany, are also grappling with the challenge of providing banking services for fintech businesses and cryptocurrency-based investments.
Regulators and major banks have been reluctant to enter the field of crypto-related banking because of potential risk factors. The Bermuda Bankers’ Association reportedly explained to the Bermuda Government that this reticence was due to the financial institutions’ “ongoing need to manage their risks to continue to operate in accordance with their existing correspondent banking relationships”.
However, The Banks and Deposit Companies Amendment Act 2018 paved the way for a new class of banking licence that could create a workable interface between blockchain-based companies, including those involved in digital currencies and tokens, and traditional banking services. The Bill has been passed by Parliament.
While banking for crypto business remains a hurdle, Mr Burt is upbeat about the strides Bermuda has taken to become a leader in the fintech and blockchain-based business sector.
He was speaking only a day after it was announced that Uulala had become the first fintech company to win approval for an initial coin offering in Bermuda under the island’s new regulatory regime.
At the summit, held in the Hamilton Princess&Beach Club, Mr Burt talked about what he would like Bermuda to accomplish in the next five years, and gave an upbeat assessment of the advancements taking place.
“I want to make sure that Bermuda is a centre for innovation, so ideally in five years’ time we will have a number of companies in this space who will have created innovations and intellectual property, who will have solved problems for the world and started exporting their goods and services,” he said.
“Where we want to be in five years’ time is where we are with reinsurance; being recognised as a leader in the space, being recognised as a place where there is an incredible amount of intellectual capital and where innovations are happening.”
He said that 40 years ago no one would have imagined that Bermuda would end up with the world’s highest concentration of insurance companies.
“But we have. We’ve seen how this can work. That is the model that we are trying to emulate.”
The Bermuda Innovation Sprint brought innovators and leaders working in the fintech, blockchain and cryptocurrency industries to Bermuda, including representatives from Ripple, one of the world’s top three cryptocurrencies, AlphaPoint, which runs trading infrastructure for some of the biggest digital exchanges in the world, and CoinFlip, a start-up that operates ATMs in the US allowing bitcoin, ether, litecoin and a number of other cryptocurrencies to be bought and sold.
Bermudian-based event host Hub Culture created the world’s first digital currency, Ven, in 2007. Founder Stan Stalnaker met with Mr Burt and members of the Bermuda Government a few days before the summit and discussed the future of Bermuda’s fintech ecosystem. Areas covered included E-identity, cybersecurity, and education.
Referring to the talks, Mr Burt said it would be amazing if Bermuda could be a digital asset payment centre.
He said: “The companies we are seeing coming to Bermuda — that could be a possibility. Our responsibility is to make sure it is a well-regulated environment and support those companies from a Government side in whatever way we can.”
The Premier said those involved in the digital business sector had been helpful in guiding decisions that have been made by the Government to develop opportunities for the island. He praised the Bermuda Business Development Agency and Wayne Caines, Minister of National Security, who is responsible for IT innovation and policy.
Mr Burt said: “The ideas come to us, and if they make sense we turn it around and turn it into legislation. Our legislation is very broad and has lots of options. Where we stand now, there are companies that can do things in Bermuda, in a well-regulated environment, that they would not be able to do in other places.”
Bermuda is on the right track, he said, adding: “We welcome events like this to inform us [about] what more we would like to see from a jurisdiction like ours, so we can continue to advance this issue.”
Mr Burt asked for those in the sector to let the Government know about the things they think can work and what they are looking for to make those things happen.
“I’m not going to say that the Government has the brightest minds in this space; we don’t. But we have the willingness to listen to the brightest minds in the space, to say these are the types of answers and developments we can do,” Mr Burt said.
“We want innovators to feel at home in Bermuda. We welcome them.”
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