Digital currency payments on horizon
If all goes to plan, residents of Bermuda will be able to use some digital currencies to pay government taxes, fees and services starting from the new year.
As of today, only one digital currency makes the grade, but within the coming months four others are expected to seek licensing approval from the Bermuda Monetary Authority.
For those using the digital currencies it could result in benefits such as reduced transaction fees when compared with those charged by credit and debit cards, and attracting higher rates of interest for your money.
Some of those involved in the initiative acknowledged that there are also risks, but pointed to Bermuda’s strength, particularly the regulation and oversight of the BMA.
The announcement that the Government has committed to accept digital currency payments, providing they are one-to-one US dollar-backed digital currencies that are licensed by the BMA, was made by David Burt at the start of the Bermuda Tech Summit in the Hamilton Princess & Beach Resort.
The expectation is to have the initiative ready by the start of the new year.
The Premier said there were some things to be done on the back end of the process “that we have to do to make sure that the money gets in on the back side of Government coffers after this, but it is not something that is incredibly difficult”.
He told The Royal Gazette: “We have a great team of partners, who want to make sure and demonstrate how this can work and we are excited.
“We know Bermuda has had a challenge when it comes to banks, but we are working through them. There are banking partners that are working with companies here, and we look forward to accelerating this type of adoption.”
He mentioned envisaged benefits that include reduced transaction costs and getting higher interest on your money. As an example he said the USDC coin is attracting 8 per cent interest on the Celsius Network.
USDC is Circle and Coinbase’s US Dollar Coin and Centre Consortium, and is regulated by the BMA. Earlier this year Circle was the first company to gain a full licence under the Bermuda Digital Asset Business Act.
Mr Burt said: “USDC, even though it is regulated by the BMA, it is a global stable coin that is accepted for payment in numerous places around the world.
“We are trying to speed adoption locally, but also to ensure that when persons are working with our government they can start developing products and services here, that will help our citizens here have lower transaction costs, better returns on their money, better able to use these digital currencies to do transactions locally, and that will make sure that we have more companies coming here that are going to provide benefits to the local economy.”
He said Circle is one of the most regulated fintech companies on the planet, regulated in the US and Bermuda and places in Europe.
The other digital currency operators that have shown support for the Bermuda initiative are Binance, Bermudian-based Hub Culture, TrustToken and Stably. While there is “open financial ecosystem” support from Celsius Network, SALT, MAPay and Stablier.
Mr Burt said: “This is the future of financial services and what we recognise that, in Bermuda’s context, we have to make sure we can speed this adoption to provide, I would say, relief for many and opportunities that don’t necessarily exist inside of Bermuda.”
Speaking at the summit, Mr Burt said the risk of Bermuda launching its own digital currency outweighed the opportunities.
“However, we recognise that there are experts who have been developing this technology to create digital versions of existing money that can be used to improve our financial system today,” he said, stating that the technology represents an opportunity to increase access to and lower the cost of financial services.
“There is a wide ecosystem of players keen to build the future of financial services on top of these digital dollars, and many have expressed an interest in becoming licensed under the Bermuda Digital Business Act and working closely with Bermuda to advance this initiative.”
He added: “Our combined hope is to showcase to the world that there is a clear path providing regulatory clarity around this industry by focusing on the risk, and using Bermuda’s small, contained ecosystem, as a place where foreign regulators and legislators can come to touch, see and use, and ultimately understand the benefits of this revolutionary technology.”
Expanding on the potential benefits from using digital currencies on a wider scale, Denis Pitcher, chief fintech adviser to the Premier, told The Royal Gazette: “Because we are classified in the Latin American region for payments, it means that traditional debit and credit card fees average 3 per cent for a small business. And then you have the device fees, rental fees, the technology, it is very expensive — it is why taxi operators don’t accept credit cards, it is why small businesses struggle to accept credit cards.
“So having a new mechanism to accept payments is quite substantial and when you say you can accept payment for US dollars in digital form, that is US dollar-backed, if we can have that and a taxi driver accepts it, you hold those and earn interest and pay the Government out of them, or hopefully other businesses come on board to start accepting them so a taxi driver who accepts them can readily spend them in the local economy.”
When asked about the possibility that people will feel less trust for a new company than a traditional bank, Mr Pitcher said: “There is a risk. The key thing to consider is we have a 30-year history of regulating risk. The BMA is very capable of managing risk.
“Circle is licensed, so we can have a lot of trust in their ability and the regulation and oversight the BMA has provided.
“The other companies involved are not yet licensed, so I would not suggest using them today, but we are working with them to get licensed and hopefully offer their services on the island, so individual Bermudians can take advantage of these opportunities.”
Among supporters of the initiative was Liz Schack Rabban, executive vice-president, global business development at Celsius Network. She praised Bermuda and the Premier for the forward-thinking approach. She added: “We came because we want to work with good people globally and clearly Bermuda is leading the way in this arena.”
Stan Stalnaker, founding director of Hub Culture, called it a bold and sensible initiative because it is built on a solid framework of regulation.
“Bermuda is pushing the envelope about what you can do with digital assets,” he said.
“That comes down to practicality. The Premier said it is all about ease of payment for Bermuda’s citizens. It is moving the payment system of this country into the future so that Bermuda citizens can save money and earn money is the idea.
“For us, being a Bermudian company for a long time, this is a dream come true to see this legislation. Now we have to do the hard work with the BMA to make sure that it is globally compliant, and that anything we do within that framework meets with the BMA.
Rob Odell, vice-president, product and marketing with SALT, said: “It is a great example of people working together, playing together, and you have to be friends with those people, you have to see them every day, so if there is anything malicious happening everyone knows right away.
“There is a real microscope on Bermuda now. I think the right decisions are being made, and the right push is being made into the technology of the 21st century.”
While Patrick Berarducci, global head of digital assets at ConsenSys, said: “It is very ambitious. One of the great things that Bermuda has going for it is that it has the government regulators and private sector all recognising that this technology, in particular payments with digital assets, is the future — it is better faster, cheaper. There are going to be more options of people.”
• Information on the initiative can be found at Fintech Bermuda’s website www.currencystandard.com
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