New licences issued for digital bank
Bermuda’s long-proposed digital bank has become a reality with a full banking licence that will allow it to provide core banking services, together with a licence under the Digital Asset Business Act.
Jewel Bank will begin operations from Victoria Street in Hamilton as early as September, pending the remaining regulatory approvals.
But a retail focus will not come immediately as the bank gets on its feet with primary functions aimed at the digital asset economy.
A Bermuda digital bank has been a key feature of the fintech strategy driven by David Burt, the Premier, and his administration.
The bank’s initial complement of staff will be less than 40, but it will grow to about 100 within a short period of time, with training and opportunity for Bermudians.
Chance Barnett, the founder, chairman and chief strategy officer of Jewel, said he was very excited about the new venture but his bank proposal had actually been in the wings for more than two years.
He was quick to acknowledge the support and long-term view of Mr Burt and the experience and forward thinking of the financial services regulator, the Bermuda Monetary Authority, which received the licence application eight months ago.
He said the bank would play a major role in accelerating Bermuda’s long-term digital transformation, not just by providing services to the emerging market on island, but by helping to promote the growth.
Jewel Bank will be the first digital asset bank in Bermuda to provide banking and payments infrastructure for the digital assets industry.
The sensational news is expected to reverberate internationally throughout the digital assets sector as the next step in the evolution of the industry.
The chairman said the world's largest digital exchanges, institutional investors, market makers and prop trading firms had specialised needs that were not being met by traditional banks due to legacy technology, outdated business practices and a lack of digital asset solutions.
Mr Barnett agrees there remains a lot of hype in the industry but he sees distributor ledger technology bringing improvements to certain banking transactions that are not only useful to institutions, but also on a retail level.
Apart from servicing the digital industry, including trading exchanges and other institutions in Bermuda and around the world, he said the new bank would also look at how it could deliver services domestically that would be useful to Bermuda residents.
He said one of the exciting changes was that the bank would issue stablecoins, which would be important for the future of both the bank and Bermuda.
Stablecoins are types of cryptocurrency but with far more stability.
Instead of the volatility seen in the value of many cryptocurrencies, the value of stablecoins is pegged to a fiat currency such as the US dollar, or a commodity such as oil or gold.
They provide users with the benefit of the security and immediate payment processing that digital currencies offer, without the price volatility of traditional cryptocurrencies.
Mr Barnett said: “Today, there are challenges and high fees with banking and we are excited about providing stablecoins as a way to make financial services a bit more accessible, more transparent and at a lower cost.
“Right now, if you are a Bermuda merchant, credit card charges may cost you four to six per cent of a transaction. Whereas stablecoins don’t have the same cost structure and so we can significantly lower that cost.”