Changing digital assets regulation overseas could cost Bermuda a critical fintech advantage if the jurisdiction does not keep innovating, a local lawyer told The Royal Gazette.

Bourn Collier, senior corporate counsel at BeesMont Law, said the newly-signed Guiding and Establishing National Innovation for United States Stablecoins Act raised the credibility of stablecoins worldwide.

He said Bermuda has the edge in terms of experience having enacted the Digital Assets Business Act seven years ago.

“We have done extremely well and got it right up until now,” Mr Collier said. “We are seeing reasonable development from stakeholders which is great. That is necessary for us to maintain our sophistication and advantage in this very competitive landscape.”

However, he said the Genius Act meant that some clients with straightforward stablecoin businesses could now set up in their own country.

“Bermuda now has to move up the value chain,” he said. “It needs to take steps to stay ahead.”

He said Bermuda is in competition with other jurisdictions.

“We should be constantly trying to come up with new things,” he said.

Earlier this month, Peter Hughes, chief executive of Apex, the general services firm, launched the Bermuda Stablecoin Association.

The group is meant to act as a forum where stakeholders can work together to set standards and the future of local stablecoin regulation.

Members want to ensure that Bermuda continues to thrive as a hub for institutional-grade digital finance.

Mr Hughes said that Bermuda has the jump over the US because the island allows for interest-bearing and yield-bearing stablecoins, while the Genius Act stopped short of that.

Europe also does not allow for interesting-bearing stablecoins.

Bermuda could become a hub for this type of crypto, Mr Hughes said, but thought the US and Europe were likely to change their mind at some point.

One source in the industry, who did not wish to be named, thought that the new American rules were likely to lead to a reduction in the number of licence applications under DABA.

“US-focused issuers will opt for the domestic US qualification from the Office of Comptroller of the Currency,” he said. “Stablecoin issuers have historically been a significant proportion of the number of Bermuda’s DABA licensee firms, many with a US focus.”

In his own business, he was seeing a slowdown in clients looking for DABA licences.

“However, Bermuda remains resilient for interest or yield-paying stablecoin issuers to obtain a DABA licence, including for businesses focused on other places such as Asia and Latin America,” he said.