Prosperous blockchain future there for us — if we want it
There is tremendous opportunity in the blockchain space if Bermuda is interested in seizing it. We’ve built an amazing cast of supporters from around the world keen to see us succeed. We have slow and steady growth in companies that are getting licences and starting to commence operations. There is great promise.
Yet, there are those who wish to see it fail. Those who attack nearly everything about it and say we shouldn’t be doing it.
Do we, as a jurisdiction, want to seize the opportunity or let it pass us by? Are you willing to do your part to embrace and support this new industry?
The Royal Gazette recently posted an article highlighting the $1.76 trillion global market opportunity in blockchain by 2030. This estimate was pulled from a recently released PwC report highlighting how blockchain will transform business and the economy while boosting gross domestic product globally.
It highlighted the top five uses of blockchain:
• Tracking and tracing of products and services ($962 billion)
• Payments and financial services ($433 billion)
• Identity management ($224 billion)
• Application of blockchain in contracts and dispute resolution ($73 billion)
• Customer engagement ($54 billion)
Does Bermuda have a role to play in this market opportunity?
Perhaps one should just look at the cast of supporters who participated in Tech Week events this year. PwC’s Global Crypto Leader Henri Arslanian was happy to take part in a panel discussion discussing the future of money. As was Michael Casey, the Chief Content Officer of Coindesk, a leading fintech media website, and Senior Adviser to MIT’s digital currency initiative.
Chamath Palihapitiya, an early Facebook executive turned billionaire venture capitalist, had a conversation with David Burt, the Premier, to talk about why Bermuda is attractive. I had conversations with Sheila Warren, the Head of Blockchain for the World Economic Forum, and Jamie Burke, founder and chief executive of Outlier Ventures, Europe’s first blockchain venture capital firm, which was set-up in 2013 — both describing the opportunity for Bermuda to move quickly.
We also had David Shrier — who leads the fintech and blockchain strategy programmes at Oxford University, and lectures at MIT’s Media Lab — host a panel on the future of the tech.
None of these individuals were paid to participate and support Bermuda. They did it because they believe Bermuda has a role to play. As Henri told me the last time we met in person, he is a big supporter of Bermuda. He suggested we punch far above our weight and that we are unique in having passionate Bermudians leading the charge, something he does not see from other comparable countries.
He also says having a young, tech-savvy leader who gets the industry is a huge advantage. All of these people were happy to participate in telling the story of how they see Bermuda as a place of opportunity for blockchain-based innovation — because they believe it.
We also have Penrose Partners, a private entity with a Bermudian founder, which has now put on two events to showcase Bermuda to Canadian businesses and has brought a host of Canadian company representatives to the island for extended stays to drive local engagement and connectivity between Canadian innovators and Bermuda. Their two-day event hosted a range of engaging discussions.
For those paying attention, we do show great promise. Looking at the market opportunity highlighted by PwC’s report, Bermuda has taken a firm shot at the payments and financial services space with our regulatory framework and foundation in regulating financial services and it is well recognised.
We are slowly but surely having companies get licensed and start to commence operations, having seen eight companies get a digital asset business licence. This compared with the 18 companies that have received licences in New York and the four companies that have received licences in London from the Financial Conduct Authority.
By contrast, Malta, which touted itself as “Blockchain Island”, has yet to issue any licences. This despite far more initial hype than we witnessed in Bermuda. Other jurisdictions such as Cayman Islands only recently rolled out legislation and British Virgin Islands, which is trying to shoehorn digital assets into its existing regulatory structures, has taken a looser approach to regulating the industry.
Although it may not seem like it on the ground, Bermuda remains a leader in this space, particularly with moves like having the Bermuda Stock Exchange launch a cryptocurrency exchange-traded fund and having commenced a digital token pilot project that made waves in global media.
Meanwhile, what the recent criminal charges and civil enforcement against Bitmex by the US Department of Justice and Commodity Futures Trading Commission show is a wake-up call to the industry. Playing fast and loose with, or even blatantly ignoring, global anti-money laundering and know your customer regulations is not acceptable.
The door is likely closing on access to top-tier markets for companies that try to avoid regulation and operate their digital asset businesses from jurisdictions such as the Seychelles.
As a jurisdiction ranked in the top six for our Caribbean Financial Action Task Force mutual evaluation, we are a world leader in AML and KYC compliance standards. We serve to attract new players that are keen to showcase up front that they are following best practices under the oversight of a competent and respected regulator. We also may attract existing players who want to showcase that they are taking steps to be compliant and follow best practices. This is all a part of the maturing of the industry.
The question is, do we as a jurisdiction want this new industry? Do we want the growth that comes with it and are we willing to do our part as a jurisdiction to embrace it?
At the beginning of Tech Week, I made a presentation to the industry as part of the Bermuda Blockchain and Sustainability Symposium put on by Penrose Partners. The core of my presentation was inviting innovators to come to Bermuda to digitise our dollar and to help drive innovation in the payments and financial services space.
I made the point that Bermuda is the perfect test bed to model these new technologies and how they will be adopted at scale in larger jurisdictions. And that Bermudians would work with these innovators to test their products, provide feedback on how to make them more accessible and reap the advantages of cheaper and easier payments, and new innovations built on top of programmable money.
In the Royal Gazette article that followed the next day, the comments were not kind. “Profoundly bad idea” wrote one. “Bermuda just hasn’t made any real inroads to put us on the international map”, another said. “This is someone’s hobby. It isn’t anything more than that”. “Let’s not but say we did” others continued. On the suggestion that we as a jurisdiction are welcoming to innovators in this space “Who is the ‘we’ he is speaking about. Is it the Premier and himself?”.
Beyond the negativity of the idea itself was the focus of many on me personally. I was touted as an example of “pie in the sky dreamers who love that govt paycheque”. Commentators heckled: “How are they paying this clown?”. “It is always nice to get a paycheque for naught.” “Great, someone else on the Government payroll that adds zero value to society”.
Questions were asked: “How much are you costing us the tax payer?” describing my role as a “useless position”. It was suggested “Bermuda hasn’t sparked global fintech interest in our products nor our shores ... But you have a great gig”.
If The Royal Gazette comments were an indication of the general sentiment on the island, the recent election would have most certainly had a wholly different outcome. However, they do represent a couple things: a lack of understanding of what is happening and a fear that this project may be a success.
Many seem very keen for this project to prove a failure and that Bermuda and Bermudians are incapable of embracing innovation to help build a new industry. I, for one, have faith in Bermuda and Bermudians to make this happen.
Are we as a jurisdiction, and a people, keen to seize the opportunity in the blockchain space or are we content to just watch those that heckle the ones that try?
Despite the naysayers who live in the comments, we do have overly broad international support, as highlighted by those willing to host and participate in our Tech Week events. If you look past the gaffe of the initial hype of fintech, Bermuda is performing rather well compared with other jurisdictions and gradually building a solid presence.
The naysayers, those who enshrine the culture of no, seem to drown out the rest and take cheap personal attacks while hiding behind pseudonyms. Should they be controlling the narrative? Do they represent you?
Achieving just 1 per cent of PwC’s GDP forecast of the market opportunity for payments and financial services would lead to $4 billion added to our GDP, which stands at about $6 billion. From the perspective of this “clown”, that is an opportunity worth pursuing.
If you want to help, ignore the naysayers and look for what you can do to embrace and support innovators, both foreign and Bermudian, working to make it happen. As we roll out digital tokens and other initiatives, look for how you can embrace, use them and give feedback.
Bermuda could be a showcase to the world in working to drive rapid adoption of these new technologies and attract key players to base themselves here, creating jobs and opportunity. Bermuda has incredible opportunity ahead if we are willing to seize it.
Denis Pitcher is a Bermudian tech entrepreneur with an interest in exploring the potential of blockchain and distributed ledger technologies for Bermuda. He is a fintech consultant to the Bermuda Government’s fintech Business Unit as well as a tech cofounder and chief architect of resQwest.com, a global tourism technology solutions provider. He can be reached at firstname.lastname@example.org