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The Bermuda difference: an incomparable regulatory environment

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Some of NEXT’s member companies

If the past few months in the crypto industry have highlighted anything, it would be the strength and vigour needed by a country’s regulator to not only develop meaningful policy, but to have the expertise and fortitude to supervise the complex activities of its licensed entities in a rapidly evolving landscape.

Bermuda has assembled a diversified ecosystem in the fintech industry, far more than just cryptocurrencies, including digitally native exchanges, lenders, wallet providers, stablecoin issuers, tokenised securities with their supporting capital markets vehicles, a bank institution to providing fiat conversions for institutional players and an ambitious project to develop a turnkey ecosystem for digitally native funds.

All of these businesses and their digital infrastructure are laying the foundation to the exciting observed convergence with Bermuda’s core (re)insurance markets. Our securities market is also expanding with digitally native funds and private equity sponsors that are specifically registered in Bermuda to get closer to the developing ecosystem. In total, this innovative ecosystem has 16 companies carrying out digitally transformative business under tight regulation and supervision of the Bermuda Monetary Authority under the Digital Asset Business Act 2018.

Reputable: the Bermuda Monetary Authority

All these companies have come to Bermuda because they believe that strong regulation underpins the healthy formation of emerging markets. Regulation does not guarantee that blow-ups won’t happen or that bad actors will always be weeded out. However, it creates a level playing field where good habits can be encouraged (and enforced), new standards can be set and innovation can play out with guardrails in place to enable a safer adoption for both the retail and institutional markets.

Bermuda is the ideal place for balancing globally recognised regulatory standards with an environment that empowers innovative new ideas. Bermuda ranks in the Top Ten globally for its Financial Action Task Force (FATF) mutual evaluation for technical compliance and the effectiveness of its regime to manage the risks associated with Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) compliance.

Bermuda is one of only two countries to have achieved US and EU regulatory equivalence in the insurance industry and has 50-plus years of risk management experience with an internationally respected financial services regulator. Bermuda has played a pivotal role in providing the capital that allows countries to rebuild and recover from catastrophes such as 9/11, hurricanes, floods, wildfires and earthquakes. In total Bermuda’s $800 billion in total assets held by 1,200 (re)insurers, writing gross premiums of approx $150 billion, make it the world’s risk capital.

Bermuda’s flexible, collaborative approach to regulation enabled innovations like captive insurance to help businesses to get independent oversight and supervision on how they self-insure against risks. It was the place where catastrophe bonds were born. These allowed for investors to buy only a portion of the overall risk of a catastrophic event like a hurricane, sell it on to others and get paid out as long as no event occurs. Similarly, it was the birthplace of the larger Insurance Linked Securities (ILS) market which enabled investors to buy a portion of the risk of any kind of insurance deal.

Bermuda knows finance. The jurisdiction faces tremendous reputational damage if things go wrong and thus the BMA applies the same standards to regulating digital asset businesses at the forefront of financial innovation as it does to more traditional financial industries.

As an industry we believe that the regulatory standard set by Bermuda is the right one to follow. We believe that prudential regulation allows for safe innovation, where risks are measured and understood and consumer and investor interests are safeguarded.

Next is Bermuda’s regulated digital asset industry forum. Next isn’t an acronym, it’s more a state of mind. Our goal is to help to consolidate the growth of the fintech and digital asset and fintech industry in Bermuda and by extension support the adoption of regulated digital asset markets globally by trying to keep ourselves at the forefront of what’s coming next.

Whether it’s providing industry advocacy, helping to promote the high-principled positive reputation of the digital asset space both here in Bermuda and abroad, seeking connections to bolster provide strength and stability to the ecosystem, or fostering initiatives to develop the local talent pool to allow the industry to grow its footprint, our goal is to work collaboratively with companies who have embraced Bermuda’s DABA businesses and the innovative ecosystem enabled by our country.

The Next organising committee is made up of Monika (Sheinberg) Adams, Stafford Lowe, John Narraway, Denis Pitcher and Tim Reed

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Published December 19, 2022 at 7:58 am (Updated December 19, 2022 at 7:59 am)

The Bermuda difference: an incomparable regulatory environment

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