Bermuda, a long-standing center for offshore insurance and reinsurance, is banking on its transparency in the digital asset market to help it attract more cryptocurrency initiatives and firms despite recent turmoil in crypto markets. Bermuda, which has a robust regulatory structure for cryptocurrencies, is doubling down on its knowledge of global business and a skilled workforce to further develop its digital-assets sector.
Bermuda persists in developing a digital-asset sector amid the market turmoil
The current crypto market environment has prompted several people to doubt the stability and freedom that cryptocurrencies were supposed to provide. Since its November high, Bitcoin, the world’s most valuable cryptocurrency by capitalization, has plummeted over 50 percent.
The collapse in the value of TerraUSD and its sister stablecoin, Luna, in recent weeks has saddled investors with billions of dollars in losses. The fall of Luna has put “Lunatics” off Do Kwon. Furthermore, various governments are pursuing legal-class action against the creators of Terraform Labs, as well as employees.
More than $1 trillion in digital money has vanished since November as investors flee hazardous assets amid rising interest rates and high inflation. However, the current market climate appears to disconcert the Bermuda government. Minister of Economy and Labor Jason Hayward of Bermuda stated:
We are aware of the recent devaluation in the price of cryptocurrencies and remain confident that it does not threaten the island’s ability to become a crypto hub. This industry downturn is likely to advance our goal and positively impact our long-term growth and role in this sector.Jason Hayward
Mr. Hayward added that the island has been developing its financial technology and crypto sectors since 2017 and that it has continued to grow during the last recession in 2018. Additionally, he stated that the recent collapse of Terra and Luna demonstrated the need for supervision and risk management, which Bermuda has experience with as an insurance and reinsurance center.
According to industry experts, Bermuda is one of the few countries in the world that has established a comprehensive framework for cryptocurrency regulation. According to Bermuda regulators, their understanding of global business, which accounts for about 27% of the island’s economy, and a trained local workforce, leads to the creation of a stable foundation for the growth of a flourishing digital-assets sector on the island. This puts Bermuda in competition with other regions attempting to attract the crypto business, such as Malta and Liechtenstein.
The crypto environment appears more progressive and structured
Bermuda’s strategy to attract blockchain businesses is similar to that of other nations that are trying to promote cryptocurrency, in that there is a lot of uncertainty about how government regulations will change and what kind of framework would be put in place.
Despite the fact that the United States has yet to implement significant regulation and investor protections for cryptocurrencies, there is increasing debate about the cryptocurrency market’s need for greater monitoring. In March, President Joe Biden signed an executive order forcing government agencies to conduct research on digital currencies.
It’s no surprise that Bermuda wants to establish itself as a crypto center. David Schwartz, president of the Financial and International Business Association, noted that Bermuda is leading the way in putting in place a framework for cryptocurrency regulation, following through with a comprehensive regulatory regime for digital assets, and tightening up its anti-money-laundering procedures.
The Financial Action Task Force, a Paris-based organization that sets anti-money-laundering legislation standards, said Bermuda has made significant improvements to its technical compliance architecture and has enacted and modified several critical rules throughout the last year, according to its 2020 mutual evaluation.
In 2018, Bermuda established a regulatory framework for initial coin offerings and digital business assets, requiring crypto enterprises to obtain permission from the Bermuda Monetary Authority to operate there.
Since then, the BMA has licensed fourteen digital-asset firms, with four crypto firms among them in 2022, according to Craig Swan, the agency’s CEO who is also in charge of all supervisory and operational activities.
According to Mr. Hayward, Bermuda’s licensing procedure can be divided into three phases: a “sandbox” test license, similar to the one used in the island’s insurance-technology licensing system; a modified license; and finally a full license. According to him, the testing license is usually valid for three to 12 months in order for a crypto firm to experiment with its business.
The regulatory requirements in Bermuda include prudential supervision to evaluate risk management, governance, and cybersecurity as well as compliance with anti-money-laundering and counterterrorism financing laws like sanctions screening and transactions monitoring.
Another roadblock to crypto’s expansion in Bermuda is the sector’s limited knowledge of anti-money-laundering standards required for a license, as well as banks and insurance companies’ refusal to deal with crypto companies. In order to meet these requirements, the BMA has been educating service providers about them via internet training. And more banks and insurance companies are embracing bitcoin businesses as customers.