The Tribune

• ‘Incredible opportunity on finance’s new frontier’

• PM unveils goal to be Caribbean’s ‘leading hub’

• But firm regulation set to ‘keep out bad actors’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas has “an incredible opportunity to reclaim lost ground and be part of finance’s new frontier”, digital asset specialists argued yesterday, as they hailed the Government’s release of its “vision” for the $3trn industry.

Andrew Rolle, the Bahamas Investments and Securities Business Association president, told Tribune Business that the policy position unveiled by the Prime Minister in Parliament “is another step in The Bahamas positioning itself as a world digital assets leader”.

The ‘white paper’, entitled The Future of Digital Assets in The Bahamas, seeks to balance signalling to crypto, blockchain and non-fungible token (NFT) providers that this nation is ‘open for business’ with the necessary risk-based regulatory approach to protect the country’s reputation and the interests of investors/consumers.

Indicating The Bahamas’ eagerness to attract blue-chip operators of the same calibre as FTX Digital Markets, one of the world’s largest crypto currency exchanges, who wish to operate in a compliant environment, the paper lists multiple broad-brush goals and policy objectives that the Government wishes to achieve in building a sustainable digital assets sector.

Pledging to work with the Central Bank and private sector to enable Bahamians to invest in digital assets using Bahamian dollars, and thus overcome a key complaint of many locals, the ‘white paper’ also promised to this year establish a Digital Policy Committee and Digital Advisory Panel to advise the Government on how best it can facilitate the sector’s growth via legislative and policy initiatives.

The Committee will be headed by the Prime Minister, be charged with overseeing the attainment of the Government’s digital policy objectives, while the Panel will feature industry and regulatory executives functioning in a capacity that will see them advise the former.

And, perhaps critically, the ‘white paper’ also focused on enabling Bahamian entrepreneurs and workers to exploit digital assets opportunities by providing them with the necessary skills upgrades. It calls for a partnership between the University of The Bahamas (UoB), Securities Commission and private sector to develop crypto asset-related courses, certifications and degrees.

To help finance this, the Government says it is mulling whether to impose a “development and training” levy - sum and mechanism not specified - on “the largest digital asset businesses” to ensure The Bahamas can provide the qualified, well-trained workforce that can help attract other operators to domicile in this nation.

Philip Davis QC, addressing the House of Assembly on the ‘white paper’, said it was designed to both place The Bahamas “at the vanguard of this new frontier” and drive increased economic growth. He added that it could modernise, and diversify, the country’s long-standing economic model, asserting that this nation cannot afford to “sit still” following COVID-19’s devastating impact.

“We have a vision to transform The Bahamas into the leading digital asset hub in the Caribbean, and a global leader in the progressive regulation of businesses in this profoundly innovative space,” the Prime Minister added of the ‘white paper’s’ ultimate goal.

“Taken together, fulfilment of these objectives will encourage the growth of an exciting new industry while protecting consumers, businesses and investors. They will also offer safeguards against systemic risks which may emerge. They will also help to promote and defend the competitiveness of The Bahamas and offer new opportunities for Bahamians and international investors alike. We wish for our country and our people to be seen as innovators, to stand among the first and best as a great place to do business.”

Mr Rolle, who has partnered with fellow Bahamian financial services executive, Brian Jones, to create Agio Digital, a digital assets “pioneer” set to launch shortly, told Tribune Business that the ‘white paper’ “complements and enhances” the Digital Assets and Registered Exchanges Act - the legislative foundation for The Bahamas’ entrance into the sector.

“I think it’s another step in The Bahamas positioning itself as a digital assets leader in the world,” he added. “I think financial services is going through a major overhaul in terms of the delivery of services and the emergence of new types of assets, the pace of which is breathtaking and it’s hard to grasp it.”

The Government’s policy position release, Mr Rolle said, “bodes well for The Bahamas where we have a robust and innovative enough framework, and where we have well-established global leaders like FTX”. Although the potential benefits for the financial services industry and wider Bahamian economy cannot be quantified at this time, he added that the digital assets/FinTech (financial technology) space will boost both local entrepreneurial activity and jobs.

With The Bahamas having spent more than two decades seeking to re-establish a competitive advantage in financial services, Mr Rolle said of digital assets: “I think it absolutely will present us with a great opportunity to reclaim lost ground.

“I think that with the novelty of digital assets and well thought through but aggressive forward-thinking of the Securities Commission, successive administrations and stakeholders such as the Bahamas Financial Services Board (BFSB), I think this is an incredible opportunity for The Bahamas to reclaim lost ground and be part of the new frontier of finance that all the world is watching and trying to find potential opportunities to participate in.”

Valdez Russell, FTX’s vice-president of communications and corporate social responsibility, yesterday told Tribune Business that it hoped the ‘white paper’s’ release will attract rival crypto currency exchanges and other digital asset providers to domicile here and do business from this jurisdiction.

“We believe that the Government of The Bahamas continues to move in a progressive direction around the digital assets space, and it is our hope that this ‘white paper’s’ release... will allow The Bahamas to remain at the forefront of policies and plans to create a welcome jurisdiction for other exchanges to do business in the country.

“We hope it attracts more of our colleagues, and we hope it creates new opportunities for young and brilliant Bahamians to contribute to our national economy.” Mr Russell added that FTX backed the Government’s plan to work with the Central Bank to facilitate Bahamian dollar investments in digital assets. This has been an issue for many locals, who have complained about having to go through exchange control to obtain foreign currency for such investments.

“We have had numerous requests from Bahamians who want to participate on the exchange, and we’re pleased that they are making the necessary steps to cause this to happen because this creates ownership in the country and allows Bahamians to contribute in a meaningful way,” Mr Russell added.

Mr Davis yesterday reiterated the Government’s intent to “keep out bad actors” with a well-regulated, compliant digital assets sector. “While we recognise the extraordinary opportunities afforded by digital assets, we also recognise the risks and thus we emphasise the importance of effective regulation. We will attract the best companies and keep out bad actors,” the Prime Minister added.

“Digital assets companies associated with our jurisdiction must operate fairly and in the interests of customers. We must ensure that customers’ money and assets are properly safeguarded, and that measures are in place to detect and prevent financial crime. In doing so, at the same time The Bahamas will be meeting its international obligations, upholding our reputation, and mitigating the inevitable risks associated with the introduction of new technologies.”

The Government’s ‘white paper’, outlining the potential economic benefits to The Bahamas, said the total dollar value of digital assets globally had expanded from zero in 2008, just prior to Bitcoin’s launch a year later, to $3trn by November 2021. 

“The Government’s approach to digital assets builds on examples of successes in other countries, including Gibraltar, Switzerland, Liechtenstein and France. We have also considered current and proposed regimes in places such as the US, the UK, the European Union, Dubai, Singapore, Japan and Australia,” the paper said. 

“We have sought to formulate a balanced policy that safely encourages innovation and fosters opportunity, while adhering to best practices and rigorous standards along with meeting our international obligations..... Volatility in the value of crypto assets remains high, and therefore they are not suitable for all investors. While the opportunity for making money in digital assets is high when prices go up, so too is the risk of suffering losses when prices go down.

“These risks, and the risks associated with financial crime such as fraud, money laundering and illicit financing, necessitate proportionate and relevant policy responses. Many jurisdictions fail to strike the right balance between, on the one-hand, effective risk-adjusted regulation appropriate to a novel and burgeoning industry and, on the other, supporting the growth and economic potential that innovative financial technology can bring.”