Late last Friday, April 27th, Bermuda’s Virtual Currency Business Act passed through the House of Commons in the United Kingdom. This week, the bill will go through the Senate and should the bill pass, it will be the most comprehensive regulation of its kind, covering the issuing, selling or redeeming tokens and cryptocurrencies, ICOs, crypto exchanges, crypto wallets and other crypto service vendors.
Joseph Weinberg, OECD Think Tank Special advisor and Chairman of Shyft, a blockchain KYC/AML solution, and Loretta Joseph, OECD Think Tank Leader, Shyft advisor and Chair of the Australian Digital Chamber of Commerce Advisory Council (ADCA), have been working intimately with the Bermudan government to craft the bill. Please see below for commentary from Joseph and Loretta.
On why Bermuda is a choice country to build comprehensive crypto legislation: “Bermuda has a long history of being a financial powerhouse and center for financial services. It has the biggest reinsurance market in the world. On top of that, being a Commonwealth country, its regulatory framework was one that Loretta and I understood, as Loretta is from Australia and I’m from Canada — both countries of which have been supportive in the development of blockchain and crypto. Bermuda also has a framework for the blockchain and crypto ecosystem to bind itself to.
“Bermuda’s proximity to Canada and the U.S., as well as its long histories with both countries (especially Canada) makes for a great geographic location to build great businesses that act local, but also enables markets globally.”
Comparing Bermuda to other countries competing to be the next crypto hub: “When you look at other current jurisdictions, they have either not been banking hubs traditionally, do not have the best track record when it comes to KYC/AML, or are in developing countries that aren’t presently suitable to support rapid growth of a technology or financial system. Bermuda does.
“Along with that, Bermuda also has a highly skilled workforce that is experienced in regulation and compliance and securities laws. The island also has a rich entrepreneurial history and a willingness to learn and adapt quickly. This made for an incredible working relation in building out regulation for the crypto community.”
On creating a crypto regulation for the world: “Working with the Bermuda Monetary Authority in crafting the Virtual Currency Business Act has been a very collaborative process — from the industry to stakeholders to the government to regulators to policymakers — its been the most collaborative jurisdiction that I’ve worked with in the crypto space and an example for the rest of the world to follow.
“The problem with regulation in the crypto space is that every country has been running toward different legislation and there’s a lot of jurisdictional arbitrage. With the Virtual Currency Business Act, we hope to create a standard. Because the BMA made a point of hearing out all the stakeholders, it is the most responsible regulation that I’ve seen being adopted by any country in the crypto space. We hope that different jurisdictions can take this as an example and will adopt similar regulations.”
On what makes the Virtual Currency Business Act Unique: “The Virtual Currency Business Act includes extensive consumer protection so that the BMA can protect its citizens. However, it also has enough regulation that allows the ecosystem to flourish without consequences of not knowing what will be down the road, if the law is going to change on them or the regulations are going to change. Within the ecosystem what are we talking about with ICOs? Are we talking about utilities, securities or something that’s in between both of them? I think as long as there’s clear guidance to the industry of the regulators goals, how they want to regulate and how things are defined, the ecosystem can flourish and develop. We’re seeing it unfold with these new blockchain entrepreneurs who want to flourish in the new open economy. These entrepreneurs are open to having regulation and a jurisdiction that doesn’t tolerate the nefarious players in ICOs.
“Governments are still grappling with ICOs and how to regulate them. For us, it’s about taking a leap of faith and saying, “Let’s put together a responsible form of regulation around activities happening anyway. Give these projects credibility and give them an ecosystem in which they can flourish.””
On putting together standards for crypto to help businesses scale globally: “Joseph and I have been working with other jurisdictions on crypto legislation—for example, we’re on the fintech advisory board to the Financial Services Commission in Mauritius—but it’s not about the telling the jurisdictions to do things better; each jurisdiction has different needs and wants. The worst thing is that policy writers are not technologists and technologists are not policy writers. The reason why we see vastly different regulations around the world is because both those worlds rarely ever meet. However, what we’re trying to achieve is to have crypto regulation across the world that looks similar. That way, entrepreneurs in this ecosystem the ability to go into jurisdictions that is similar around the world that have similar KYC/AML for their business so they can move seamlessly between jurisdictions. At the end of the day, companies have be able to scale. Once they have built their company in a smaller jurisdiction, it has to be able to scale into more mature markets and take it global.
“What we want to avoid is what happened with internet regulation. Every jurisdiction came out with different responses on how we grapple with innovation and technology, and it has not been working. So let’s start to write responsible local standards that affect people at much more global level. If we’ve learned anything from that into blockchain technologies, it’s that we need to work together from the start to write the rules that include everybody.”