‘Reclaiming Lost Ground’: Gov’Ts Digital Asset Plan – Finance and Banking

Marion Steward


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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.”

Originally published by The Tribune.

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https://www.mondaq.com/financial-services/1186250/reclaiming-lost-ground39-gov39ts-digital-asset-plan

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