Bermuda To Establish “New Class Of Banks” For FinTech And Blockchain Firms

Blockchain, News, Regulation | July 3, 2018 By:

The government of Bermuda is planning to amend the country’s Banking Act in order to establish a new class of bank that will provide services to blockchain firms.

The upcoming amendments to the Banks and Deposit Companies Act 1999 is part of the government’s mission to put its name on the map as an outlier destination for FinTech innovation. The amendments was introduced in the Bermuda Parliament because of the unwillingness of local banks to provide banking services to the new class of companies converging on the island, citing regulatory issues and potential risks. The amendments would create a new restricted banking license and set out the sorts of services local banks could provide.

“In the wake of the global financial crisis and the ever-broadening risk mitigation strategies, banks are increasingly risk-averse,” David Burt, Bermuda premier and minister of finance. “While that is understandable, as given their risk tolerances, to date local banks have been unwilling to offer services to newly incorporated FinTech and distributed ledger technology companies. The simple fact of the matter is that the FinTech industry’s success globally depends on the ability of the businesses operating in this space to enjoy necessary banking services. In other jurisdictions, banking has been the greatest challenge and for us in Bermuda, it is equally so and must be resolved.”

In May of this year, the initial coin offering (ICO) Act and the Digital Asset Business Act have been passed by the House of Assembly and the Senate. Under the Digital Asset Business Act, crypto firms must obtain a license to conduct digital asset business in or from within Bermuda.

Even before the crypto bills were passed, the government has been collaborating with a number of crypto companies. In April, Bermuda signed a $15 million memorandum of understanding (MoU) with Binance, the largest cryptocurrency exchange in the world, to establish funding for educational programs related to FinTech and blockchain. Binance reportedly plans to develop a “global compliance base” in Bermuda, a move which is expected to add around 40 news jobs.

“Legacy industries the world over have lost that ability and the future belongs to those who can quickly lay a foundation for growth, respond to emerging trends and preserve a reputation for sound management in the process,” Burt said. “For countries it is no different, Bermuda must be nimble or we will be left behind.”