Many of the most innovative disruptions in the global payments ecosystem are coming from outside players with some aggressive new ideas.
Perhaps one of its most poignant examples of that external disruption is The Hon. David Burt, the Premier of Bermuda. Under Premier Burt’s ambitious, highly capable and disciplined leadership, Bermuda has recently emerged as a global leader in creating a legal, regulatory and entrepreneurial environment to foster and promote the development, testing and commercialization of alternative payment technologies and crypto currencies.
From a standing start in 2017, aided only by Bermuda’s stellar reputation for its aggressive and world-leading anti-money laundering measures, Premier Burt regularly joins the likes of Michael Bloomberg, Brian Duperreault (CEO of AIG) and Lord Chris Holmes (a UK leader on technology policy) to deliver fireside explanations of how Bermuda has (as of Q1 2020) attracted 100 disruptive fintech, digital asset and cryptocurrency enterprises to its shores. Indeed, Bermuda has a strong culture of economic innovation, so it is not surprising that Premier Burt’s five-step approach to dramatically expand Bermuda’s economy into the avant-garde world of fintech and payments disruption, has proven to be an envious model for competitive jurisdictions to follow.
With the benefit of an MSc in Information Systems Development from The George Washington University and direct entrepreneurial experience, Premier Burt first reached out to potential industry partners to better understand their legal, regulatory and commercial frustrations. Once Bermuda got a grip on what problems needed solving first, it nimbly launched a multi-pronged legal and regulatory reform initiative that took only just over one year to complete – and which included:
- an initial cryptocurrency (coin) offering statute
- a digital asset business statute with regulations (to foster the development of an ecosystem around the application of digital representations of value)
- amendments to the insurance legislation to promote and encourage insurtech innovation
- new legislation to provide fintech development funding by the Government
- the embracement of innovation by the highly respected Bermuda Monetary Authority to both create a fintech unit and advance its oversight and governance authority over such disruptive payments and fintech operations
- innovative laws to promote a new class of banks in Bermuda that will cater to the unique demands and risks of Bermuda’s emerging fintech and digital asset sector
And that strategy has worked well with increased traction over the last two years. With Bermuda’s demanding economic substance laws now in effect, technology companies attracted to the island’s regulatory regime are establishing themselves as part of the growing ecosystem and helping to incubate the same environment that led to Bermuda’s prominence in the insurance industry.
Bermuda’s rapid ascent as a global alternative payments jurisdiction has not escaped the respectful and admiring attention of the U.S.’s Securities & Exchange Commission, including SEC commissioner Hester Peirce, who has commented that, “The U.S. SEC can look to our counterparts overseas for ideas in untangling some of our most difficult legal and policy questions. Bermuda is one of the only jurisdictions to address the (digital) custody question in detail.”
And when it comes to disruptive payment innovation, Bermuda practices what it preaches well beyond its recent innovative legal and regulatory reforms. In 2019, Bermuda launched an aggressive cybersecurity strategy to maintain a highly secure digital infrastructure in both the public and private sectors and started the creation of an ecosystem to develop and drive interoperability between blockchain based identity solutions that can help streamline both public and private sector services. The government has further announced its currency standard initiative designed to develop the adoption of digital currencies and innovation in open finance. It began with the announcement of its willingness to accept some tax payments in cryptocurrency (but perhaps not without the caveat that any such payment currency must have a fixed value that is linked to the U.S. dollar and is 100% reserved) – a small step, but a step nonetheless.
To better understand the rapid success of Bermuda’s role in the global payments ecosystem, Michael Bloomberg delivered the following succinct challenge to Bermuda’s competitors while discussing Bermuda at the 2019 Bermuda Executive Forum in New York, “Culture attracts capital faster than capital attracts culture.”
Mr. Card is a Senior Partner practicing commercial law in the Toronto office of Bennett Jones LLP, Canada.