The Bermuda Monetary Authority (BMA) approved the license of Coinbase to operate within its jurisdiction last week. The crypto exchange joins other big names such as Binance and Circle who have earlier set up shop in the small island nation.
The piling frustrations of Coinbase with the US Securities and Exchange Commission (SEC), especially in relation to the failure of the regulator to provide clear guidelines for crypto businesses operating under its wing, has finally led its CEO Brian Armstrong to finally bring their business to Bermuda. This move is not at all surprising, given Bermuda’s reputation as a crypto-friendly nation with a unique position in the market.
The crypto exchange is set to start its operations in Bermuda within the last week of April according to Fortune’s unnamed contact within the company.
Unique Geography and Regulatory Approach
Bermuda, a small island nation located in the Atlantic Ocean, has emerged as a hub for the crypto industry due to its unique geography and regulatory approach. The island is just a two-and-a-half-hour flight from New York, making it a convenient location for crypto investors to conduct business. Additionally, Bermuda’s government has created a favorable regulatory environment for the crypto industry, attracting a growing number of investors to its shores.
The territory is strategically situated outside of traditional regulatory jurisdictions, which has allowed it to create its own regulatory framework for the crypto industry. Over the years, Bermuda has established a regulatory sandbox for fintech companies, including crypto firms, to test new products and services without being subject to the full scope of regulatory requirements.
It should be noted that the island nation was one of the first to establish guidelines governing initial coin offerings (ICO) held within its boundaries, which instantly placed it on the map as a proactive player in the burgeoning cryptocurrency industry as early as 2018. In 2020, it followed up its support for the sector by crafting the Digital Asset Business Act that requires players in the crypto industry to get approval from the BMA to make sure that they don’t violate any of the provisions of anti-money laundering and anti-terrorism financing laws.
This approach allowed for innovation to occur in a controlled environment, ultimately benefiting the industry as a whole.
Advantages and Challenges for Crypto Businesses and Investors
Bermuda’s regulatory approach has resulted in several advantages for crypto businesses and investors. It’s for this specific reason that has led to the likes of Binance, Circle, and other crypto-related businesses to set up shop there. In addition to Coinbase, rumors say that Ripple is on its way there, too.
The island’s government has made it easier for crypto firms to conduct business by streamlining the application process for crypto-related licenses. This has reduced the amount of time and resources needed for firms to get up and running. Additionally, Bermuda’s favorable tax environment has made it an attractive destination for investors seeking to maximize their returns.
However, there are also disadvantages for crypto investors in Bermuda. One major concern is the island’s vulnerability to natural disasters, such as hurricanes. These events can disrupt business operations, resulting in significant losses for exchanges and investors if they result in damages to communication infrastructure.
Moreover, Bermuda’s small area and population can limit the growth potential for some firms only operating within. But then again, most crypto firms are not usually confined within certain geographical boundaries in doing their business, so this may unlikely pose a hindrance to their operations.
Coinbase’s move to Bermuda is not surprising due to the regulatory pressures it faces in the US and Bermuda’s reputation as a crypto-friendly nation. As more big players in the sector set up shop in Bermuda, it has the potential to become a hub for innovation and growth. This may encourage other countries to adopt similar regulatory approaches, thus fostering innovation in the crypto industry.
Only time will tell how successful Bermuda’s strategies will be, but it is clear that it has become an attractive destination for the crypto industry going forward.
Giancarlo is an economist and researcher by profession. Prior to his addition to Blockzeit’s dynamic team, he was handling several crypto projects for both the government and private sectors as a Project Manager of a consultancy firm.