Bermuda Island is in the spotlight when the topic is about offshores and GDP per capita statistics. This British Overseas Territory is inhabited by just 68000 citizens but it’s magnetic for tourists and finances. Though Bermuda is a British Territory (the oldest colony), it is self-governing, with its own constitution and its own government, which enacts local laws, while the United Kingdom retains responsibility for defence and foreign relations. Bermuda is sometimes called “a tax paradise” by businessmen from all around the world, and this is quite reasonable.
Some interesting facts about the island:
GDP per capita in the year 2016 was $99,3 which put Bermuda on the 2nd place in the world.
Bermuda's two largest economic sectors are offshore insurance and reinsurance, and tourism. About 600 000 tourists visit the territory annually, USA residents being 85% of them.
Bermuda is the second largest captive insurance domicile, and is the third largest reinsurance centre in the world. It is the domicile of 6% of offshore funds (2010).
Having no VAT and corporate income tax, Bermuda is a popular tax avoidance location.There are more than 12,500 foreign companies registered in Bermuda, many if of them are US-owned.
The Bermuda Monetary Authority (BMA) is an independent regulator of Bermuda's financial services sector, including the Bermuda Stock Exchange (BSE). There are 800 securities listed on the stock exchange. The Exchange specialises in listing and trading of capital market instruments such as equities, debt issues, funds (including hedge fund structures) and depository receipt programmes.
“Insurtech”on the Islands
According to the recent Aon research, Bermuda Island has attracted approximately $14 billion in cumulative investment in insurance technology, or “insurtech”. This phenomenal success probably motivated the Government to follow the path of digital economy development furthermore.
The crypto industry in Bermuda
In May 2016, Rick Willard, the founder and Managing Director of the Agentic Group made arrangements with Bermuda officials to launch ‘Bitmuda” project, an accelerated digital currency ecosystem. He also called Bermuda to be a perfect place to become a ‘bitcoin island’.
In November 2016, the R3 company gave a real-time demonstration of blockchain technology. There were brokers, underwriters, insurers as well as the Bermuda Monetary Authority representatives.
On November 22nd, 2017, Bermuda’s Premier, E. David Burt spoke about the potential impact of blockchain on Bermuda’s economy. He stated that the Island saw blockchain opportunities as a new aspect of its overall economic plan, seeking to attract initial coin offering (ICO) and cryptocurrency businesses to Bermuda through the introduction of a sensible and credible regulatory framework.
In April 2018, the Bermuda Monetary Authority published the paper called “Regulation of Virtual Currency Business” which served as a basis for creating the legislative framework for blockchain businesses on the territory.
Consequently, in May 2018, the Digital Asset Business Act (DABA) was presented. E. David Burt announced Bermuda as the first country to provide certain regulation for businesses in the blockchain economy. He said that this “puts Bermuda in the ‘First in the World’ category.”
In July 2018 a separate ‘ICO Act’ was presented. This way, the Authority made it clear that the legislation governs two distinct categories of business.
Andreas Vlachos, Academic Coordinator Officer of the Blockchain Initiative at University of Nicosia, studied the documents and created a brief list of comments.
Summary from the DABA and ICO Act
The business with virtual currency is the following:
Issuing, selling or redeeming virtual coins, tokens or any other form of virtual currency e.g., ICO/
Payment service provider business utilising virtual currency/
Operating an electronic exchange whereby virtual currency of any type is exchanged for cash or another virtual currency/
Provision of virtual currency custodial wallet services/
Virtual currency services vendor/
In general, the legislation clearly states two different branches of businesses:
ICOs launched for crowdfunding purposes will be regulated by amendments to the existing Companies Act 1981 and Limited Liability Company Act 2016 (collectively, the ICO Act), and by the Registrar of Companies (ROC).
Issuers of virtual currencies and operators of digital asset exchanges, as well as individuals who provide services related to digital assets, are regulated under the new Digital Asset Business Act 2018 (DABA) and by the Bermuda Monetary Authority (BMA).
The Minister of Finance, after consultation with the Authority, by order, is able to amend the Act by adding new activities, or by amending, suspending, or deleting any of the activities caught under the DABA.
The Authority will appoint a panel to advise it in relation to DAB activities.
The Authority will issue two classes of license: Class F which will be a full license and class M which would be a defined period license.
It is intended that a Class M license will be an intermediate license type which is designed to facilitate a regulatory sandbox for novelty start-up businesses, particularly those businesses desirous of testing new products and or services (proof of concept). These licenses will have modified requirements and certain restrictions.
A class M license is intended to be valid for a specified period, at which point the licensee must cease conducting business, or make application for either an extension to the initial time or transition to a full class F license.
The class F licensee will be a full license not subject to a specified period. With consumer protection the paramount goal, the class F license would still be subject to restrictions if the Authority deemed it appropriate to do so.
Directors and officers: Show regard for the probity, have competence and soundness of judgement for fulfilling the respective role
Business to be conducted in a prudent manner (regard for compliance with the DABA and all applicable laws in Bermuda, such as AML/ATF; codes of practice issued by the Authority; international sanctions in effect in Bermuda; minimum capital requirements; adequate business systems controls and accounting systems);
Integrity and skill (require that officers have a satisfactory level of experience and knowledge consistent with their responsibilities);
Corporate governance (require the implementation of corporate governance policies and procedures as the Authority considers appropriate given the nature, size, complexity and risk profile of the DAB).