Bermuda Receives Cryptocurrency Warning – The Royal Gazette


Martin Walker, director of banking and finance at the Center for Evidence-Based Management (Twitter photo)

Bermuda is taking a “huge reputational risk” for what is likely to be a small reward by encouraging crypto firms to come to the island, according to a tech expert.

Martin Walker, director of banking and finance at the Center for Evidence-Based Management, a nonprofit organization, said The Royal Gazette: “It sounds like easy money, but think about the risks you’re taking.”

His words echoed those of Francine McKenna, a professor at the Wharton School of Philadelphia University, who said of Bermuda, “I think they should be very careful who they support and promote.”

They both talked to The Royal Gazette after appearing on a panel at the Offshore Alert conference in London this week, alongside crypto skeptic Stephen Diehl, director of the Center for Emerging Technology.

During the discussion, titled “Normalizing Fraud: The Wacky World of Cryptocurrency,” all three speakers gave stern warnings about the high level of fraud taking place in the cryptocurrency industry.

Walker told the Gazette afterwards, struggling “offshore centers” trying to develop a crypto industry to boost their economies were playing with fire, as digital currencies were designed to avoid regulation and liability.

“It’s a similar situation conventional banks find themselves in,” Walker said. “They think ‘there’s a lot of money here. We want a piece.’”

But he cautioned: “You’re taking a huge reputational risk to possibly gain very, very little.”

The government has long sought to establish Bermuda as a hub for digital assets, with the island becoming one of the first jurisdictions in the world to implement a regulatory regime.

David Burt, the Prime Minister, promised that fintech would create jobs for Bermudians, while the Chancellor of the Exchequer, Jason Hayward, was quoted in The Wall Street Journal he recently said that the recent devaluation in the price of cryptocurrencies “did not threaten the island’s ability to become a crypto hub” and “would likely advance our goal and positively impact our long-term growth and role in this sector.” .

So far, the Bermuda Monetary Authority has issued eight full digital asset business licences, four licenses for businesses looking to prove their proof of concept and four modified licenses for those looking to expand their operations for a limited period.

Walker said Malta tried to become a “crypto island” but didn’t get very far because “it still has the rule of law.”

He said that Bermuda should consider how encouraging crypto firms, with their often complex and opaque legal structures, could affect the first pillar of the island’s economy: international business.

“You don’t want to be on the ‘grey list’ again,” he said, referring to Bermuda’s previous inclusion on a list of European Union standards.

The Financial Action Task Force maintains and publishes lists of countries that do not comply with its recommendations against money laundering and the financing of terrorism.

The lists are used by the Council of the European Union.

Countries that do not cooperate with the FATF recommendations are included in a “black list” and countries that do not meet the standards, or are still working to achieve them, are included in a “grey list”.

The island was removed from the “grey list” last month.

“If you let [crypto] go a long way, then it probably means you’ve lost control in terms of the good things that get people to come in the first place…it can screw all of that up,” Walker said.

“The cryptocurrency industry doesn’t give a shit about that sort of thing. They can get up and move around.”

During the panel discussion, he said that the rules of proper financial trading had gone out the window for cryptocurrencies, with no attempt to determine the suitability of customers for the products being sold to them.

“The crypto industry in general is trying to sell increasingly complex and high-risk products to everyone they can get their hands on,” he alleged.

He added that it was not revealed who was organizing the cryptocurrencies.

“Trading in these products is nothing like any kind of regulated exchange,” he said.

Speaker and financial journalist Francine McKenna

Ms McKenna said one of her concerns was that regulators in the US and elsewhere were “trying to pacify or stifle innovation”.

She said: “What we’re doing is allowing companies that basically have business models that are illegitimate to gain the gloss of respectability and then regulators have to go after them.”

Diehl emphasized that crypto was “not an innovation” and was “designed specifically for regulatory evasion.”

He added: “It’s an environment where fraud can thrive.”

The Offshore Alert conference on Monday and Tuesday was attended by more than 200 intelligence, investigations and recovery professionals from the world of high-value international finance.

It included an orientation session on crypto research and recovery and another on the Tether stablecoin.

the Gazette sought comments for this article from Mr. Burt and Next, Bermuda’s digital asset industry forum, but received no response.

The OffshoreAlert Conference London 2022, the publication’s European conference on intelligence, investigations and recovery, brought together participants in international high-value finance.


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