Crypto companies are increasingly turning away from the US in search of clear digital asset regulations, and some of the major companies are finding a home in Bermuda. Still, some experts warn that this may be a short-term solution as the issues in the land of the free are not getting fixed.
One of the biggest crypto companies recently revealed its Bermuda arm. In April, Coinbase announced that it got a license under the Digital Asset Business Act from the Bermuda Monetary Authority (BMA), stating that,
“Bermuda was one of the first financial centers to pass comprehensive digital assets regulation […] and its regulatory environment is long known for a high level of rigor, transparency, compliance, and cooperation.”
It added that it chose Bermuda because the BMA is “a highly respected and experienced financial regulator” with close relationships with other regulatory agencies globally.
“What Coinbase recognized, which is what a lot of other companies have recognized, is that we have a superior regulatory environment,” Bermuda Premier E. David Burt said at the Consensus 2023 in Texas, USA, as reported by CoinDesk.
“It is, as I’ve said, a race to the top for regulation, and Bermuda has proven that we are a place that you can do that.”
Notably, Coinbase’s move came at a time when it’s facing a legal battle with the US Securities and Exchange Commission (SEC), which in March served the exchange with a so-called Wells notice, which typically precedes enforcement action.
In late April, Coinbase announced that it filed a lawsuit against the SEC to get the clarity it needs.
Anc Coinbase may influence other companies. Bermuda will “definitely be a hotspot for businesses that do choose to relocate. And they can put their toe in the water like Coinbase,” said Phil Berg, head of the corporate department at Otterbourg law firm, as The Block reported.
US ‘Punishment’ Made Other Places Attractive
Bermuda enacted the Digital Asset Business Act in 2018 as the statutory basis for regulating digital asset businesses. It established rules for issuing, selling, and redeeming digital assets, as well as operating an exchange and payment service provider business using digital assets, the BMA stated.
Besides Coinbase, Bermuda has granted licenses to the USDC issuer Circle, as well as Block and its subsidiary Cash App.
“It’s kind of ironic that we’re praising all of these detailed regulations when the whole concept of crypto initially was decentralization and no trusted institutions,” Berg was quoted as saying.
“But because of the punishing that we’ve taken at the hand of regulators in the US by regulation through enforcement and a kind of refusal to rule make and an inability to pass laws, it has really made a jurisdiction with some regulatory clarity attractive.”
Bitstamp USA Chief Compliance Officer Thomas Hook, however, told the Block that locations like Bermuda and the Bahamas may be an attractive short-term solution in response to the regulatory issues.
But, he warned,
“While offshore licensure has its business benefits from a global perspective, it isn’t a long-term solution to serving customers in the US. If you want to serve the US market, then you need to work with US regulators.”
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