Cayman’s offshore rivals target crypto market

| 15/05/2018 | 52 Comments

Bermuda, Cayman News Service(CNS): As the global cryptocurrency sector heats up, job creating international investment is seeking out suitable jurisdictions and Cayman Islands’ offshore rivals are looking to steal a march on this growth by introducing crypto-friendly laws and legislation, with Bermuda in pole position. Bermuda’s government said recently that it wants to become one of the first countries to specifically regulate initial coin offerings (ICOs), which have provided a new way for companies to raise funds in a crowd-sale format, bypassing the middlemen of the traditional world of venture capital and capital markets.

Bermuda said it had an opportunity to become a global leader in the fintech space by introducing this regulatory framework, which Premier and Minister of Finance David Burt said would provide legal certainty to companies looking to conduct ICOs in Bermuda.

Bermuda, which has a larger and more successful offshore insurance industry than Cayman but a significantly smaller investment fund industry, announced in November the formation of a Blockchain Task Force, including a Business Development Working Group and a Legal and Regulatory Working Group. This is all aimed at creating an environment attractive to businesses operating with blockchain technology to bring more businesses, more jobs and economic growth to Bermuda.

This programme is already paying dividends for Bermuda’s domestic economy. Premier Burt recently announced a partnership with Hong Kong’s Binance, the world’s largest cryptocurrency exchange — which trades over 2 billion dollars of crypto transactions every day — investing $15 million in Bermuda to create jobs, train local people and provide expertise in developing a cryptocurrency offering to international market participants.

Under the memorandum of understanding, Binance will develop its global compliance base in Bermuda and launch a new cryptocurrency exchange once the regulatory picture has been agreed. The compliance centre will create at least 40 jobs, with 30 of these to be earmarked for Bermudians, according to reports. The company will also sponsor training in blockchain technology and compliance for local people.

While no specific legislation for ICOs and cryptocurrency businesses, such as exchanges, exists in Cayman, a large number of such projects have established operations in this jurisdiction, attracted by the flexible corporate environment, zero tax regime and special incentives offered in the Cayman Islands’ special economic zone, Cayman Enterprise City (CEC).

The Cayman Ministry of Financial Services has said it is considering the recommendations of a Cayman Islands Monetary Authority (CIMA) working group to establish a framework of governance for operations of digital currency projects taking place in Cayman.

Financial Services Minister Tara Rivers has also commented, including at the GREAT Festival of Innovation in Hong Kong in March, that Cayman is well positioned to serve as the jurisdiction of choice for a new breed of financial services business, whose innovations are changing the traditional face of the financial sector.

“Fintech’s underlying blockchain technology presents opportunities for greater operational efficiency and transparency, both of which would improve the industry’s products and services, as well as government’s public services,” the minister said.

In the meantime, Bermuda is moving swiftly to get its legislation in place to govern ICOs, where regulatory certainty will be welcomed by the companies setting up operations. A recent press release from CIMA, which warned Cayman Islands residents of the dangers involved in investing in ICOs, highlighted the risk that an ICO coin or token sold to the public could at some point be designated a security by the domicile it had been issued from, which would raise new regulatory questions and likely negatively affect its value.

Bermuda’s draft legislation to govern ICOs will treat this new type of fundraising as a restricted business activity that will require consent from the jurisdiction’s finance minister. Applications for consent will be required to include specific details about the people managing the company conducting the ICO and the underlying digital asset offered for sale, as well as how any product related to the ICO will develop, including timelines for the business.

Bermuda’s authorities also want information on the amount of funds to be raised, along with information on the technology being used and mandatory disclosures to investors.

Financial centres large and small around the world are seeking a path towards providing greater regulatory clarity in the fast-growing cryptocurrency market.

The US Securities and Exchange Commission (SEC), the world’s most prominent financial regulator, recently said it is examining numerous US ICOs to see if they breach securities regulations, while a number of would-be issuers of digital coins in the US have either adjusted the terms of their sale to exclude US nationals, other than wealthy accredited investors, to avoid any ambiguity in the law.

The standard investment contract that has developed is a Simple Agreement for Future Tokens (SAFT), which is considered a security and must comply with the relevant laws.

Additionally, the European Parliament recently said it would tighten up regulation on cryptocurrency exchanges and the providers of wallets that enable anonymous online storage of cryptocurrency holdings, as part of its overall effort to quash shell companies, which it said could be used to launder money, hide wealth and avoid paying taxes.

The EU Parliament voted overwhelmingly in favour of the rules, which will force cryptocurrency exchanges to conduct due diligence on its customers as well as identity verification checks.

Another offshore jurisdiction — and typically not the first competitor in Cayman’s traditional offshore business — is the European island group of Malta, which has earned the tag of ‘Crypto Island’ by embracing the new cryptocurrency-related technology.

In addition to working on a blockchain technology framework to encourage development and investment, the Maltese government is in the process of establishing a Virtual Currency Act and plans to set up a Malta Digital Innovation Authority. This will create a unique auditing framework to regulate blockchain investment operations, such as ICOs.

Hong Kong’s Binance is also investing heavily in Malta, selecting the country as the base for its European expansion due to the jurisdiction’s forward thinking leadership, which is making it a centre for blockchain innovation. Binance said it had reviewed several jurisdictions and plans to hire 200 new employees to facilitate this expansion.

Local Cayman Islands fund directors have said that the biggest problems for potential ICO issuers or crypto-related funds is the difficulties involved in AML compliance, in particular demonstrating the source of funds in any fundraising because investors often subscribe with other cryptocurrencies. Other issues include the custody of funds that are held in a digital wallet, compared to the traditional arrangement where a bank holds a share certificate for an investment manager.

Most legitimate corporate service providers in Cayman, meanwhile, would likely not take on business from an ICO that has not had the right legal advice to understand its obligations under relevant Cayman law, including anti-money laundering regulations.

Local legal industry participants have said it would make sense for Cayman to introduce a regulatory regime or class of licence from CIMA to cover this type of business, both to embrace the technological advances taking place at a rapid rate and to ensure Cayman is not left picking up the pieces of an ICO that turns out to be a major fraud or is linked to money laundering.

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Category: Business, Financial Services

Comments (52)

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  1. Anonymous says:

    Indeed. But quite remarkable at seeing the bigger picture.

  2. Anonymous says:

    The person who thinks governments are going to give up control of their monetary policy?

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  3. Anonymous says:

    Uh oh! FOMO! Some other places gonna get all the monies and cayman won’t. End of the world right there. End of the world.

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  4. Anonymous says:

    Just 1/3 of all BTC stolen or lost so far, lol. Encryption of the blockchain might be bullet proof but almost no one knows how to keep their wallets safe.

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  5. Anonymous says:

    So what? Becoming a haven for sketchy ICO’s has nothing to do with blockchain uptake into the financial mainstream. That ship has already sailed.

  6. Anonymous says:

    Interesting that the UK is tormenting us about privacy laws and openness and the core mantra of bitcoin is anonymity to the users.

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  7. Anonymous says:

    CNS you need to speak to Cayman Finance and get the real story. This article is of poor journalistic quality as it simply recites what is in the public domain. No interview with major accounting or law firms who are close to this matter.

    CNS: Hey, ding dong! Click on the tag called “cryptocurrencies” and you’ll find previous articles on the topic. This is just one of a series of articles, not a Bitcoin thesis. Try to keep up.

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  8. Anonymous says:

    Bermuda will get what it works for and Cayman will still be trying to create a functional garbage system, Port authority, customs, immigration, schools, Airlines, Turtle farm, Healthcare, etc, etc.While at the same time trying very hard not to screw up what the private sector is doing. Be thank full for the little things that still function here. Wait until they try and take over the internet and communication sector.

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  9. Anonymous says:

    Nobody out there ever heard of ‘Fool’s Gold’?

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    • Anonymous says:

      well the EU just started trading oil for euro’s China just started trading oil for yuan.
      How much longer you going to depend on the “fools dollar, the USD”.

      Funny how someone who mentions “fools” gold on a subject they know nothing about. Isn’t getting a reply back from mirror mirror on the wall.

      Who’s the foolish of them all……

      Crypto is a currency that is global. And as long as someone beleives it’s worth something. it is. No different than the USD, Gold, Silver, ect.

      But mark these words. Technology always wins. And if the entire technology establishment is backing crypto. Whatcha think is gonna happen?

      Amazon has adopted it, Fb just announced making it’s own currency. New egg accepts it. It’s only a matter of time before ATM’s distribute it and let you buy it.

      Banks are even using it, for money transfers. Tying swift to ripple’s block chain technology.

      So…who’s the fool?

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    • linda reise says:

      You soon be wishing you were one of dem fools

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  10. Anonymous says:

    Anyone at Consensus NYC will have heard the Bermudan PM address 8500 attendees telling them Bermuda is open for business. Plus they had dozens of govt & private representatives, threw a cocktail reception for everyone, and sponsored the conference app so that every single time anyone of the 8500 attendees use it, they see an advert for Bermuda & its fintech industry.

    Cayman?
    nada.

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  11. Bertie :B says:

    If one can afford to gamble the money < go for it , but from what I have seen their is very high risk involved with crypto at this time , just like stocks actually as they are also a form of gambling . Although you have to sign legal documents that make you aware that you could lose all your money , idk about this stuff coming mainstream yet , although many people have hit the big time with it by getting in just at the right time . If I had extra cash ? yes , probably try it out .

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  12. Anonymous says:

    “Satoshi Nakamoto is the name used by the unknown person or people who developed bitcoin, authored the bitcoin white paper, and created and deployed bitcoin’s original reference implementation. As part of the implementation, they also devised the first blockchain database.” – Wiki.

    Nobody even knows who this bloke is. The “currency” does not even have any real value except illusory. (This is such an indictment on human greed.)

    So technically you could have gold and silver that have real value since they are precious metals and require a lot of effort to locate, extract, refine and stamp and exchange them for bits and bytes that can be created, destroyed, inflated and deflated at will.

    How low we have fallen as a race! Driven by greed in a temporal existence refusing to acknowledge our immortality.

    There is a day coming when we will all give account of ourselves to the Creator.

    Jesus said a man cannot serve God and money. How right He is!

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    • Gray Matter says:

      The only ones who benefit from this is the Drought Cartel … Used for laundering their money.

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      • Anonymous says:

        Where are they? We can deliver some water!

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      • Anonymous says:

        Really? So no money laundering ever existed until Bitcoin came along? Wow. Ignorance is bliss.

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      • StopTheCrime says:

        If you meant to say “drug”, then you’re wrong and have succumbed to the media hype. The drug cartel uses cold hard cash 10x more than they use crypto… so what does that say about you if you use cash?

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    • Anonymous says:

      11:32am. I guess you also met or know of the man that created paper money?

      There are many fiat currencies in this world my dear CNS blogger!

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      • Anonymous says:

        Yes, I know that. Perhaps you missed my point. Bitcoin is digital FIAT on steroids.
        Does that help?

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        • StopTheCrime says:

          No, it doesn’t help any of us here because it’s not FIAT at all. Do you even understand what that word means?

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    • StopTheCrime says:

      Your ignorance about the value of cryptocurrencies proves you really have no clue about what you’re talking about. There isn’t a single thing that fiat currency does that bitcoin can’t do better, faster and cheaper. Your example of gold/silver is a perfect example. They can be counterfeited (look up tungsten bars). They can be mined which means no one knows how far it can be inflated with increasing supply. Precious metals have very little practical use: you can’t drive them, eat them, build them, etc. but you still think they have value. Think about why you consider them to be “precious” and you’ll realize it’s all based on consensus.

      Meanwhile, cryptos can utilize smart contracts. VeChain, for example, could single-handedly put an end to the counterfeiting trade. Do your research.

      You don’t need to know who Satoshi Nakamoto is to know if bitcoin works or not. The math confirms it. Just like you don’t need to know if Newton was hit on the head with an apple or not to know if gravity is real. The math confirms it.

      Spare me the moral high horse. This has nothing to do with Jesus. This is abot sound money that cannot be inflated or printed int oblivion (as fiat does).

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      • Anonymous says:

        Nothing BTC can’t do better or cheaper? Rubbish. Be it *simply* paying for things, having your holdings government insured through to monetary policy ie preventing destructive deflationary spirals turning into depression. There is almost nothing BTC does better or cheaper except sending money across 3rd world borders or buying drugs online.

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        • StopTheCrime says:

          Wow… way too much ignorance being displayed here. Virtually every single thing you said is 100% false. No government is going to give your money back if you get robbed on the street. FDIC insurance in your bank account is paid for in ways you have obviously have never even researched. If you think you’re “safe” because you believe in a centralized currency which has lost 98% of it’s buying power over the last century, I have a nice bridge to sell you. The fact that Bitcoin is mathematically limited and unable to be hacked or counterfeited should alone prove it’s superiority over all fiat forms of currency. You literally just argued FOR central banking, which is patently ludicrous! Tell me: how much did it cost you to send your last wire transfer? How long did it take? Even Butterfield here charges you 1% to take out more than $5000 of YOUR OWN MONEY!

    • The Oracle of Omaha, Warren Buffet, was asked earlier this year what Berkshire Hathaway was doing in the bitcoin market. He said nothing. When asked why, Buffet said he had asked a range of questions about bitcoin but was not getting satisfactory answers from anyone. When Warren Buffet says yes to bitcoin then I will too.

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      • Anonymous says:

        When has Warren Buffet ever been a tech investor? I feel sorry for you.

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        • Anonymous says:

          Wait, you mean the guy who is Apple’s second largest shareholder now? Yeah, he clearly doesn’t know tech.

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      • StopTheCrime says:

        You mean the same Warren Buffet that now admits he “blew it” by misjudging Amazon and Google? That Oracle of Omaha? Yeah, Warren is absolutely clueless about tech.

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    • Anonymous says:

      Crypto mining is also mining, just not in the traditional sense. It does take effort albeit, computer effort. There is a cost to mining coins and the solution to mine a single coin becomes exponentially more complex and expensive (in the case of bitcoin) the more coins are mined. Though bitcoin has no “intrinsic” value, precious metal intrinsic value is vastly overstated. It is the invisible trust that gives value for the most part just like paper money. The gold standard is long gone. Currency is simply a value promise for the most part.

  13. Anonymous says:

    CIG asleep at the wheel. Again. zzzzzzzzzzzzzzzzzzzzzzz

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    • Anonymous says:

      Bermuda is so desperate that they are taking silly risks.

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      • StopTheCrime says:

        Cryptocurrency is the future. It’s time for you to start understanding how it works instead of using the same, tired, debunked thinking against it. Bermuda is smart for doing this. Cayman better act quick before it’s left behind.

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        • Anonymous says:

          Yes, and all of our futures are doomed because of this stupid “new world order”.

          • StopTheCrime says:

            The world is always going to be in constant change and you need to learn how to adapt to new technology because fighting it is a losing battle. With big changes comes big opportunities as well. Don’t be the one who draws the short straw. History is littered with people who didn’t adapt.

  14. Anonymous says:

    There is a big difference between “operating with blockchain technology” and selling coins. There’s a lot of the latter and very little of the former. Coins are a promoters wet dream. Have fun!

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    • Anonymous says:

      The entire planet will be operating on blockchain technology within 5 years. Every aspect of our lives will involve blockchain. Please do some research.

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      • Anonymous says:

        I read the comment as being directed towards coins, not the technology.

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      • Anonymous says:

        Young and dumb. Enjoy your
        Youth!

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        • Anonymous says:

          12:17pm.

          You sir is part of the reason that the number of 30something billionaires is rising so rapidly.

          Stay that way – we love you!

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        • Anonymous says:

          12:17pm we understand that you are the keynote speaker at an upcoming Blockchain conference at the Dumbest Hotel entitled “block chain is not the future” sponsored by dumb and dumber! Smh

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        • Anonymous says:

          How were you able to determine my age by that comment? I’m actually 50+ years old and a well informed tech investor. Now clean your dentures and go to bed grandpa.

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      • Anonymous says:

        So what if the entire financial system moves to blockchain? That’s got nothing to do with the ico market.

        • Anonymous says:

          They are just playing with blockchain. so far it doesn’t do anything that something else doesn’t do cheaper, faster and/or safer.

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