The Future Of Digital Assets In The Bahamas

• Published date: 22 April 2022
• Subject Matter: Finance and Banking, Government, Public Sector, Technology, Financial Services, Money Laundering, Fin Tech
• Law Firm: Bahamas Financial Services Board
• Author: Bahamas Financial Services Board

1 INTRODUCTION

1.1 This White Paper sets out a vision and a framework to guide Bahamian digital asset policy between now and 2026. It is a complete policy update and its actions have been informed by The Bahamas' initial success in attracting significant digital asset businesses to set up in the country, and by our vision to transform The Bahamas into the leading digital asset hub in the Caribbean and a global leader in the progressive regulation of businesses in this profoundly innovative space. By this we mean that we will substantially grow the sector by 2025, while ensuring that only well-run, trustworthy, and thriving digital asset businesses, which are able to maintain high standards and sustain the good reputation of The Bahamas, are allowed to operate from the country. The growth of the digital asset sector is seen as a critically important part of rebuilding an economy that has been badly damaged by Hurricane Dorian and the effects of the COVID-19 pandemic.

1.2 The use of digital assets has grown exponentially since the first cryptocurrency, Bitcoin, was launched in 2009, and more strongly since 2017. Digital assets can be said to have gone mainstream globally in 2021 with large banks, investment firms and other financial institutions beginning to invest and trade in them. By November 2021, the total market value of all crypto assets exceeded USD 3 trillion. To date, more than 12,000 crypto assets are traded on exchanges and this number continues to grow daily as new use cases are discovered. Central banks, such as the European Central Bank, the Federal Reserve, the Bank of England, and the Central Bank of China are at various stages of exploring, developing, launching, or trialling Central Bank Digital Currencies (CBDCs). Some Central Banks are exploring cryptography and blockchain technology in the development of their CBDCs. Significantly, on 9th March 2022, President Biden, issued a wide ranging executive order tasking multiple government agencies with developing policy recommendations on digital assets and crypto currencies. Specifically he directed the Secretary of the Treasury to develop and "submit a report on the future of money and payment systems, including the conditions that drive broad adoption of digital assets," This directive clearly indicates the United States intention to explore options for developing its own CBDC and acknowledged that crypto is here to stay.

1.3 Volatility in the value of crypto assets remains high, and...