By YOURI KEMP
Tribune Business Reporter
A former Caribbean attorney general is urging The Bahamas to "get into that race" of digital currency regulation as a means to overcome its traditional challenges with economic scale.
John McKendrick QC, Anguilla's ex-top law enforcement officer, told Tribune Business that The Bahamas should use its Central Bank Digital Currency, the Sand Dollar, as a platform to establish a regulatory framework for initial coin offerings (ICOs) and digital assets such as crypto currencies.
He warned, though, that this nation could not afford any delay in targeting this space because rivals such as Bermuda and Gibraltar were already doing "an extraordinary job" of selling their jurisdictions to digital asset promoters and investors.
Speaking to this newspaper at last week's Arbitration and Investment Summit, Mr McKendrick said Project Sand Dollar had become the "second digital currency in the region". He added: "The first one is the Eastern Caribbean Central Bank, the ECCB, which issued a digital Eastern Caribbean dollar that has been quite successful.
"But it's fascinating to see The Bahamas has done that. When I was the attorney general of Anguilla we issued something called the Anguilla Utility Token Act, which was the first Caribbean attempt to regulate the issuing of utility tokens.
"I think from a regulatory perspective, as a lawyer, regulating Fin-tech (financial technology) is a challenge and there are risks, but regulating regular financials services is also challenging and we mustn't be put off by not understanding the technology behind Fin-tech. We must embrace it."
The Bahamas has several pieces of legislation in the pipeline to accomplish the objectives suggested by Mr McKendrick. The Securities Commission is aiming to complete a second round of consultation on the Digital Assets and Registered Exchanges (DARE) Bill early this year, while the government is also working on legislation to regulate blockchain technology and encourage innovation in this space.
Asked what The Bahamas' next move should be, Mr McKendrick added: "They have to consider how they can use the digital currency to generate further commercial activity in the country, and what would be interesting is if the regulators - once they have some experience in regulating that currency- can think about whether they can regulate larger currencies beyond The Bahamas.
"Would you consider some form of regulation of crypto-assets backed by a non-Bahamian currency because that would attract a lot of commerce and business to the country, and that's really the way forward."
Mr McKendrick added that while "the international appeal of a Bahamas digital currency is possibly limited", this nation could "bring in the investors behind the established virtual currencies like Bitcoin and Ethereum if you could find a way of regulating them from here".
"That's what we were trying to do in Anguilla," he added. "We were trying to regulate utility tokens, and people who are offering utility tokens want to be regulated because that establishes customer confidence."
While acknowledging that "the legislation was challenging," Mr McKendrick said "you have to get out there and promote it and sell it" to gain a competitive economic advantage.
"What The Bahamas must do is that now they have taken these steps with a digital currency and regulating crypto-assets, they must now get out there and market it," he argued. "That's very important because some of these other smaller jurisdictions are doing a very good job.
"If you look at what Gibraltar is doing and what Bermuda is doing, they have done an extraordinary job in selling their regulation of initial coin offerings and crypto-asset regulations. The Bahamas must get into that race, because it will generate economic utility.
"One of the great things of regulating crypto-assets is all the economies of scale that go against smaller Caribbean island jurisdictions don't matter because you are doing everything on your telephone or your laptop. So there aren't those normal costs of doing business that run against the Caribbean," Mr McKendrick continued.
"I just think this is a great opportunity for The Bahamas, and they just have to get out there and sell it because it can generate a lot of income in the islands."