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Alternative Market Briefing

The Bahamas wants to be best jurisdiction for digital finance

Thursday, September 01, 2022

Christina R. Rolle
B. G., Opalesque Geneva:

The Bahamas has all the elements to grow its role as an international financial centre, said Christina Role, executive director of the Securities Commission of The Bahamas during Opalesque's latest Roundtable.

"If you take The Bahamas' approach and positioning with respect to the enactment of the Digital Assets and Registered Exchanges Act 2020, as an example, you can clearly see that we, as regulators, took the time to speak with industry, to understand the needs of operators and more importantly to understand where regulation can play a much needed role for the protection of consumers and investors."

The one advantage the jurisdiction has over others, she says, is the depth of knowledge in digital assets. It boasts a great number of experienced financial services professionals who are able to understand and apply sound principles in the areas of compliance, custody, banking, etc. that transcend any particular product or asset class.

The government itself is committed to the growth of financial services in the digital asset space. In a bid to tap into the world of cryptocurrency, Prime Minister Philip Davis presented a policy white paper to the House of Assembly in April.

"Digital assets are a remarkable opportunity for our country," he said then, "an opportunity to leverage and build on our world-class financial services expertise, diversify our economy, engage a whole new generation of Bahamians, and lead the way in innovation. Digital assets are going to have a transformative impact across the globe and we believe that The Bahamas -- and Bahamians - can be at the vanguard of this new frontier."

The Bahamas will be the best jurisdiction for cryptocurrency digital assets, says Valdez Russell, one of the Roundtable's participants and president at FTX Digital Markets, a locally-based company. "At the core, we see ourselves as a catalyst for change while also being a champion for The Bahamas as the clear and compelling choice for financial services." This year's Crypto event, which FTX helped organise, attracted over 2000 people.

The reason why the Bahamas has become a strong player in the digital assets space is, in fact, Regulation, Rolle adds. Not just the regulatory framework, but the approach to the regulatory framework.

"The Bahamas took the approach that as opposed to trying to address crypto assets in a very shallow bucket as securities - we decided to put crypto assets in its own framework, essentially treating it as its own asset class. This approach allows us to address the complexity of products we see being developed in the space without being confined within the perimeters of taxonomies and legal frameworks that were developed for traditional finance."

Not a tax haven

"In addition to our innovative thrust, The Bahamas has done and continues to do substantial work to ensure that we reset the outdated and inaccurate "tax haven", "non-compliant" narrative," says Christina Role. "It is important to us that the jurisdiction not only keeps pace with but, anticipates international best practices and is viewed globally as best in class with respect to our regulatory framework."

The Bahamas has long been viewed as a tax haven, and despite efforts to shed off the branding, some of its low tax systems are still attracting banks in drove, maintaining the unwanted reputation.

In 2010, the Bahamas was removed from an OECD "gray list" of countries that have not fully implemented internationally agreed tax standards. It was moved onto the "white list" of nations which have substantially implemented tax and information standards set by the OECD and G20. Seven years later, the Atlantic archipelago signed a multilateral convention with the OECD and became the 116th jurisdiction to join the world's leading instrument for boosting transparency and combating cross-border tax evasion. In July last year, the government agreed in principle to adopt the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (IF) two-pillar solution to address the tax challenges arising from the digitalisation of the economy. Shortly after, the Bahamas was still listed in a report by the EU Tax Observatory as one of 17 "tax haven" jurisdictions, reported the Nassau Guardian. There is still work ahead.

You can read the full 2022 Bahamas Roundtable report here.

Related articles:

16.Jul.2021 Opalesque Exclusive: The point of CBDC
06.Jul.2021 Opalesque Roundtable: The Bahamas continues modernising to welcome businesses and remote workers

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