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How EY can help
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The EY region of the Bahamas, Bermuda, British Virgin Islands and Cayman Islands is aligned with EY’s Americas Financial Services Organization, headquartered in New York.
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Our portfolio of high-demand services is designed to address your cyber and privacy regulatory compliance requirements in a holistic and impactful way.
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Our portfolio of high-demand services is designed to address your cyber and privacy regulatory compliance requirements in a holistic and impactful way.
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Our digital solutions can help your clients solve bigger and more complex end-to-end business transformation challenges.
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The Bahamas, Bermuda and the Cayman Islands are all early movers in crypto regulation, signaling their intent to embrace the new digital economy. Bermuda, with the passing of the Digital Asset Business (DAB) Act in 2018, created one of the first FinTech-specific regulatory regimes. The Cayman Islands, with its Virtual Asset (Service Providers) (VASP) Act, and the Bahamas, through its Digital Assets and Registered Exchanges (DARE) Act, passed their legislation in 2020. Accompanying the legislation in each jurisdiction is a consistent “voice campaign” from senior officials, articulating their current and future intent to embrace the new digital economy.
Each of these jurisdictions provides a long-established international business environment, offering sophisticated financial and legal services that support the effective functioning of these young digital business regimes.
The blockchain and distributed ledger technology at the root of virtual assets has the potential to disrupt the entire financial services landscape. In the Bahamas, Bermuda and the Cayman Islands, financial services innovators are already taking advantage of the progress made, and the environment can be characterized as one of rapid growth relative to the technology.
Background of virtual assets regulation
Consumers and businesses have increasingly evolved to capitalize on the promise of decentralized finance solutions, since the launch of the bitcoin network in 2009. In recent years, crypto assets have attracted growing allocations from institutional investors and venture capital sources, helping to drive up the market capitalization of cryptocurrencies to over $3 trillion at its peak.
Blockchain technology has the capability to transfer value around the world quickly and efficiently. Traditional banks, faced with the prospect of disruption of their business models, are having to adapt, and some are building out trading and custody solutions for crypto assets to meet growing customer demand.
Beyond cryptocurrencies, a developing trend is tokenization, the movement of real-world assets, such as real estate, commodities or licenses for content use, onto the blockchain. Tokens reflect full or partial ownership of an asset, with provenance enhanced by blockchain’s irrefutable transaction history.
With its enhanced security, built-in record-keeping and transferability, tokenization has significant advantages over traditional means of holding and transferring assets. Its capacity for creating units representing ownership of a small fraction of an asset could open the door to a broader investor base, for example allowing investors to own a $1,000 stake in a hotel or an apartment block. Tokenization, if combined with efficient exchange mechanisms, may significantly improve the liquidity of assets traditionally regarded as illiquid.
Tokens can be fungible or non-fungible. Fungible tokens can be divided or exchanged for an identical item. Non-fungible tokens (NFTs) represent something unique, whether it be an item of sports memorabilia, a piece of digital artwork such as a video, a ticket to a venue or event, or a plot of land in a game’s virtual world.
For asset managers in the Cayman Islands, one of the world’s leading hedge fund hubs, tokenization offers opportunities to increase investor participation and expand the universe of investable assets.
Another strengthening trend is the wide interest in Central Bank Digital Currencies (CBDCs), digitized forms of fiat currencies. Over 86% of the Central Banks, including the United States, the United Kingdom and China, are exploring or piloting CBDCs. That being said, the Bahamas was the first mover, having launched the world’s first CBDC, known as the Sand Dollar, in October 2020.
The Central Bank of the Bahamas achieved a pivotal milestone in March 2022, when it completed the initial integration of the Sand Dollar with the Bahamas Automated Clearing House system. In practical terms, this allows Sand Dollars to be transferred from digital wallets to any deposit account held at a Bahamian clearing bank, effectively bridging the gap between the digital currency and the real economy.