Despite having a land area of only around 21 square miles, the fintech scene in Bermuda is one that is ripe for innovation and disruption of the global industry. With a strong regulatory environment, the Bermudan government has identified the country’s opportunity to be a pioneer in the financial technology sphere, attracting the world’s best-structured fintech companies to be a part of the ecosystem.
Edward David Burt MP was elected Premier of the country in July of 2017 as Bermuda’s youngest-ever head of government. Burt is also the minister responsible for fintech, keen to continue the growth of the island’s fintech landscape, as well as promote and develop its long-established strengths and status as a hub for innovation. Only a few months after he was elected, Bermuda formed a blockchain task force to examine both the business development side of things as well as regulatory aspects, highlighting the country’s strong regulation and legislation pathways.
“Bermuda was one of the first countries in the world to introduce a licensing regime for digital asset companies, and in addition to that we continue to advance, with Bermuda known for being a sound regulator,” says Burt.
Government involvement in fintech
As the minister responsible for fintech, Burt stresses that the responsibility to supervise and develop the industry is shared threefold.
“In Bermuda, we have what I used to call the holy trinity, but now I call it the Bermuda Triangle, and what that is, is the relationship between the industry, our regulator and the government. All three of us work to ensure that our financial services marketplaces can advance.
“The government sets the laws, but when it comes to regulating digital asset companies, that is completely independent of the government and is handled by the Bermuda Monetary Authority. The government takes feedback from the industry to use when drafting legislation, which is then implemented by the regulator.”
In terms of the three institutions working together, Burt adds: “Things are working so well in Bermuda. One of the latest changes that we’ve made was in the area of clarifying derivatives and how those can work underneath our regulated environment, something that was requested by industry players to make sure we can have additional growth and expansion for Bermuda products.”
Strong regulatory landscape
The regulatory landscape in Bermuda is strong, with Burt stressing the robustness of their regulation.
“Bermuda is known for being a sound regulator, our Bermuda Monetary Authority is very well respected,” he said.
Bermuda is also one of the only global authorities to implement a legislative framework that encourages the testing and development of technology that could disrupt the financial services industry, not only via a regulatory sandbox but also with a strong, proactive regulatory regime.
“There are only two countries in the world that have regulatory equivalence when it comes to risk matters with both the United States and the European Union, and that is Switzerland and Bermuda.
“So, we are a place that is known by international regulators as a serious contender. Right now, we have 10 regulated companies inside of our space, with more companies going through the process as we speak – some incredibly big names that we can’t wait to announce when they become officially regulated.
“For companies that want to be regulated, Bermuda is the home for them. We enable fintech companies
to do things that they cannot do in other jurisdictions with a well-known regulator, and we believe this will stand us in good stead as we move forward.”
The local market
As a small country, Burt advises that Bermuda often gets excluded from what he calls ‘Fintech 1.0’, the
companies, products and services that are commonplace for consumers in Europe and the US, such as Paypal and Venmo.
“These companies don’t come to countries as small as ours because it doesn’t make sense for them to put in the infrastructure for such a small market,” the Premier said.
Instead, Bermuda encourages homegrown fintech companies in the country to create these solutions locally,
offering an alternative licence to its sandbox level which starts with a slightly lower level of regulatory scrutiny than what is applied to companies in the digital asset spaces.
“Our test licence has a lower application fee and allows locals and others who are looking to test their startups inside this environment to go ahead and see what it is like working with a regulator to build and develop their products, eventually advancing them up to a sandbox license and ultimately a full licence.
“We have a full suite, and we want to be known as the place where companies can come and test and develop their products and services in an environment where a government is willing to work with them to help scale them up.”
Looking to the future
Bermuda’s goals and objectives as a fintech sector over the next five years all revolve around being known and recognised in the global market. As an established hub for fintech that is consistently growing, the
Premier is keen to highlight the country’s role in the industry moving forward as a provider of sound regulation.
“We haven’t been like other countries who have rushed to try and get in the big names because we recognise that inside of this industry that there are people who want to be regulated but not everyone actually wants the scrutiny that a regulator does provide,” Burt said.
“From our perspective, the companies that do want that scrutiny are in for the long haul and recognise the way the industry is moving globally and that need for a well-regulated environment. Those are the types of companies that we’re looking to attract in Bermuda.”
A home for all fintech
Finally, when asked what was the one thing he wanted the global fintech industry to know about Bermuda, the Premier concluded: “Bermuda will be the future of fintech regulation. If you are a company that is serious about wanting to be regulated by an internationally respected regulator that understands digital assets, offers regulatory clarity and a government that will commit to working with you to develop products and services locally, there’s a place for you here.”