Bermuda, Malta, Gibraltar, and Liechtenstein Lure Cryptocurrency Companies

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Regenerative Finance 101: A Guide to Crypto’s ReFi Movement

Last year’s bitcoin price surge led to renewed interest in the cryptocurrency market, with investors and enthusiasts making haste to cash in. However, it also laid bare the potential for widespread abuse within the growing market.

Hacks, scams and suspicious price manipulation practices ran rampant, sending governments across the world into panic mode, as the U.S., Japanese and Chinese governments, among others, scrambled to reign in the new fad.

Digital currencies had opened up a new frontier and their multi-faceted nature and underpinning decentralized blockchain technology makes them hard to regulate. Naturally, many governments were ill-prepared.

The new challenge prompted countries such as the United States and China to enact legislative cryptocurrency policies aimed at curtailing unauthorized Initial Coin Offerings and money laundering, rather than stimulate the growth of the industry.

One of the first moves by the U.S. government was to warn investors of the inherent risks of investing in Initial Coin Offerings.

This was through The Securities and Exchange Commission (SEC), while it attempted to lay the foundation for a comprehensive regulatory framework.

The Commodity Futures Trading Commission was the first U.S. agency to allow public trading of cryptocurrency derivatives.

In regard to Initial Coin Offerings, none have so far been approved by the SEC. As such, it is hard for cryptocurrency companies seeking to raise funds to do so in the United States.

The Appeal of a Friendly Market

And now, more of them are gravitating towards countries such as Bermuda, Malta, Gibraltar, and Liechtenstein, which are luring in industry players with market-friendly regulations.

They allow firms to reap the financial and geopolitical benefits that come with a global capital-friendly jurisdiction, as opposed to the enforcement-heavy approach adopted by the United States.

Crypto agencies in America are largely only given two fundraising options. The first is to issue tokens through a highly restrictive process such as registering as a security, which restricts resale, and has a limited customer base.

The second is applying for a Regulation D exemption claim, which is hard to acquire. The third option is to simply leave the United States.

The situation in China is no better. The 2017 cryptocurrency frenzy led many enthusiasts and hodlers to invest their life savings in digital currencies in anticipation of a price upsurge.

This was with little regard to the marauding fraudsters looking to cash in on the hype. Consternation, coupled with the highly unregulated and speculative nature of the market, prompted a swift ban on cryptocurrency trading in the country.

Binance, the world’s largest cryptocurrency exchange company, which has its roots in China was forced out. Today, its headquarters are in Malta.

The Cryptocurrency Market In Smaller Countries

Malta has been warming up to blockchain and cryptocurrency venture companies for some time now.

On July 4, 2018, it passed bills aimed at regulating Distributed Ledger Technology (DLT), making it the first nation in the world to lay out a comprehensive regulatory framework for the industry.

Bermuda is another country that is positioning itself as a major crypto hub. It recently passed a law enabling fast approval of ICOs and will soon allow cryptocurrency exchanges to operate in the country.  

According to the country’s Minister of National Security, Wayne Caines, who had a conference with the business community in April, the country was receiving a sizeable number of requests from fintech and cryptocurrency companies looking to set up base on the island nation.

Lydia Dickens, senior manager of Government’s Business Development Unit pointed out that the main concern among crypto companies was legal uncertainty. According to her, they wish to carry out business without having to face jail time for doing so. Consumer protection is also key to the process.

Bermuda passed the Initial Coin Offering legislation on 27 April 2018. It came into effect on 10 July, 2018.

According to iCash cryptocurrency founder, Will McDonough, Bermuda is an especially attractive destination for fintech startups because it has experience in international finance. The government is also willing to listen to the business community.

Gibraltar is also moving full steam ahead to vie for the cryptocurrency industry space, and is working on legislation that will allow trading and issuance of trade digital tokens. 35 companies have already applied for a blockchain permit.

In the case of Liechtenstein, it is still rolling out laws pertinent to the industry. It has to date only allowed five ICOs that have raised about $37.5 million.

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