Bahamas Sets Sights On Becoming Crypto Hub

April 25, 2022
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The government of the Bahamas, home of the Sand Dollar, has published a white paper detailing its digital asset strategy up to 2026, including information on how citizens can pay tax with digital assets.

The government of the Bahamas, home of the Sand Dollar, has published a white paper detailing its digital asset strategy up to 2026, including information on how citizens can pay tax with digital assets.

Enabling access to digital assets for Bahamians in B$ and encouraging greater use of Sand Dollars, the central bank digital currency issued by the Central Bank of The Bahamas (CBB), is a priority for the government, a new report says.

The white paper has been developed as a method for the Bahamas to use digitisation and, in particular, crypto-assets as a form of soft power that can bring prosperity to the island. “This expansive digital asset policy framework will enable the Bahamas to create a vital opportunity to tackle some of our economic challenges and provide jobs and prosperity for Bahamians,” the government said.

“We will work with the Securities Commission of The Bahamas, the CBB, and the private sector on ways to enable Bahamians to access digital assets with B$, and for Bahamians to pay taxes using Sand Dollars,” the white paper notes.

“We will also seek to promote wider use of Sand Dollars in commerce on the islands.”

The Bahamas has been keen to become a crypto-asset leader for sometime.

It made history in 2020 when it became the first jurisdiction to issue a CBDC. The Sand Dollar went from pilot to national rollout in October of that year, becoming available to all citizens.

The sole purpose at present for the Sand Dollar is to help facilitate payments, with the government having stepped away from allowing it to become an investment vehicle.

Alongside its CBDC, the Bahamas was one of the first jurisdictions to introduce a regulatory framework for private digital assets, in the shape of the Digital Assets and Registered Exchanges Act (the DARE Act).

It also established safeguards for the custody of digital assets in the Financial and Corporate Service Providers Act. Both came into force in 2020.

The white paper has now committed to, where necessary, clarifying and expanding the scope of the current legislative framework, and the DARE Act in particular, to “continue to safely regulate digital assets and digital asset businesses”.

An island of prosperity

In addition, the government has stated that it wants to improve the attractiveness of the Bahamas as a well-regulated jurisdiction where well-run digital asset businesses, of any size, can operate, grow and prosper.

In particular, the government is keen to explore opportunities related to decentralised finance (DeFi) and non-fungible tokens.

The latter is a type of crypto-asset that policymakers have yet to grasp internationally, although the UK’s finance ministry recently committed to minting one.

The Bahamas is also set to follow in the footsteps of countries including Spain, the UK and Singapore, by introducing new laws regarding crypto-asset promotions.

“Unfettered promotion of digital assets, such as unfairly balanced or biased statements and the use of social media influencers, is a growing concern globally,” the white paper says.

“We will review whether there is need for controls to be implemented on the marketing and promotion of digital assets and digital asset businesses. It is important to adhere to and adopt international standards for financial consumer and investor protection.”

Sustainability is another key component in the Bahamas’ crypto-driven future.

“We will consider the feasibility of introducing incentives for digital asset businesses that prioritise more energy efficient digital assets (such as those using proof-of-stake mechanisms) over those that are less energy-efficient (such as those using proof-of-work).”

Meanwhile, to help mitigate the effects of greenhouse gas emissions, the government will explore the feasibility of establishing a system of carbon credits and a Caribbean carbon market using distributed ledger technology (DLT) and operating within the Bahamas’ digital asset regime.

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