British Virgin Islands

Tuesday, Mar 09, 2021

Bermuda Will Trial Digital Dollar for Rum Sales

Bermuda Will Trial Digital Dollar for Rum Sales

In Bermuda, you may soon be able to use digital dollars to buy rum.

Canadian fintech firm Bidali announced Thursday that, with the support of the Bermuda government, it has launched a pilot to test a digital Bermuda dollar. Under the pilot program, popular local rum company Gosling’s Limited will be accepting digital Bermuda dollars through the Stellar network. In other words, people will be able to buy rum with digital dollars.

The pilot is the latest development in Bermuda’s plan to create a comprehensive crypto payments system that uses a digitized version of the Bermuda dollar. The initiative has been underway since 2018, when Bermuda launched its licensing regime for crypto and blockchain fintech firms in the country.

According to the announcement, the first phase of the project will be coordinated by Penrose Partners, a Canadian and Bermudan emerging technology consulting firm.

“With this pilot we’re looking forward to seeing people get hands-on experience with this technology and start to realize the benefits. From there we hope to expand to other businesses in Bermuda,” said Eric Kryski, Bidali’s chief executive.

Denis Pitcher, chief fintech adviser to Premier E. David Burt, explained that Bermuda, a British island territory in the North Atlantic Ocean with a population of around 64,000, does not have a central bank or the necessary expertise to issue the type of government-issued digital currencies countries like China are developing.

Bermuda also does not have access to payment platforms that are typically taken for granted in other countries like PayPal or Square, Pitcher said. Under these conditions, existing crypto systems can help connect Bermudans with the global financial system.

“Our aim is to try and get the Bermuda dollar digitized on every public blockchain. Then, the markets and citizens will figure out what the best solution is,” Pitcher told CoinDesk.

To that end, Bermuda invites fintech firms from all over the world to come experiment and help build a digital payments network in the country.

“What we really resolved to do is to try and attract players to demonstrate their technology on the island,” Pitcher said.

A number of initiatives are already underway. A year after Bermuda launched the blockchain regulatory framework to attract businesses to the country, it started work on a pilot for a blockchain-based digital ID solution.

Since the Bermuda dollar is pegged one-to-one to the U.S. dollar, Pitcher said that it made sense to attract firms that excelled in stablecoin applications. In 2019, the government announced Bermudans could pay taxes with USDC stablecoins, a cryptocurrency pegged to the U.S. dollar. USDC is issued by the CENTRE consortium of crypto exchange Coinbase and Circle Pay, a Boston-based company that is one of eight digital assets firms licensed in Bermuda.

In 2020, Bermuda piloted a digital stimulus token to distribute funds to citizens during the coronavirus pandemic. According to Pitcher, the 2020 stimulus token project was dedicated to experimenting with the Liquid network, while the new digital dollar pilot works with the Stellar network.

“There’s not going to be one unifying solution that’s going to be optimal for every problem. It’s more likely to be that there will be different blockchains that will solve different use cases or different problems,” Pitcher said.

‘Many moving parts’
Although Bermuda is moving forward with the project, Pitcher admits that progress is slow due to a number of challenges.

Integrating payments systems with banks and just getting banks on board has been a challenge, Pitcher explained. Bermuda’s strict licensing regime means companies have to work towards meeting the standards of the country’s financial regulator.

“One of the big challenges we have is, since we have roughly $3 billion in debt, every dollar that flows in basically flows out immediately. So it becomes a management challenge,” Pitcher said.

Despite the various obstacles, Bermuda is forging ahead.

“It’s not our position to say which tech is going to solve the problem. It’s our position to look at what are the risks and how we make sure they’re managed. … Your customers may want to be able to pay in USDC or they may want to pay in a variety of assets. So it’s about enabling that kind of choice,” Pitcher said.

Source: Fintechs.fi – Fintech News

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