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The Eastern Caribbean Central Bank (ECCB) is the monetary authority for eight island economies in the Eastern Caribbean Currency Union that use a common currency known as the Eastern Caribbean dollar—Anguilla, Antigua and Barbuda, the Commonwealth of Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. On March 9, 2018, the ECCB signed a memorandum of understanding with the Barbados-based financial technology company Bitt Inc. agreeing to participate in a pilot program that will enable it to issue a digital currency. Expected to start at the end of 2018, the pilot will specifically involve
the development of a digital Eastern Caribbean Dollar using distributed ledger technology with a blockchain platform specifically designed for a safe and secure digital financial ecosystem. Essentially, it would be a proof of concept, designed to demonstrate the viability and functionality of the ECCB issuing Digital Eastern Caribbean Dollars.
The ECCB will work closely with Bitt Inc. to
develop, deploy and test technology which focuses on data management, compliance and transaction monitoring system for Know Your Customer, Anti-Money Laundering, and Combating the Financing of Terrorism… The pilot will also focus on developing a secure, resilient digital payment and settlement platform with embedded regional and global compliance; and the issuance of a digital EC [Eastern Caribbean] currency which will operate alongside physical EC currency.
While this summarizes the regional effort to adopt a common digital currency, national efforts by ECCB member states to deal with emerging cryptocurrencies are discussed below, along with the efforts of other Caribbean countries that are not participating in the ECCB pilot.
The Anguillan government announced at the end of 2017 that it would introduce legislation, known as the Anguilla Utility Token Offering Act (the AUTO Act), to regulate initial offerings of certain types of cryptocurrencies (ICOs). The government has noted that some types of tokens are considered to be securities, and thus are already regulated under the existing securities framework, but that
there remained a large swath of non-security tokens with no clear guidance as to where they would fit in the emerging blockchain economy. Therefore, we focused our efforts on creating a safe and effective regulatory framework for non-security token offerings, which appear to represent a majority of the current capital raising activity within the blockchain community.
The new legislation will serve to provide a regime for Anguillan entities to register in order to conduct an offering of non-security tokens, which are tokens that do not have the same features securities do, but that “have one or more ‘utility’ features within the issuer’s current or proposed blockchain platform.”
The AUTO Act is structured in a way to regulate utility tokens, while avoiding the burden imposed by securities regulations and the “higher levels of regulatory scrutiny that would have to take place were the tokens to fall under securities laws.” As such, utility tokens are categorized as those that may be redeemed for consumer goods or services, rather than a share in profits or an interest in technology connected to the offering.
In order to become registered, the entity must put together a “white paper,” along with its disclosure documents, which must undergo a technical and legal review that must include information about the companies structure, location, business status, description of the project, a technical and legal description of the tokens that will be offered, how any proceeds made will be used, and anti-money laundering provisions along with any risk factors present for purchasing the tokens. The Anguillan government will financially benefit from the legislation by collecting a registration fee, along with a “1.5 percent levy on the total amount raised by a token offering.”
The government of Anguilla has stated as follows:
We believe this new AUTO Act will help Anguilla become the leader in establishing best practices for cryptocurrency offerings, to protect the people of Anguilla and the participating public… We believe the AUTO Act would be a significant step in the right direction, to provide clearly defined rules and increased safety for the blockchain community.
On December 13, 2017, the Executive Council of Anguilla stated that officials should formulate a regulatory regime for Utility Token Offerings that would be submitted to the Governor. No further information about the status of this bill has been located.
Anguilla has also signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency.
Antigua and Barbuda
Antigua and Barbuda currently does not have any legislation that specifically regulates the use of cryptocurrency. Newspapers on Antigua and Barbuda have reported that the government of Antigua has instructed its Attorney General to “draft laws for the implementation of bitcoin.” No specifics or further information on this reported proposed legislation was located.
The government of Antigua and Barbuda has reportedly permitted the funding of projects and charities in the country through an Initial Coin Offering for Development by selling a state-supported (not state-sponsored) Antigua and Barbuda Development Coin, based on the Ethereum cryptocurrency. No further information on this offering via a government source was located.
Antigua and Barbuda has signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency.
The Bahamas does not have any legislation that specifically applies to cryptocurrencies. Regulation of cryptocurrencies in the Bahamas currently varies according to whether the currency is considered to be a security, currency, or commodity. Despite not having legislation specifically designed to addresses cryptocurrencies, the Central Bank of the Bahamas has stated that regulations it issued in 2017, which provide a framework for a system of national electronic payments services, also apply to cryptocurrencies. The regulations “apply best international standards for the provision of local payments services” and define “electronic money” as
electronically stored monetary value as represented by a claim on the issuer, which is issued on receipt of funds for the purpose of making payment transactions and which is accepted as a means of payment by persons other than the issuer, and includes monetary value stored magnetically or in any other tangible or intangible device (such as a SIM card or software).
The Central Bank further stated that converting instruments in and out of the Bahamian currency would be governed by Exchange Control Regulations, and that “[t]he Securities Commission of The Bahamas would reserve the right to supervise any non-payments aspect of crypto currency operations domiciled in The Bahamas.”
The Bahamas is actively looking at developing blockchain technology to use on the Island to help create efficient and simplified transactions. Specifically, the government has noted that “[t]he Bahamas is also currently developing programs for block chain-based solutions, fin-tech and crypto-currency companies, and we intend to promote block chain as a sub-industry within ICT.”
The Bahamas is in the process of considering a bill that would bring virtual currencies within the ambit of the proceeds of crime legislation. Clause 2 of the bill defines “virtual currency” as
a digital representation of value which can be digitally traded and functions as – (a) a medium of exchange; (b) a unit of account; or (c) a store of value, that does not have legal tender status or carry any security or guarantee in any jurisdiction.
If enacted, the bill’s provisions on money laundering and counterterrorism financing would apply to cryptocurrencies.
It also appears that the Bahamas might act to both bring cryptocurrency exchanges within the remit of the Central Bank of the Bahamas and introduce a “digital version of the Bahamian dollar.”
Barbados does not appear to have any laws that specifically regulate cryptocurrencies. In 2015, the Central Bank of Barbados (CBB) issued a paper that discussed whether cryptocurrencies should be included in its portfolio of international reserves, but it does not appear to have acted to do this.
Barbados is home to Bitt Inc., the financial technology startup that has signed a Memorandum of Understanding with the ECCB to launch a pilot of blockchain technology, which will enable eight Caribbean countries to test the use of cryptocurrencies alongside their national currencies. While Barbados is not a party to this Memorandum of Understanding, there have been reports that Bitt Inc. is to create a digital Barbadian dollar that would be tied to the value of the country’s physical currency, but the government has not yet issued a statement on this subject.
British Virgin Islands
The British Virgin Islands has yet to issue any guidance that applies to cryptocurrency and does not appear to have legislation or regulations that specifically apply to this area, with the government instead appearing to opt for a wait-and-see approach. One commentator has noted that its existing laws appeal to companies that wish to do initial coin offerings (ICOs), and a number of companies have already registered under the country’s company laws and then conducted ICOs.
The Cayman Islands appear to have a fairly flexible regulatory environment for cryptocurrencies and blockchain technologies. While there appears to be no specific legislation geared towards regulating cryptocurrencies, there are laws that in certain circumstances may be applicable. These include the Securities Investment Business Law (2015 Revision), Anti-Money Laundering (AML) Laws and regulations, Money Services Law (2010 Revision), and Electronic Transactions Law (2003 Revision). Lawyers Chris Humphries and James Smith predict that
more-specific legislation will eventually be created although, for the time being, the regulators and lawmakers in the Cayman Islands are keen to avoid rushing through any legislation before the potential benefits and pitfalls of blockchain technology, cryptocurrencies and ICOs are properly understood.
On January 29, 2018, Cayman Islands’ Premier, Alden McLaughlin, reportedly spoke at a leading blockchain conference called “d10e” where he encouraged blockchain companies to establish themselves at Cayman Enterprise City, a “special economic zone that caters to tech-related entities.” Cayman Enterprise City CEO Charlie Kirkconnell stated at the conference that some fifty blockchain companies have established or are in the process of establishing themselves in the zone.
On March 14, 2015, Dominica was reportedly scheduled to host an event, officially titled “The Bit Drop,” which was meant to put bitcoins into the hands of Dominica’s entire population, reported to be 70,000 people, but the project was cancelled. According to Dominica News Online, organizers indicated that they did not receive enough support from the government on the event, and an election cycle may have “complicated matters.”
More recently, Dominica signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency.
The Dominican Central Bank has indicated that virtual currencies are not backed by the Bank and are not legal currency under Dominican law. Thus, financial institutions authorized to operate in the country may not engage in transactions that use these currencies, and individuals who acquire them or accept them as payment do so at their own risk.
Grenada does not have any specific legislation to regulate cryptocurrencies. It has, however, signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency.
In a press release issued on February 5, 2018, the Bank of Jamaica warned the public to “exercise caution in the use of virtual currencies (cryptocurrencies) given the associated risks and the absence of appropriate governance and consumer protection arrangements,” according to the Jamaica Observer. While noting the advantages of virtual currencies in potentially promoting “financial inclusion,” the Bank warned that
…the following risks need to be taken into consideration:
- Virtual currencies are not legal tender in Jamaica.
- Bank of Jamaica neither issues nor backs virtual currencies.
- Virtual currencies are not foreign currencies as there is no monetary authority that issues or backs them.
- Bank of Jamaica does not regulate or supervise virtual currencies.
- Bank of Jamaica has not authorised any entity to operate a virtual currency platform.
- Transactions in virtual currencies, such as bitcoin, are susceptible to abuse by criminals and may facilitate money laundering and the financing of terrorism.
Montserrat does not have any specific legislation to regulate cryptocurrencies. It has, however, has signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside its national currency.
Saint Kitts and Nevis
Saint Kitts and Nevis does not have specific legislation to regulate cryptocurrencies. However, it has signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency.
While the country has no specific legislation on the subject, the Saint Kitts and Nevis Citizenship by Investment Unit (CIU) reportedly issued a statement in June 2014 that it would not accept digital currency as a means by which applicants for citizenship through the Citizenship by Investment Program could participate in the program. “We further emphasize that we do not accept Bitcoins, have never accepted Bitcoins, and will not accept Bitcoins,” the CIU was quoted as saying.
Saint Lucia does not have specific legislation to regulate cryptocurrencies. However, it has signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency.
Saint Vincent and the Grenadines
Saint Vincent and the Grenadines does not have any specific legislation to regulate cryptocurrencies. It has, however, signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside its current national currency.
Trinidad and Tobago
A February 24, 2018, news article reported that the Trinidad and Tobago Finance Ministry has distanced itself from a recent digital currency offering, and in clarifying its position emphasized in a statement that “the Commission, has not as of this date approved any Initial Coin Offering.” According to the article, the Commission’s statement also identified the following risks and urged the public to exercise caution:
- Heightened potential for fraud – the fact that the products and those selling them may in some cases not be subject to regulation, [may] expose the investors to fraud;
- Cross-border distribution risks – the issuer may be operating the ICO from outside of the investor’s jurisdiction, therefore, following the money in the event of a collapse of the ICO as well as recovering invested funds, may prove extremely difficult [for the investor];
- Information asymmetry – investors may not be able to understand the risks, costs and expired returns . . . arising from their investment;
- Liquidity risks – In some jurisdictions, cryptocurrency exchanges may also be unregulated and operate without oversight. Thus leaving investors vulnerable to dramatic price changes and possibility that they may not be able to exit their holdings (funds invested)…
Based on the foregoing, the Ministry of Finance advises members of the public to exercise caution when engaging in any form of investment and when in doubt, seek the advice of the Regulatory Bodies – The Securities and Exchange Commission and/or the Central Bank of Trinidad and Tobago.
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