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FTX bankruptcy jeopardizes Bahamas’ digital assets hub dream, says lawyer

While Prime Minister Philip Brave Davis insists The Bahamas’ reputation will survive the FTX fallout, Partner in law firm Berliner Corcoran and Rowe LLP Bruce Zagaris told the Wall Street Journal (WSJ) in a recent interview that the cryptocurrency exchange’s bankruptcy has jeopardized this country’s move to become a leading digital assets hub.

Zagaris, who the WSJ said has worked on Caribbean financial services matters as well as white collar crimes, also contended that FTX chose to open its cryptocurrency exchange in The Bahamas because it expected that the regulatory regime would not be “harsh”.

“Before a company, especially if it’s going to be a digital exchange, puts its headquarters in a country… [they establish it] once they have certainty about how that country is classifying all these different products,” Zagaris said.

“The Bahamas regulatory regime is not as harsh, so most likely FTX was hoping or maybe even expecting that The Bahamas would not harshly implement its DARE (Digital Assets and Registered Exchanges) Act.

“It’s very helpful if you’re a company like FTX and you want to attract US business and you want to do business in the US, but yet you don’t want to be subject to all the regulation and the tax regime.

“The fact that The Bahamas attracted the number three digital exchange and it quickly went from success to bankruptcy, has jeopardized the new product and the new innovation that The Bahamas has undertaken, unfortunately.”

When he finally addressed the FTX matter in the House of Assembly last week, Davis completed his remarks with the contention that the The Bahamas will emerge from the FTX debacle with an improved reputation.

“I have every confidence that The Bahamas will emerge from the proceedings involving FTX – proceedings taking place here as well as in other jurisdictions – with an enhanced reputation as a solid digital assets jurisdiction,” said Davis.

However, much of the conversations about The Bahamas and its bid to become a leading digital assets jurisdiction that have come from outside The Bahamas, have criticized this country’s handling of FTX.

Some of the pundits who have pontificated on this country’s regulatory regime for companies like FTX, speak as if this country has no regulatory regime at all.

Chief Executive Officer of Castle Hall Diligence Chris Addy said last week that while The Bahamas has robust and innovative legislation to police the digital assets space, he insists regulatory entities as small as the Securities Commission of The Bahamas (SCB) do not have the required manpower to maintain “a fully forensic and vigorously intrusive regulatory environment”.

Addy, who was part of a webinar last week that focused on what went wrong with FTX, said regulators the size of the SCB are typically not in a position to effectively police an organization with billions of dollars of assets under management and a million or so customers.

Chairman of the Progressive Liberal Party and Minister of Foreign Affairs and the Public Service Fred Mitchell released a voice note yesterday contending that the opposition party is attempting to use the FTX matter to “sully” the reputation of The Bahamas for political gain.

Mitchell said in his note that “There is nothing unusual about this FTX matter, except maybe the size of the figures.” He also insisted that American pundits have no right to criticize the handling of the FTX matter when their country has overseen some of the worst financial scandals.

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Chester Robards

Chester Robards rejoined The Nassau Guardian in November 2017 as a senior business reporter. He has covered myriad topics and events for The Nassau Guardian. Education: Florida International University, BS in Journalism

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