I wrote a short article three weeks ago “Binance CEO Changpeng “CZ” Zhao Lands in Barbados Today & What It Means for Caribbean Crypto & Fintech Industries.” and it sparked some great conversations on Linked in. Below are three answers I wanted to share with you.
The first is from David Palmer – Global Vodafone Business Blockchain Platform Innovator Lead
He said: “Very interesting to see the centralized crypto exchange Binance now in Barbados for talks, and this after TRON won a government deal with Dominica and all this after the recent collapse of FTX, which was based in the Bahamas. (Thanks for this article Ingrid Riley)
Why are centralized crypto exchanges located on small Caribbean islands?
Could the power of centralized crypto exchanges versus small indebted governments lead to too much relative power for these exchanges? The market capitalization of Binance is $19,014,856,231, while the market capitalization of all shares of all securities traded on the Barbados Stock Exchange is US$2.44 billion and the GDP of Barbados was $4.9 billion in 2021
Will the exchanges located in these countries really bring employment, investment and growth? What are the broader policy implications?
Are the movements in the Caribbean just a symptom of inadequate regulation or unfriendly regulation in larger countries like the US, the EU?
At the beginning of my blockchain journey, I never thought there would be so much focus on cryptocurrency trading and a lack of focus on the underlying protocol, project and valuation based on the protocol’s profitability and potential. Instead, crypto is treated as just another speculative and risky asset class, packaged and traded for profit in the same way as other assets from the financial markets, all facilitated by crypto exchanges.
I believe that blockchain and Web3 technology has the potential to significantly change the world in a positive way, however, I also believe that while the focus remains on turning protocols into financial products for speculation, many good protocols may be lost in the process, or even worse they may never get the capital to start.
Could the real potential growth for countries like Barbados be to focus on providing a friendly incubator environment for protocols rather than focusing on exchanges?
Then Jonathan Brathwaite – General Counsel at FlatStone Capital Advisors
“Crypto exchange and digital asset businesses will surely migrate to Barbados and other Caribbean islands.
In the UK, people earning over 125kGBP – are subject to 60% plus income tax. What do you think these people will do? Stay in the UK and high tax countries and be taxed into poverty? No.
Small open economies are above all agile. They can adapt more quickly and are used to surviving without largesse and without much help. Small open economies do not and have never had huge expenditures and endless unfunded liabilities.
As digital technology, the Internet and the network economy advance, small island open economies will continue to experience growing demand for citizenship and access. Small open economies will adapt faster than large countries.
CZ and the crypto crew see this – they can talk directly to the regulators and executives – who have the kind of geopolitics of survival – Barbados kicked out Allen Stanford and SBF. We know that people who give gifts are not always your friends.
Thus, the Caribbean islands have the basic frameworks to become a lifestyle and economic node in global economic networks. We don’t need a fuss, it’s happening organically
Then Tara Frater, Fintech Lawyer at FT Legal.
There is a global competition to become a member of an elite class of crypto hubs around the world with participants including UK, USA (eg Wyoming), Switzerland, Estonia, Singapore, Dubai etc. Many of these countries, in their bid to attract the rising tide of digital entrepreneurial wealth, offer tax-optimized environments with attractive regulatory frameworks.
Small Island Developing States in the Caribbean are no different from developed and wealthy countries in their efforts to exploit economic opportunities and attract foreign investment. Caribbean moves are NOT synonymous with inadequate regulation.
Regulation in the digital asset space is evolving. Fraudulent actors are not synonymous with fraudulent systems. The latest FTX debacle will be a lesson for regulators around the world – including developed countries – to learn from.
What are your thoughts. Leave a comment.
