Blockchain can be bigger than reinsurance

Leadership position: Stan Stalnaker, founder of Bermudian-based Hub Culture, which created the worlds first digital currency, Ven, said new regulations and legislation in Bermuda is providing clarity and standards for those operating in the digital asset and fintech sector



Bermuda is positioning itself to gain a share of the blockchain market  a market that could double in size to be worth $1 trillion by the end of this year.

Stan Stalnaker has been keeping a close eye on the islands development in the space, and said he is excited about its future prospects.

The industry for blockchain is going to be a trillion-dollar industry, and Bermuda is positioning itself to be a leader in that front. My hope would be that Bermuda has a role similar to the way it controls the reinsurance industry, but in blockchain, he said.

The blockchain sector will become much larger than the reinsurance industry, and Bermuda will not be able to get all of it, Mr Stalnaker said. But hopefully it will end up with a healthy stake.

He is the founder and creative director of Hub Culture, a social network service that also operates the worlds first digital currency, Ven.

The Bermuda Government has been working to attract a number of fintech companies to the island since late last year, most visibly seen by a wave of memorandum of understanding signings in the past few months. However, Hub Culture was ahead of the pack; it moved its global headquarters to Bermuda 12 years ago.

When it comes to digital assets, distributed ledger technologies and blockchain  which is a form of DLT  Mr Stalnaker said the tide has turned, and there is no longer a debate about whether the technologies will stay and be used to create viable companies and businesses.

In November, the Government set up a blockchain-focused task force, containing two working groups, to steer the islands ambitions in the sector. Last month, the Initial Coin Offering Act completed its passage through Parliament. It was followed this month by the Digital Asset Business Act 2018, which has also been passed by Parliament, and now awaits the assent of the Governor and a notice of the Minister of Finance.

As the Government has been creating the legislation and regulations, a number of fintech companies have been attracted to the island, with a number signing MOUs that contain non-binding pledges related to investment, training and job creation on the island. Among those who have signed memorandums are Binance, Omega One, Shyft Network and Medici Ventures, while Arbitrade, a coin and cryptocurrency exchange, has chosen Bermuda for its world headquarters.

Mr Stalnaker believes the legislation Bermuda has created is the best in class and shows the island is serious about maintaining its standards.

The rules for setting up here with a virtual currency business, digital asset business or [issuing] an ICO are probably going to be much more stringent than other places. A lot of people will find it easier to go somewhere else, but the best people will want to come here, because it provides clarity, and that is important, he said.

This legislation provides clarity and standards  and pretty high hurdles to pass. It is going to be a turn-off for people who do not want to play by the rules. But for people who do, and want to build a scalable, global business, it is going to be awesome.

The MOUs show that Bermuda is getting the word out about its intention to be a leading jurisdiction for fintech, blockchain and cryptotechnology, he said.

Binance coming here is a big deal, he said, noting that Binance has 2,000 coins listed on its exchange, with a waiting list of 6,000.

If Binance is doing business with Bermuda, that means at least some of those 8,000 companies are thinking about Bermuda in a way that they would not have before.

He welcomes the influx of technology companies, and sees it as beneficial for Hub Culture and its pioneering digital currency Ven.

For us to survive and prosper in Bermuda we have to build ecosystem, because we cant be the only player in fintech here and be able to compete. We have to build a whole ecosystem of companies, who all work together and co-operate, he said, noting that such ecosystems are being created in other places, such as Puerto Rico, Switzerland, Luxembourg, Malta, Hong Kong and Singapore.

Mr Stalnaker believes the digital assets market will double from $500 billion to $1 trillion by the end of the year, and said institutional funding would be the big driver.

Goldmans just opened a trading desk for bitcoin. If they do it, every other investment bank will open a trading desk. If they are going to trade bitcoin they will eventually trade 200 other coins or assets, he said.

Bermuda has an opportunity to write insurance and reinsurance on these businesses or assets. Once you do that, institutional investors, pensions funds will find it easier to invest.

He sees the potential for advisory and servicing work connected to the industry, to come Bermudas way.

If all the big Wall Street companies know that there is a clear regime for blockchain in Bermuda, which already has the track record for hedge funds and reinsurance, youll probably start to see big companies setting up their blockchain operations here.

 Tomorrow, in the second part of the interview Mr Stalnaker talks about Hub Cultures latest projects, which include plans for an event in Bermuda this year.