What does FTX’s “substantial presence” in The Bahamas mean for the country/people?

by Leroy Forbes

We’ve talked about this kind of possibility before.. but now that it’s here.. I don’t know how to feel about it yet.

So.. it was announced recently that “FTX Digital Markets” (a subsidiary of the crypto mega-giant, FTX Trading Ltd., that’s based in The Bahamas), has officially been registered by the Securities Commission of The Bahamas (The Commission) as a “digital assets business.”

This approval came under the recently enacted “Digital Asset and Registered Exchanges (DARE) Act.” Coming into effect on December 14, 2020, DARE not only provided “comprehensive legislation” for “the issuance, sale, and trade of digital assets in (or from within) the jurisdiction” (in this case, The Bahamas), but it also legally recognized distributed ledger technology (…blockchain) “as a launchpad for disruptive innovation within the financial services sector, and far beyond.”

In this article, we’re gonna touch on these new developments and talk a bit about what this could mean for Bahamians living in The Bahamas.

The DARE Act

So first, let’s talk a bit about this “DARE Act” that came into existence less than a year ago (sourced from Graham Thompson Attorneys’ “Legal Updates” section.. I highly recommend visiting their post for a short summary that highlights some FAQs and key points about the bill).

The first thing to note is who it applies to:

• DARE applies to any organizer, issuer, founder, purchaser or investor (as defined by DARE) that participates in the formation, promotion, maintenance, organization, sale or redemption of an initial token offering (“ITO”) as well as any legal entity carrying on a digital asset business, irrespective of any physical location from which the activity is carried out.

Another thing to note is that these digital assets and related activities will all be regulated exclusively by The Commission. Here’s a short look at their to-do list:

• the regulation, monitoring and supervising of the issuance of digital assets and those persons conducting digital asset businesses in or from within The Bahamas
• the development of rules, guidance and codes of practice with regard to the conduct of digital asset businesses and ITOs
• the approval and regulation of digital asset businesses
• the regulation of initial and subsequent token offers
• enforcing the provisions and any violations of DARE

And here’s a look at a few terms and definitions that you’ll be seeing pop up a lot more frequently in the news now:

• digital asset — a digital representation of value distributed through a distributed ledger technology (DLT) platform where value is embedded or in which there is a contractual right of use (including digital tokens).
• digital token — a kind of digital asset the can be broken down into 4 categories: virtual currency tokens, asset tokens, utility tokens and non-fungible tokens.
• digital asset business — an umbrella term that includes things like digital token exchanges, payment service providers, digital asset service providers and participants/providers of financial services related to digital asset sales.
• digital token exchange (DTX) — a marketplace in the form of a platform using DLT for the sale, trade or exchange of digital tokens, whether for fiat currency or one or more digital tokens.
• initial token offering (ITO) — an offer made by an issuer (which is the entity contractually responsible for issuing the digital token) to the public for sale of a digital token in exchange for fiat currency or another digital asset.

They go into more detail about things like who is invited to apply for registration, what the registration and compliance requirements for businesses under DARE look like, and how data protection obligation will be handled, but I’m not gonna overwhelm you with every little detail (if you have the time, though, I highly recommend reading the 74pg bill here).

FTX:DM

Let’s touch a bit on the FTX side of things now.

FTX is one of the largest crypto platforms in the world, offering products/services such as derivatives, options, tokenized stocks, and an OTC desk.

Sam Bankman-Fried, the supreme overlord and Founder of FTX, was quoted:

• With this expansion through the DARE Act we are further committing to providing all our clients with a safe, trustworthy, and compliant exchange. We are committed to maintaining a close working relationship with local regulators so that together we can navigate putting a comprehensive regulatory framework in place to help promote the growth of this nascent asset class.

Ryan Salame, former head of OTC trading at Alameda Research, and newly appointed CEO of FTX:DM, stated:

• The relationship we have fostered with local regulators culminating with us being authorized under the framework offered through the DARE Act, gives me confidence that we’ll be able to work closely with regulators to make sure our offerings are compliant in multiple jurisdictions.

One important thing to note from this announcement, however, is the fact that neither FTX nor Bahamian officials have announced what kinds of (crypto) services they plan on rolling out yet. Using the international FTX platform for reference, though, you can speculate what kinds of services they would offer here.

Stepping back to look at the full picture, this is just another one of the major plays made by FTX on the international market. Sam “Gotta-Catch-Em-All” Bankman-Fried means business and has been working his M&A team over time, expanding the company’s international operations and influence in the space. From sports stadium acquisitions to crypto derivatives platform acquisitions (and did I mention the $900M funding round that they closed a couple of months ago?), FTX has been on an absolute tear this past year, and they’re showing no signs of slowing down.

So.. What Now?

Excellent question!

And the answer — as usual — is…

I don’t know.

Unless you were in those rooms or a part of the teams involved in these dealings, there is no way to know for sure where this is gonna go.

This could potentially open the door for so much opportunity in The Bahamas! At the same time, though, I’m still a bit apprehensive. Some of my first thoughts:

• Is The Bahamas finally gonna have a simple on-ramp for Bahamians to be able to easily purchase bitcoin (or any other crypto)?
• ArawakX, a Bahamas-based crowdfunding/fundraising platform, recently launched, allowing many Bahamian individuals to take their first steps as investors, and many Bahamian business owners to have an alternative means of raising capital. If they were to collab with FTX:DM, could this potentially lead to tokenized stocks/shares becoming a part of their service products?
• Numerous CashApp clones have popped up in The Bahamas (i.e. Kanoo, Island Pay, Cash N Go, etc.) that facilitate both peer-to-peer and business transactions. With the infrastructure already being built out for the Sand Dollar (remember the Bahamian CBDC that we talked about before?), could these companies also facilitate custodial services for crypto assets?
• Speaking of custodial services.. in the event that crypto is one of the offered products here (and let’s be real.. it’s FTX.. crypto is almost guaranteed to be offered), will Bahamians have the full autonomy to remove their assets from the platform? Or will it be some bs like Robinhood where all you get is an IOU instead of the actual asset itself?
• Several crypto startups were attempted by Bahamian entrepreneurs prior to FTX’s introduction (hell.. prior to the DARE Act even). But I woke up and blinked one day, and all of them were just.. gone. What happened to them? My assumption: the good ol’ regulatory chokehold. But, if the lack of clear regulations was the issue to begin with, then why wouldn’t these Bahamian businesses be the first to be supported/launched after regulations have been clarified.. instead of debuting with essentially another foreign entity that wants to “plant the flag” for their corporation in the country? Nothing against FTX.. I’m just sayin..
• It just feels a lil sus to me. I’m far from a super political person, but.. I mean.. political elections were just 4 days ago. This announcement was made literally the same day as the swearing in ceremony of the newly appointed Cabinet Ministers. I’m NOT saying that the 2 things are necessarily related! But, I mean.. come on.. it can’t just be me. That’s kinda sus.

All in all, everything here is purely speculative — nothing has officially been confirmed or denied yet.

This could easily be one of the greatest tech breakthroughs for The Bahamas, finally allowing more Bahamians to easily step into the digital age and take part in this global tech renaissance.

On the other hand, it could just as easily be another instance of a foreign company being allowed to come into the country and do as they please.

Again though… this is all just speculation. What do I know? These are nothing more than fleeting thoughts that marinate in my subconscious as I sip on my whiskey, staring out into the September sky, missing home.

We’ll just have to patiently wait to see how this all plays out…

*take bite of guava duff* Alexa, play “Bend Down”.

$/@LeroyForbesJr | Crypto Education | Digital Marketing | Writer | Content Creator | Tech Nerd | ACG Weeb | Smoke Seeker | Black Guy Voting for Everyone Black

*Disclaimer: I’m no economist, nor do I claim to be an expert in the country’s economic affairs; these are just the thoughts of a mildly educated observer and should be treated as such. I am not a financial/investment advisor, this article is not financial/investment advice and any information shared here should be personally researched prior to making any financial/investment decisions.*