Bermuda hopes to be among the first places in the world to roll out a digital stimulus token that is aimed at benefiting residents and vendors.

The Bermuda Government is working in collaboration with the company Stablehouse on a pilot digital token programme that is being tested on the island.

The idea started last year, but the Covid-19 pandemic created added impetus and accelerated it to a pilot scheme.

In essence it is way for the Government to distribute payments to those who qualify for financial aid, by way of digital tokens. The tokens are sent to a digital wallet on a recipient’s phone and can be used to pay for goods and services at participating vendors.

The tokens are spent at a retailer or vendor by scanning a QR code on a small point-of-sale device.

The vendor can later press a redeem button and the tokens are transferred to a Stablehouse government account, and then a cash wire transfer for the value of the tokens goes from the government to the vendor.

The token has been developed by Stablehouse, a payment and foreign exchange platform for stablecoins. Stablecoins are a class of cryptocurrencies that attempt to offer price stability and are backed by a reserve asset. The stimulus token is backed one-for-one to the dollar.

Stablehouse is based in Bermuda and holds a Digital Asset Business Licence from the Bermuda Monetary Authority.

The pilot scheme aims to show how blockchain technology can increase access to digital payments, while solving some of the inherent challenges with stimulus programmes.

It intends to demonstrate the use of digital tokens to enable the purchase of food and essential products and services through participating on-island merchants and retailers.

The pilot programme has begun with a select group of consumers and merchants to provide initial feedback and validation on the use of a stimulus token for in-person payments.

The project has been in development since last year as part of the Government’s initiative to support the adoption of digital currencies on island. Those plans were put on fast-forward due to the Covid-19 outbreak as a possible solution to the need for fast and efficient distribution of financial aid.

Philippe Bekhazi, chief executive officer of Stablehouse, told The Royal Gazette: “A stimulus token is providing people in need with emergency money. The problem is it has been difficult for people to receive their cheques, or bank transfers that are slow or with details are not up to date, or people not banked.

“What we are proposing is bypassing all the middle men, bypassing the banks, and airdrop what is basically an IOU from the government to the people.”

He explained: “You will go to a website and register your ID, and the Government will airdrop to you a certain amount of money. It will be immediate and you will have it on your phone wallet.

“You can then go to all the participating merchants on the island, scan a QR code and pay for food, groceries, taxis — any product or service that is using this Stablehouse payment infrastructure.”

If the testing is successful, additional phases are being proposed in collaboration with the Bermuda Economic Development Corporation for a wider public roll out with select merchants in Bermuda’s Economic Empowerment Zones.

David Burt, the Premier, said: “Bermuda is keen to establish itself as a leader in supporting innovative private-sector digital asset solutions and to work with locally licensed companies to drive digital asset adoption.

“A key part of that is not just creating regulatory frameworks but also actually working with and using the products created by companies that choose Bermuda as their home.”

The Government believes other, similar tokens may also serve to alleviate some of the challenges and costs associated with local payment options.

Mr Bekhazi said: “The Covid-19 pandemic has laid bare the need for digital payments solutions to help businesses survive and overcome an uncertain and challenging market backdrop. The stimulus token is designed exactly to do that, by giving merchants more accessible and practical payments options in the evolving digital age.

“For consumers, it alleviates the dependency on cash amid the ongoing health concerns, while providing an easy and convenient payment channel. Together, with the Government of Bermuda, we aim to set a benchmark for all governments around the world to pursue digital stimulus solutions.”

While Mr Burt said: “I have personally participated in the pilot and am encouraged by the potential to provide a platform for stimulus programmes.

“It also shows great promise as a means to help make digital payments more accessible to small businesses and entrepreneurs, which is particularly important in this challenging economic climate.”

The token devices for merchants are being rolled out. Mr Bekhazi said benefits for vendors included that fact that the process is cheap and transparent.

He said: “Basically we are breaking down all this friction and making it more like sending an e-mail. It’s as simple as cash, but you don’t have to worry about change.”

Mr Bekhazi added: “Everyone is excited. Integration with POS is critical and that is something we are working on right now, so we can roll it out to as many merchants as possible. We believe, at the end of the day, all merchants will want to accept digital currency.

“Bermuda is fairly small, It’s a great place to try new technologies. We are regulated by the BMA, and are in a good position to be doing this in a bigger way. It’s going to be the first of its kind.”

• Stablehouse has a website at stablehouse.io, and is on Twitter at @stablehouse_io