A company that has a licence to operate a cryptocurrency exchange in Bermuda is looking at the potential for issuing a digital token backed by Bermuda dollars.

Bittrex Global has been discussing the possibility with the Government and a bank in Bermuda. It is also in the process of setting up an office on the island and recruiting compliance officers.

The company operates from Liechtenstein, in Europe, and trades cryptotokens such as bitcoin, ethereum and alt-coins. Bittrex Global expanded its business this month by setting up Bittrex Global (Bermuda) Ltd, which has been given a licence to operate a cryptocurrency exchange under the supervision of the Bermuda Monetary Authority.

At the Virtual Bermuda Tech Summit 2020, David Burt, the Premier, asked Stephen Stonberg, chief financial officer and chief operating officer, Bittrex Global, if he had a view on Bittrex offering “a type of Bermuda digital dollar”.

Mr Stonberg said: “We are already in discussions, and we would love to help the Government, and we can definitely facilitate that. We are looking at the idea where the exchange, which is global and in Bermuda, could be the issuer of a token and it could be backed by a Bermuda dollar.

“We have a bank account, shortly here, with one of the local banks. We are talking to them about custody of Bermuda dollars, and it would be audited, and it would be there from day one.”

When asked why people should favour using a digital token to exchange value, rather than traditional payment methods, Mr Stonberg said that in some places in the world there is no proper banking system, and even in places with banking systems, sending money, such as through a bank wire, took three days and was “quite inefficient”.

He said: "So you go from not having a bank to having something that settles instantaneously. It’s a much more efficient way of processing payments, you can get a real leg up on some other jurisdictions – that’s why it makes sense.“

Another benefit of particular relevance to businesses, was that digital token transactions are cheaper “especially versus credit cards”.

Mr Burt said the island is inviting licensed entities to go ahead and experiment with digital currency in order to foster a community of innovation on the island.

He asked: “What do you think is the potential to have a Bermuda-backed and Bermuda-audited government-supported coin?”

Mr Stonberg said there were different options, such as having a private company, like Bittrex, issue a coin, or for the government to issue it.

“From our standpoint, we want to be a facilitator and helpful, and we will do whatever makes the most sense for all parties,” he added.

When asked if there would be international interest in a digital non-US dollar but which is closely associated to the US dollar, such as the Bermuda dollar, Mr Stonberg said: “There will be a ton of interest just because it’s dollars. You are creating a stablecoin where it is audited, it’s regulated – depending on how the BMA wants to regulate this. There will be a lot of interest.”

Mr Burt said: “People have been wondering when they are actually going to see how fintech can affect their lives, and a time when people are going to be able to send money or share value as easy as you do send a Whatsapp, and I think then people will begin to get it. People need to see that in action.”

Looking ahead to possible expansion in Bermuda, Mr Stonberg said: “We have leased an office here. Now we have to fill it with people. I imagine we will hire mostly compliance officers here. We can also hire some of the staff to support our Liechtenstein business from here. There is more compliance staff availability here.”

Beyond that, the company is also looking at crypto insurance.

Mr Stonberg said: “It’s an area that is so new and so little capacity, we are definitely thinking about potentially setting up an insurance company here as well.”

Bittrex Global also has a US-based sister company called Bittrex Inc, which is a separate legal entity. The Royal Gazette reported this month that Bittrex Inc was named a co-defendant in a class action case alleging price manipulation in the US.