The Society for Trust and Estate Practitioners (STEP) has noted on its web site that:
The Bermuda government has launched a bid to accelerate the establishment and growth of digital currency business on the island. The initial framework for regulating Bermudan firms that use Distributed Ledger Technologies will come into force in early 2018.
A task force has been set up to draft the new legislation. Two teams — the Blockchain Business Development Working Group and the Blockchain Legal and Regulatory Working Group — will collaborate to design a regulatory environment that promotes Bermuda as a destination for utility tokens, tokenised securities, cryptocurrencies, and coin offerings. Bermuda-based token issuers will have to join the new Bermuda Crypto Association and comply with its code of conduct, including measures to ensure enhanced business transparency, and Know Your Customer and anti-money laundering rules.
The Bermuda Development Agency is pushing the move as part of an economic diversification strategy to bring new business to the island, and boost existing industry service providers. It has persuaded several US cryptocurrency start-ups to set up companies in the jurisdiction.
Now there's a surprise. A tax haven is promoting the use of cryptocurrencies whose use is untraceable just as automatic information exchange from the island is coming into use. What possible interest would they have in this?
But there's another, as important, question. Why are STEP, which has done a great deal to spread tax haven activity from jurisdiction to jurisdiction, despite which many UK solicitors are members, so keen to promote this? Superficially this has nothing whatsoever to do with their purpose, which they say is:
STEP is the global professional association for practitioners who specialise in family inheritance and succession planning.
And if it has, would they like to say what that link might be? I'm curious to know. I'm happy to host the explanation.
Hat tip: Naomi Fowler
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The important term, I would like to suggest in all of this, is not “cryptocurrency”, or “STEP”; but “Blockchain”.
Blockchain uses Distributed Ledger Technology (DLT) in order to create “a more robust environment for real-time and secure data sharing”. The DLT recorded “blocks” of data in a “crypto-currency” are stored in a linear chain: “Each block in the chain contains data (e.g. bitcoin transaction, but there are many so-called crypto-currencies), is cryptographically hashed. The blocks of hashed data draw upon the previous-block (which came before it) in the chain, ensuring all data in the overall “blockchain” has not been tampered with and remains unchanged.” (Quotations from the website Blockchain Technologies).
What does all this do?
I think (and I put this out as a hypothesis, no more) that we we are seeing here is the creation of a new concept in money; Commodity money (backed by a commodity like gold); the modern convention – fiat money (money backed by Government); and now the 21st century revolution: Blockchain money (money backed by the impermeable – at least allegedly – security of a blockchain). Hence I think it is best called blockchain money, because it is secured by itself – the Blockchain. Money requires the confidence of users, and in crypto-currency it is the blockchain that defines “confidence” becuase it establishes the guarantee (at least as good as a Government).
Why is it of interest to tax havens? Because it fits hand-in-glove with tax free transactions; government-free money.
Think about it. Then worry.
I am worried
Hence my comments
And my concern about STEP’s interest given their own history of promoting secrecy
Family offices want to invest in distributed ledger assets (and who wouldn’t given the astronomic price growth). They will require regulated entities to issue and process cryptocurrency denominations – feeling that the current market is composed of dubious unregulated entities. Hence the impetus for jurisdictions to introduce regulations for such organisations to develop.
Ah, family offices….
Read Brooke Harrington on the issue
And on STEP come to that
Hah!
So I was right about the fact that the attractiveness of this form of money to certain parties is because it broke links with central bank/Government money and taxation for example.
Yes – I am very worried indeed.
It would be very interesting to work through what this would mean.
This issue needs to be monitored. It is malevolent in nature.
‘Certain parties’ (such as the ‘Buchananists’?) who view state power in the context of democracy as unnatural or as a threat or just illegitimate – I think that they are most dangerous in the world today and have everything to gain if this idea is allowed to develop.
No doubt the lawyers involved will do similar stuff in the vein of making a corporation a ‘legal person’ or enshrining stockholder rights as above anyone else’s in law.
You are 100% right to be worried
So am I
And my concern starts in the same place
I agree this is a worrying departure from conventional financial practices, but what worries me most about it is that I see little evidence that government thinking is nearly as advanced as it should be.
I suspect there is more thought evident in the exchanges on this blog.
This Bermuda development is just one of many responses to this new technology. South Korea is looking to introduce a government DLT currency system mid 2018. Russia, China and Japan are striving to get their heads round the implications. The IMF has a system in place sitting in the background waiting to kick in and rescue the world financial system. (So I’m told.) I wish I believed the same was true of our own government. I suspect ‘we’ are keeping calm and carrying on’. Pretending nothing will go wrong.
Common criminals, drug barons and terrorists are not the only bodies who like to move money about secretly. Governments (No Names no packdrill) intent on destabilising regimes they don’t like do this sort of thing all the time.
The solution surely comes from LVT. Governments need to concentrate on taxing real value assets. Taxing money is like chasing clouds already. Not a losing battle, but a lost one in a global financial world. The obfuscation of DLT transactions will make it impossible. So why bother?
What manner of currency a government chooses to accept its tax payments in is a matter of what currency it can use to ‘balance’, its accounts. IF it has to be its own issued currency then that is what it will need to demand. Or reclaim tangible assets in lieu. Money is after all just a concept which we have found useful. You can’t eat it.
In every adversity there lie the seeds of a greater possible advantage and this jiggery pokery that surrounds DLT is precisely what is needed to concentrate minds on scrapping a system which stopped working (except for a wealthy minority who screwed it to their own ends) many years ago. The threat of total undermining of the present system is exactly what the doctor ordered.
Governments and financial wizards who insist on fighting a rearguard action will suffer the fate of every rearguard action in history. They will hold up progress very briefly then they will get minced.
Let us be of good cheer.
Well, Yes Pilgrim, we may have to cull some lawyers. Not before time.
There will be heated debate as to whether they go to the wall before or after the Bankers and the Estate Agents.
The financial system will crash. Either it will be brought down by concerted and controlled efforts of governments or it will crash in the traditional way that the markets always collapse.
Business as usual is not an option. We’re operating in fantasy land. This is time to start carving a new Rosetta stone.
It is revealing that the creation of “money” by labour to fund a much needed national investment programme is greeted with derision by the national press whilst the creation of “money” in the form of Bitcoin is treated with respect.
I think that we have agreed that Bitcoin cannot be used to purchase anything in the regulated, audited, world most of us live in. The language used to describe it is currently alien to me and, I would suggest, to virtually all accountants and auditors; the idea of a blockchain ledger is incomprehensible. How to access the section of the blockchain that forms the books of a company and ensure that a double entry system is in place.
The “currency” is a challenge to accounting as we know it and I would like to know how the Bermuda Development Association is working with the accountancy profession to establish a reporting system that can be audited and verified. And HMRC, to me the Bitcoin is not a currency but a speculative asset the movements on which are cuaght be CGT.
Having said that where there is no transparency there is no need for accounting.
Yhink about the function of a currency, and how it acquires credibility. Two attributes.
KeithP says:
December 3 2017 at 4:18 pm
“I think that we have agreed that Bitcoin cannot be used to purchase anything in the regulated, audited, world most of us live in.”
I don’t think we are agreed on anything of the sort. I think you’ll find people are already doing exactly that.
The fact that financial authorities don’t like it (because it takes them out of the lucrative role of sticky fingers money handlers) and that governments aren’t addressing the changes that are coming is where the problem lies.
And don’t expect much sense from the media. All you’ll get is the usual garbage from ‘authoritative sources’ who don’t get it any way, and have been assiduously not noticing pyramid schemes and Trickle Down policies for what they are.
But almost no one is using it
I noted the Guardian article from London retailers who say they will take it – and the facility is almost never used
But almost no one is using it.
Yet. 🙂
The current price of one Bitcoin is circa £8,400. It is not your average credit or debit card. A single Bitcoin can be sub-divided, almost endlessly for small transactions (I stand to be corrected on this); but it rather takes itself out of everyday pockets; so far – I take Mr Crow’s whimsical point. There will be other cryptocurrencies….. …..
When they say they take it I bet they dont actually “take” bitcoin but actually use a 3rd party who exchange bitcoin for GBP. I mean that is like using your credit card abroad to pay for goods and services.
Remind me, what is said to happen in The Bermuda Triangle? Apart from that now and again Bermuda has weather conditions that are very damaging. What is difficult is predicting the occasional one that is catastrophic. And may I be the first to wish you a happy Xmas and New Year?
I am afraid the first card had already arrived!
I thought that was what Boxing Day was for – writing Christmas cards.
Your blog on taxing wealth shows the necessity for getting our hands on their filthy lucre and redistributing it. But maybe the cryptocurrency scam will be the way that it remains beyond our grasp. I hope there will be some focus on how to disrupt because the prospects are frightening: The Iron Heel .
Carol,
Why would you want to get your hands on something that is only a figment of the imagination and redistribute it?
Who in their right mind would want it?
I don’t hold with the ‘fictitious capital’ myth. The hidden trillions lodged in various assets is expropriated surplus labour.
Am I reading this correctly? The thread has managed to argue itself into the position that there is “nothing to see here; move along”?
I am astonished. We often observe (I hope with understanding) that the elderly become detached from elements of modern life (during my life this has happened with the relentless march, from computers, to the internet, mobiles, smart phones) and because of that detachment, they do not understand what is happening in the culture they inhabit – they become ‘alienated’, and even isolated. I think I have just watched this happen in real time to people who assume that they are the ones who “understand”.
John S Warren says:
December 4 2017 at 10:03 am
Am I reading this correctly? The thread has managed to argue itself into the position that there is “nothing to see here; move along”?
I don’t think that’s where the thread has taken us, John. It’s not where I am and others have said they find it a worrying ….trend.
The reason I am seeing it as positive, if that’s the right word, is that I see the rise of cryptos as being a very grave threat to the economic/financial status quo. Given the current orthodoxy is so deeply unsatisfactory (Oh! I do so enjoy a rank understatement) I find it a good thing that it is being challenged. It may prove to be a case of my enemy’s enemy is my friend, but I think there are genuinely going to be great benefits to flow from the Blockchain revolution.
Much of the ‘official’ establishment/media narrative has tried to dismiss this development as being a refuge of criminals and scoundrels. The Bermuda issue rather continues that narrative, but it is now being harnessed by the ‘establishment criminals’. If this ramping up of scale is what it takes to wake our legislature from its complacent slumber then so be it.
I don’t think this current government is going to raise a challenge so much as watch the new kid on the block with with a paternalistic eye to an opportunity for further abusive self enrichment.
Bitcoin is forcing everybody to try to come to terms with what they think money is. The questions were being asked in the financial ‘community’ in terms of heated debate months ago and that debate is now becoming mainstream as the ‘shoeshine boy’ is now telling the experts they should buy Bitcoin.
Nothing to see here? Far from it.
fyi – Gibraltar has taken the same step, with legislation entering into force in Jan 2018
Now there’s another surprise
STEP probably helped write that too
probably…