It is a pleasure to be back in Trinidad & Tobago.
As always, I can expect to experience true Caribbean hospitality from the moment I touch down at the airport until the moment I depart.
I am honoured to speak with you tonight in the spirit of Caribbean unity and mutual advancement. The industry leaders who have gathered here tonight represent some of the best and brightest that Trinidad & Tobago and this region has to offer. If there is any group that understands the importance of bringing people together for a common, mutually beneficial purpose, it is the Trinidad and Tobago Coalition of Service Industries. So, tonight, I feel I am among kindred spirits.
I have always been an advocate for increased regional cooperation. As the Chair of CARICOM during the first half of 2023, I was privileged to witness how strong we can be when we speak in one voice and focus on areas of strategic importance to the region.
The urgency of doing so has perhaps never been greater.
Climate change poses an existential threat to small island nations, and we must build readiness and resilience while simultaneously confronting food insecurity, an epidemic of violence, illegal firearms flooding the region, sanctions on our financial services industries, and the weakening of our correspondent banking relationships. This is our reality!
The good news is that together, we are finding our “sea legs” and setting sail in the same direction. We are more frequently speaking with one voice because we recognise the power of Caribbean unity as we seek to overcome these very serious threats to our people and our way of life.
It is said that adversity is the mother of invention – and certainly we do not lack ingenuity in the Caribbean. When political and industry leaders come together to have open and frank discussions, the experience generates ideas that strengthen us all.
We are at the point where innovation is essential, tenacity is a must, and excellence is the only viable standard. The world is changing quickly and preserving the status quo will only result in us being left behind.
Nowhere is this rapid growth cycle more apparent than within the fintech sector. As digital assets and blockchain technology become more integrated into the global financial system, Caribbean nations must position ourselves for success.
At the same time, throughout the region, we are seeing the loss of correspondent banking relationships as international financial institutions close their doors to smaller, less profitable accounts they deem to be not worth the perceived risk.
This perception of risk is largely influenced by the European Union, the Financial Action Task Force, and the OECD.
These closures come at the expense of our people. The immediate impact has been on remittances and foreign trade. As sending and receiving money internationally has been made more difficult, countries with large diasporic populations like Guyana, Haiti, and Jamaica have felt it most.
In each of these nations, international remittances make up over 10% of their national GDP (for Haiti it is over 20%).
The loss of correspondent banking relationships has negatively impacted the ease of doing business, as well as the region’s ability to trade internationally and experience sustained economic growth.
Many communities now lack access to effective payment mechanisms and to traditional banking. In The Bahamas, we have seen the retreat of brick-and-mortar banking institutions from some of our populated islands, which means some Bahamians are forced to travel by boat or plane to perform basic financial transactions.
In response, we have embraced innovation, as we launched the world’s first Central Bank Digital Currency in 2020. Since then, Jamaica and the Eastern Caribbean Currency Union have joined us in launching their own Central Bank Digital Currencies.
In The Bahamas, we are working with our Central Bank toward the goal of widespread adoption. This also requires working with the commercial sector, to encourage wider acceptance of digital payments.
Meanwhile, there are millions of unbanked people in the Caribbean and Latin America who require solutions. Some of these solutions will come from within the banking sector itself. For example, we can facilitate the pooling of regional transactions and harmonize our Anti-Money Laundering and Counter-Terrorism Financing processes to lower operational and compliance-related costs for banks. But this will not necessarily address all the core issues.
Cryptocurrencies and digital assets have been advanced as an accessible solution for unbanked populations. While barriers such as Internet access and digital literacy can impact uptake, advocates point to the potential for cheaper and faster payments as decentralized digital ledger technologies reduce the need for intermediaries.
Cryptocurrencies could also facilitate cross-border transactions and regional trade, although this would first require regional coordination on regulatory frameworks and interoperability between systems. We note there is an effort by the Commonwealth Secretariat to work with countries to develop a uniform regulatory approach to cryptocurrencies. We have pledged to use our expertise and first-mover position to assist in this endeavor.
Such an approach would also require standards in place to preserve jurisdictional reputations, preventing cryptocurrencies from being used for illicit activities, including tax evasion and money laundering.
In addition, there are volatility and cybersecurity risks to consider. The advancement of stablecoins as a commercial payment mechanism mitigates some of this volatility risk. In The Bahamas, our approach looks to provide a proper regulatory framework for stablecoins so there can be confidence in its application and use in commercial transactions.
Each of these issues requires major reforms and investments to protect our people and our investors. These should be undertaken in earnest, because crypto assets represent an opportunity for our financial systems to innovate, remain relevant in a quickly changing sector, and provide a diversified approach to payment mechanisms for our people.
While there is not yet a large domestic market for crypto assets in Caribbean countries, there is intense international interest by investors who want to do business throughout Latin America and the Western Hemisphere.
In these instances, Caribbean nations can serve as a strategic hub. Many Caribbean countries already have decades of experience as financial services centres, and we can rely on our expertise in international compliance and the regulation of financial systems to provide a well-regulated, ideal space for startups and existing digital asset enterprises seeking to expand.
Eventually, we do anticipate that domestic markets will emerge. There is a movement toward the tokenization of all assets, and we must begin preparing for that future now. Our people will inevitably be involved as the use of crypto assets expands and evolves. There is vast potential for empowerment, as long as we make informed, strategic decisions.
The key to our success in the digital assets space is the development of an effective regulatory framework against the backdrop of an industry and asset class that is still in flux. We must regulate within a context where there is little domestic market activity and where there are large external players seeking to come to our jurisdictions to operate and conduct business internationally.
While we want to attract investors, we must first ensure that everything is being done according to the highest global standards. This includes constantly adapting and future-proofing our standards in anticipation of an increase in international and domestic participation. Our success hinges on the development of an effective regulatory framework.
In The Bahamas, our Digital Assets and Registered Exchanges Act (the DARE Act) has been hailed as being among the best frameworks in the world. At the time of its development, we were able to review best practices from jurisdictions around the world while adding a few ideas of our own to ensure that we were providing an appealing destination for digital asset businesses.
Our comprehensive regulatory framework was designed to provide effective oversight without stifling innovation, while leaving room for the ongoing development of appropriate regulation for the then-nascent space.
Despite the great lengths we went through to build out our regulations, we still encountered some difficulties, most notably, those related to FTX. As challenging as that experience was, however, it demonstrated that the regulatory systems in The Bahamas worked under the most difficult conditions, enabling immediate and effective action as we swiftly appointed Joint Liquidators and secured assets, which are now under the control of the Bahamian regulator.
Furthermore, that event demonstrated the need for a regulatory framework that is responsive – a system which will continuously learn and grow in the wake of challenges and changes in this fast-changing sector.
From its inception, our digital assets governance has made provision for this positive evolution with the establishment of the Digital Assets Advisory Panel (DAP). This body of experts is charged with constantly reviewing and advising on emerging digital assets trends, shifting regulatory standards, and all associated risks. The lessons learned in the wake of FTX will join our other early learnings to strengthen our DARE Act and propel our digital assets sector forward.
The new amendments to the legislation include – among other things – measures to clarify the regulation of stablecoins, more robust investor and consumer protection mechanisms, and the regulation of staking for digital asset-related mining in The Bahamas.
We are innovating, not only in response to our own insights, but in anticipation of industry and global trends. As digital assets and fintech evolve, we are in conversation with leaders and thinkers in the industry. As one example, The Bahamas will be hosting our D3 Conference October 10th–12th – D3 standing for “Digital, Decentralised, Disruptive.” Our themes include: Deploying FinTech solutions safely, responsibly, and ethically; Joining forces to foster global digital innovation; and Introducing Web3 and digital assets into mainstream adoption. We invite you to join us for what will be an exciting exchange in support of innovation.
In closing, I want to underscore the extraordinary opportunity we have before us to diversify, adapt, and lead – in ways which can expand our economies and empower our people.
And the best way to fulfill this potential for innovation and advancement is to work together and stand as a united Caribbean.
Thank you for the invitation to share this evening with you.