Bermuda issues tokens to support residents’ spending amid crisis

The Bermuda government announced a pilot programme to encourage payment for goods and services with tokens amid the economic impact of the COVID-19 pandemic. The partner is the local payment platform Stablehouse, which uses a solution from Blockstream.

The digital stimulus pilot token is based on Blockstream’s @Liquid_BTC blockchain protocol while the #BlockstreamGreen app will enable payments via a point-of-sale terminal provided by @stablehouse_io.

— Blockstream (@Blockstream) September 1, 2020

The project uses the Bitcoin sidechain Liquid Network. The BlockstreamGreen app will enable payments via point-of-sale terminals provided by Stablehouse. Initially, the token will be tested in three towns by a defined group of merchants and residents.

I’m pleased to have participated in the pilot testing of @stablehouse_io‘s digital stimulus token and look forward to its wider rollout to EEZ businesses. It’s a great showcase of Fintech innovation and a step toward making payments more accessible for Bermudian entrepreneurs. pic.twitter.com/YUERr30UED

— Premier David Burt (@BermudaPremier) September 1, 2020

“A key part of the drive to become a leader in digital assets is not only creating a regulatory framework. This should also include hands-on work with products created by companies that have found a home here,” the prime minister said.

In 2019, the government of this British Overseas Territory allowed the payment of taxes and government fees in the stablecoin USDC. Officials described the decision as part of a broader initiative to use decentralised financial protocols and services. A digital identity system is also envisaged.

Development of the incentive tokens began this year as part of a programme to build an ecosystem based on digital currencies. The COVID-19 pandemic accelerated its rollout due to the need for rapid distribution of financial assistance to residents.

“We aim to put a wallet on every phone in Bermuda,” noted Denis Pitcher, the prime minister’s fintech adviser.

According to the official, authorities faced difficulties in distributing unemployment benefits. The process was complicated by the introduction of strict isolation measures in a context where a portion of the population lacks access to banking services.

According to Pitcher, Bermuda is an ideal testing ground for digital payments. The country is home to just over 71,000 people, 99% of whom are internet users, 87% have access to it via mobile phones.

Pitcher added that the backbone for deploying the system would be the infrastructure left behind by British and American troops after World War II—from airports and hospitals to energy infrastructure.

“We have a truly suitable environment for mass adoption and subsequently improving the user experience, which can then be scaled to a city with millions of residents or a country with hundreds of millions of citizens,” the adviser explained.

Pitcher does not think the initiative will lead to a central bank digital currency (CBDC).

“We do not plan to create a unifying technical solution that will solve all problems of digitising money, as its implementation remains unclear,” the official explained.

The Bermuda government engages private licensed organisations, such as Stablehouse, to issue tokens on its behalf. The reason is their speed in developing the technology.

According to Pitcher, local banks will not play a key role in the pilot. This is explained by their correspondent banking links with large financial institutions that do not welcome such initiatives.

An expert says banks struggle to stay at the forefront of technological innovation due to regulatory requirements. Stablecoins, such as USDC, in his view, create a new role for them.

Earlier, the Central Bank of the Bahamas released the digital currency Sand Dollar for $48 000.

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