The Bahamas, FTX and the limits of offshore crypto markets


Hello and welcome to the newest version of the FT Cryptofinance publication. This week, we’re speaking about The Bahamas, as soon as everybody’s favorite “crypto hub.” 

If you’re a crypto enterprise in the US, there’s a excessive likelihood this yr your administration crew has mentioned leaving for a rustic much less hostile to what you’re attempting to do.

Rightly or wrongly, American authorities have clearly determined they don’t like many of the business’s practices. If you’re working one of these companies, it’s fairly a comedown from the days when the doorways have been held open and you have been seen as progressive and experimental. Now it’s a must to show why you’re not overtly flouting federal legal guidelines.

Luckily there are nonetheless some locations that welcome you. Last week Coinbase obtained a licence in Bermuda and this week Gemini, the alternate run by the Winklevoss twins, introduced it would launch a crypto derivatives market, open to customers in lots of nations (however not China, the EU, UK, Japan and definitely not the US). Its location has but to be revealed.

But even these pleasant locations might not keep fairly as welcoming for lengthy. Take The Bahamas, the place FTX was based mostly and hosted a blowout, no-expense-spared conference solely a yr in the past (sure, actually!) that now defines the peak of the crypto bubble.

It’s not a spot that’s notably welcoming to folks eager to ask about sources of wealth and regulatory requirements, as I discovered again in November — however it’s tough to dismiss the legacy Sam Bankman-Fried has left behind.

The FTX saga left a big black spot on its ambition to turn into a hub for digital belongings, a lot in order that regulators are rewriting their crypto legal guidelines for a contemporary go round.

On Tuesday the markets regulator started a session on guidelines that “strengthens financial and reporting requirements for digital asset businesses”. 

Of explicit word is a give attention to “new regulatory frameworks”, together with one essential level: ensuring service suppliers are in a position to return consumer belongings and preserve procedures to make sure these belongings are protected. Hindsight is an excellent factor, isn’t it?

It’s one thing of an about-turn for The Bahamas, which was speeding to defend itself as FTX fell aside. Only six months in the past Prime Minister Philip Davis mentioned: “Based on the analysis and understanding of the FTX liquidity crisis to date, we have not identified any deficiencies in our regulatory framework that could have avoided this.” 

I requested the PM’s workplace this week why new laws was vital, given such a powerful defence of his nation’s legal guidelines. I didn’t obtain a response.

In reality the island had already began to look once more at its guidelines. The Securities Commission of The Bahamas mentioned it started reviewing its laws in April 2022, months earlier than FTX’s collapse. It has additionally engaged regulation agency Hogan Lovells — which can also be lobbying for Binance US’s pursuits in Washington DC — to start drafting new legal guidelines, though it didn’t say when the work started. The SCB didn’t reply to a request for remark.

An individual acquainted with Bahamian rules informed me through e-mail that “as the digital assets space evolved and new risks became apparent, particularly following the crypto winter of 2022, it became necessary to update the legislative framework”, including it “is not unusual for regulation to be reactive to emerging threats”. 

That’s true; however it’s additionally a reminder that if the alternative is between welcoming crypto firms and toughening your requirements to avoid wasting face internationally, there comes a degree when even the most “progressive” regulators raises the barrier.

What’s your tackle The Bahamas’ contemporary strategy to crypto guidelines? As all the time, e-mail me at 

Join me and FT colleagues at the FT’s Crypto and Digital Assets Summit on May 9-10 as we focus on the place the digital belongings market is heading. Also showing at the occasion will probably be the UK’s financial secretary to the Treasury Andrew Griffith and Hester Peirce of the US Securities and Exchange Commission. Register to your cross here.

Weekly highlights

  • From one “crypto hub” to a different: I wrote about my residence Gibraltar being compelled into the highlight by the failure of Globix, a cryptocurrency dealer included in the British Virgin Islands however whose traders have been principally from the British Overseas Territory. I revealed that liquidators are trying to find $43mn in lacking funds, and not less than one sitting member of Gibraltar’s parliament was an investor. Read my scoop right here.

  • On Thursday the UK mentioned it could overview the means it collected taxes on trades in decentralised finance, which normally includes lending and staking of crypto belongings. The session follows a sweeping new regulatory regime proposed by the UK earlier this yr and is one other signal of the authorities’s will to show the UK right into a crypto hub.

  • Binance US — the American arm of offshore large Binance — deserted its proposed $1bn acquisition of belongings belonging to Voyager Digital, a crypto lender that went bankrupt final yr. The alternate tried for months to persuade regulators to present the deal the inexperienced mild, together with the Committee on Foreign Investment in the US, which was reviewing the deal for potential safety dangers. In the finish, Binance US gave up, blaming . . . you guessed it, a “hostile and uncertain regulatory climate in the United States”. 

  • A small windfall for FTX: the bankrupt alternate has agreed to promote its futures and clearing enterprise LedgerX LLC to stock and derivatives alternate MIAX for $50mn. One takeaway from this: LedgerX was absolutely US regulated, with a licence from the Commodity Futures Trading Commission, making it extra viable than different components of the former Bankman-Fried empire. John Ray III, who took over as FTX chief, said the deal was an “example of our continuing efforts to monetise assets to deliver recoveries to stakeholders”. 

  • A Jack Dorsey-backed non-profit referred to as the Bitcoin Legal Defense Fund (BLDF) is co-ordinating the defence of bitcoin builders focused in lawsuits by Craig Wright, who has claimed — with out proof — to be the identification behind bitcoin’s pseudonymous creator Satoshi Nakamoto. You can learn all about the case through the BLDF web site here.

Soundbite of the week: Coinbase lays out its SEC defence

This yr Coinbase obtained a Wells Notice from the Securities and Exchange Commission, America’s chief monetary markets watchdog. These notices are uncomfortable as a result of they inform an organization that an enforcement motion might be coming its means.

Correspondence can also be normally stored non-public however Coinbase has opted to struggle it out in public. This week it printed its response, laying out why it thought the regulator is fallacious. Coinbase’s chief authorized officer Paul Grewal sums it up as:

“Coinbase is the same company that we were when the SEC allowed us to become public two years ago . . . we didn’t list securities then, and we still don’t. We’d like to in the future, but the SEC has still not complied with the law by providing companies like Coinbase with a way to register to be able to do that.” 

Data mining: Stablecoins in decline

Global regulators have lengthy anxious that stablecoins may develop to a dimension the place they pose a substantial threat to monetary stability. That makes good sense of course; however proper now the stablecoin market goes in the different route.

According to numbers offered by knowledge analytics platform CCData, the complete circulating worth of stablecoins has been declining for greater than a yr. In April, the complete stablecoin market cap fell greater than 1 per cent to $131bn, its lowest level since September 2021.

And whereas the market shrinks, Tether continues to tighten its grip. There are presently greater than $80bn tethers in circulation, up from $66bn at the begin of the yr.

In distinction Circle’s USDC, lengthy thought of Tether’s chief rival, has executed nothing however shrink (and briefly de-peg throughout a time of disaster). At the time of writing there are simply $30bn USDC tokens in circulation, a far cry from the $55bn flowing via the market final summer season.

Cryptofinance is edited by Philip Stafford. Please ship any ideas and suggestions to

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