In August last year, the Jamaica Stock Exchange (JSE) announced that it will carry out a live-trading pilot of Bitcoin and Ethereum (both are types of cryptocurrencies). This was made possible after the JSE signed an agreement with a Canadian Fintech firm called Blockchain to introduce an end-to-end crypto trading platform called Blockstation that would enable the live trading of digital assets and security tokens in a regulated and secured environment.
It came as no surprise that Jamaica chose to trial cryptocurrencies as a new asset class. It joined several other countries that have done so. According to the JSE’s managing director, Marlene Street Forrest, the development allowed the JSE to ‘diversify its product offerings’. Additionally, it allowed the JSE to ‘attract new listings and inbound investments.” In April this year, Ms. Forest further confirmed that the pilot exercise carried out with select broker-dealers, market makers, and the Jamaica Central Securities Depository, had been successful.
Fad or Real Future?
Several stock exchanges around the world have already gone ahead and launched digital asset exchanges and there are many more either trialling or waiting in line to do so.
Cryptocurrency is a medium of exchange like normal currencies, such as the United States dollar, but is designed for exchanging digital information through a process made possible by certain principles of cryptography. In its simplest form, cryptocurrency is digital currency.
Bitcoin, Ethereum, Litecoin are examples of a digital currency. There are several other varieties. They can be traded for goods and services with vendors who accept such digital currency as payment. In fact, Facebook’s unveiling of plans to introduce its own global cryptocurrency called Libra in 2020 has cemented the belief that digital currencies are here to stay and will be even more prevalent in the future.
Legal & Financial Industry Framework
Since the successful pilot exercise, the JSE and Blockstation have entered into a world-first Master Agreement, with the JSE becoming one of the first stock exchanges in the world to sign an agreement to enable live trading of digital assets and security token offerings in a regulated and secure environment. Moving forward, the JSE plans to:
- Support international small and medium-sized enterprises by providing them with a streamlined and simple process for raising capital in a compliant and transparent manner;
- Demonstrate market leadership by showing the financial community that digital assets and cryptocurrencies can be traded safely through trusted broker members like any other security;
- Create an inclusive, regulated market that is more accessible to institutions, as well as non-accredited investors who would otherwise be excluded from opportunities in the digital asset space; and
- Streamline the public disclosure process for SMEs, making it easier and more cost-effective to list shares and other assets.
Exciting as it may be for investors and the business community, many are still holding their breath to see which regulatory guidelines and procedures will be put in place by the JSE, the Financial Services Commission and the Bank of Jamaica to support this brave new world of digital currency trading and management. Many questions will need answering. Just a few are listed here:
- Will cryptocurrencies in Jamaica fall into the definition of “Jamaican currency”?
- What revisions (if any) will be made to the Bank of Jamaica Act?
- Will cryptocurrencies be seen as “securities” and allowed to be traded under the Securities Act?
- Are they to be regarded as “electronic money” to be regulated under the Banking Services Act?
- If cryptocurrencies are regarded as e-money, would the Guideline for Electronic Retail Payment Services apply?
- How will the Payment, Clearing and Settlement Act which makes provisions for the protection of clearing and settlement systems from disruptions that may lead to risks to the stability of financial systems come into play (if at all)?
- How will companies dealing with cryptocurrency offerings be regulated and what licences (if any) would be required?
- Will cybersecurity laws and their enforcement mechanisms need to be enhanced to provide safer environments especially for digital wallets?
- Can the public and the business community be convinced that cryptocurrencies are not deemed analogous to money laundering or financial scams?
Watch this Space …
Change is inevitable, and it would make no sense for Jamaica to be absent as the rest of the world embraces the wider use of opportunities that digital currencies provide. Now is as good a time as any for investment brokers, advisers, potential security token offerors and investors themselves to gear up and be prepared.
Importantly, the authorities and stakeholders need to examine new regulations and guidelines to be issued, so that digital currencies can be safe and be accessed through legitimate trusted financial institutions.
If cryptocurrencies intrigue you as they do us, please contact us to discuss.
