‘Step By Step: Bermuda’s Global Opportunity’

October 10, 2019

[Written by Stan Stalnaker, Chief Strategy Officer, Hub Culture]

The Bermuda Innovation Sprint hit the ground running this week with over a dozen coordinated events on the island focused around Fintech, blockchain and other aspects of digital progress.

Entering its second year, the idea for an “Innovation Sprint” grew from the 2017 Hub Culture Innovation Campus at Ariel Sands, which gathered global thought leaders and financial technology entrepreneurs at a pop-up beach club over four months on the heels of the America’s Cup.

The campus provided a beautiful home for conversations and learning among Hub Culture members who attended it from around the world. Established in 2006 in Bermuda, Hub Culture has since helped to bring dozens of companies and personalities to Bermuda, and supported Bermuda’s transformation into a destination for innovation that is now recognised around the world.

Just like a tree that takes time to grow and bear fruit, the true results of these activities take time to appear, and require fertile ground in which to take root. Over the last two years, Bermuda has taken the hard steps of establishing clear frameworks for businesses operating in new areas of financial services, setting a high bar for participation and watching closely both domestic and international developments.

In Fintech and blockchain, these global developments are rapid and far reaching.

Here is an overview of the arch themes this year’s Bermuda Innovation Sprint will explore over several events, including during the 6th Liquidity Summit, returning 14-15 October at the Fairmont Hamilton Princess.

Cloud Banking

Over 7,000 banks around the world run on core technologies built from the 1960s onward, managed by a handful of technology providers linked to very old, offline mainframe systems. These core banking functions include the global correspondent banking network, settlement networks, and routing structures built long ago and which can take days to fully process information.

New technologies are finally gaining enough traction to offer banks alternatives to old core functions, and an opportunity to upgrade to realtime services. Many of these new services are in the cloud, allowing for distributed processing and lower costs, but present new risks for banks seeking advantage.

Part of this risk includes upstart financial services players who seek to unbundle banks, providing payments, lending, identity, vault, custody and other services on an individual basis.

Asset Tokenisation

Asset tokenisation is set to change the reach and scope of the blockchain industry by enabling the representation of wide varieties of assets in digital form. By representing both data and physical things in digital formats, it becomes possible to register, manage, trade and understand the world differently.

Distributed blockchain architectures are pushing the envelope of what’s possible, giving rise to scenarios where groups of participants can manage assets in new ways. Accountability is changing – certain technologies ensure radical transparency, more resolute management of transactions, and the ability to understand trends in the data that were previously hidden.

All of this information makes it possible to reconsider how we manage transactions, opening up opportunities for automation, and even exotic new structures for collaboration.Examples include companies with no owners, or business models that don’t rely on making money to exist. At the most basic level, the ability to digitise physical goods, for ownership or transfer, creates new methods for wealth creation.

Digital Governance

As assets and value gain exchange velocity in digital environments, the ability to deploy new rules around governance and voting is also taking shape. The impact of this change has the opportunity to influence government efficiency around the world, corporate governance at the entity level, and even loose social governance at the individual level. Groups of people can now organise projects in new ways, while people-focused governments begin to find efficiencies and new ways of serving their citizens.

A key component of good digital governance is linked to identity, and the ability to trust participants in the system. Blockchains in particular provide new ways to measure and maintain digital identity, especially when identity is formed by multiple inputs. Within companies this also presents big changes, as digital identity helps turn a customer and a supplier into a network partner, sometimes blurring the line between the two.

In the future, companies may need to find themselves paying their communities for some services while charging for others.

For governments, the move to cloud governance can present cost savings and better outcomes for citizens. Many small countries, like Bermuda, are particularly poised to benefit from these changes, which give smaller countries with strong existing governance frameworks a major advantage.

Scaling and sharing best practices in these areas, and looking for ways to chip away at previously hidden processes is changing the way governance can be applied. Simply digitizing apects of governance could have huge benefits in social outcomes.

Managing Risk

With any new epoch come risks, along with potential winners and losers. As technology around the world leaps ahead, individuals, companies and nation-states all have to learn to adapt and evolve to land on the ‘winner’ side of the change equation. These changes present big opportunities, but to tackle new markets and invent helpful services is not a skill limited to Silicon Valley.

At the same time, care must be taken to avoid unnecessary risk: cyber security, hacking, bad apples and simple greed all create opportunities for failure. Because the Fintech ecosystem is small and connected, understanding risk and where it could lie becomes an important factor for everyone, on all sides.

For instance, some aspects of blockchains, while distributed at one level, remain consolidated at another. Some projects are slow, which can create risk, while others are fast, which can create risk. Everyone suffers from reputation risk if something goes wrong. The secret lies in mitigating these risks and working to identify them in advance, so they can be addressed before they even arrive.

The Bermuda Innovation Sprint, Bermuda Tech Week, leadership conferences, bilateral discussions, hackathons and other moments during October will set the stage and cement relationships that ensure Bermuda maintains a leadership role in the development of 21st century global finance. From artificial intelligence to liquid voting, autonomous organizations to universal basic revenue, there is something for everyone to explore.

The most exciting thing is that these areas are being shaped now, in real time, by those participating. It is never too late to jump in, learn, or lead as Bermuda sprints toward the future.

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