FTX Has Wrecked the Crypto Party in Paradise

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In the two years since, a collection of startups and large crypto companies have set up shop in the Bahamas, among them FTX and OKX, another large crypto exchange. Separately, Tether, whose dollar-pegged stablecoin is central to the smooth operation of crypto markets, holds its reserves with a Bahamian bank, Deltec Bank & Trust.

But already, signs of damage dealt by the FTX collapse to the Bahamas’ status as an emerging crypto capital are beginning to show.

In December, SALT, the events company led by former White House communications director Anthony Scaramucci, announced the cancellation of Crypto Bahamas 2023. Another event, D3 Bahamas, run by the Bahamas government and billed as the country’s “flagship Web3 and financial technology festival,” was due to take place this January, but has been postponed. A new date has not yet been set.

Carlyle Bethel, founder of real estate tokenization startup Akerage, was due to pitch for venture capital funding at D3 and describes the postponement as “disheartening.” His chief concern is that the FTX collapse has “shaken potential investors,” making it more difficult for startups like his to bring onboard the funding they need to scale.

As for other global crypto businesses with ties to the Bahamas, the response has been mixed. Tether is unmoved; Paolo Ardoino, CTO, says the FTX situation is in no way a reflection of the Bahamas and that Tether is “strongly considering” opening an office there. OKX, however, declined to answer questions about its commitment to the country.

Nassau is also home to a growing brigade of crypto startups, like oceanfront coworking space Crypto Isle, which aims to bring together isolated groups of entrepreneurs and “create a space for people to learn about crypto,” says cofounder Davinia Bain. 

Other startups work alongside the Caribbean Blockchain Alliance, an NGO that advocates for the adoption of blockchain technology in the region. Stefen Deleveaux, president of the organization, describes the crypto scene in the Bahamas as “small, but active and growing.”

Neither Bain nor Deleveaux expressed particular concern about the knock-on effects FTX could have on local crypto businesses. With the exception of a few companies that were anticipating direct funding from FTX’s venture capital division, Bain says “the mood at Crypto Isle hasn’t changed.” Deleveaux points to the “massive potential” of the local grassroots crypto movement, which is “quite ready to move on” from FTX.

Others see things slightly differently, though. Although Rees is confident in the quality of Bahamian crypto startups, he says the collapse of FTX is “not good for the industry.”

Specifically, he is concerned that people typically fail to distinguish between the actions of a company (or handful of individuals within a company) and the industry and nation in which it operates. As a result, crypto companies in the Bahamas face a tarring—even firms like Kanoo Pays, which deals predominantly in central bank digital currencies (CBDCs), the antithesis of decentralized cryptocurrencies like Bitcoin.

In the two months since FTX collapsed, the Bahamas’ willful embrace of crypto has come under the microscope, along with its approach to regulating the industry. And Philip Davis, prime minister of the Bahamas, has had to come out on the defensive.