Bermuda and the Cost of Being Small: A Payment, Followed Through the Rails

A payment, followed

Consider, as an illustration, a small guesthouse in St. George's. A visitor who has just landed at L.F. Wade pays for a week's stay by card. The guesthouse later needs to pay an overseas supplier, and at some point to move part of its balance off the island.

Every step of that journey runs through rails the guesthouse does not control. The January announcement of the programme, issued by Circle, described the problem this way: being classified alongside Caribbean and other island jurisdictions drives up fees from payment processors and local banking rails, squeezing already thin merchant margins. The card payment carries those costs on the way in. The supplier payment carries a different set on the way out.

None of this is unusual for a small economy. What is unusual is that Bermuda has decided to build a second path.

The plumbing behind the payment

The outbound leg is where scale bites hardest. Bermuda's 2020 mutual evaluation report noted that the island's four banks act as respondent banks only, relying on foreign correspondent banks for their access to the wider system. A wire from the guesthouse to its supplier depends on that relationship holding.

That relationship has been getting more expensive. A 2017 IMF working paper on the Caribbean found that as global banks de-risked, correspondent banking costs rose substantially in some cases, and that jurisdictions reporting higher correspondent fees generally also reported higher customer fees for wire transfers and foreign currency drafts. In November 2024, the Premier told the House of Assembly that the cost of compliance needed to retain correspondent banking has risen significantly worldwide. A BMA outreach presentation to banks in October 2026 was blunter: lost or repriced correspondent relationships can sever access to the US dollar and global payments.

A dollar-denominated stablecoin offers a different route. It settles on a public ledger without a chain of correspondent intermediaries for each transfer. It does not remove compliance: know-your-customer checks, sanctions screening and licensing still apply to the firms involved. What changes is where reconciliation happens and who holds the record.

There is a catch on the return leg, and Premier Burt named it himself at Consensus in May: a vendor who accepts digital assets but cannot use and spend them inside the local economy has a problem. A second rail is only useful if both ends of the guesthouse's journey connect to it.

A second rail, built under supervision

Bermuda's answer was announced at the World Economic Forum in Davos on 19 January 2026: a plan to become what the Government called the world's first "fully onchain national economy", with Circle and Coinbase as infrastructure partners. The programme covers government agencies piloting stablecoin-based payments, local banks and insurers integrating tokenization tools, and a national digital finance literacy effort. The Royal Gazette reported that officials stressed the initiative is voluntary, and The Block, citing a person with direct knowledge, reported that the partnership is non-exclusive and the goal aspirational.

The plan sits on regulatory groundwork laid years earlier. In 2018 Bermuda introduced the Digital Asset Business Act, one of the first comprehensive licensing regimes for digital asset firms. The Bermuda Monetary Authority licenses in tiers, Class T for testing, Class M for modified operations and Class F for full licences, and its 2025 annual report records 50 supervised digital asset businesses: 22 Class F, 21 Class M and 7 Class T. The Authority also runs a regulatory sandbox and innovation hub, and in late 2025 launched an Embedded Supervision Pilot exploring oversight built on real-time data. Add a long history as an insurance and reinsurance centre, and the pattern looks consistent: a small jurisdiction competing on regulatory quality rather than size.

The Government has also been here before. In October 2019, Premier Burt committed to accept one-to-one US dollar backed stablecoins licensed by the BMA for taxes, fees and services, and said at the time that the risks of launching a Bermudian digital currency outweighed the opportunities. Regulating private dollar tokens rather than issuing a sovereign one remains the through-line.

Ten months after Davos, the first numbers are in. Following a visit to Hamilton by Coinbase's chief executive on 9 November, the Government said more than 60 local businesses and over 1,000 residents have been onboarded to wallets and USDC on Base, with more than $65,000 in USDC moved through the programme. These are pilot-scale figures. The Government has not published data on visitor use, so the guesthouse's card-paying guest is not yet part of the evidence.

Same dollar, different rail

The macro fit is what makes Bermuda a clean test. Under the Bermudian Dollar Parity Order 1981, the Bermudian dollar is held at parity with the US dollar, a link the BMA dates to 1972. Bermuda does not run an independent monetary policy; the peg ties it to the US dollar. For the guesthouse, a US dollar stablecoin introduces no new currency risk. It is the same unit of account on a different rail.

That matters for anyone watching small and offshore jurisdictions. Where currencies float or are managed, widespread use of dollar stablecoins raises real questions about currency substitution and monetary control. In an economy already pegged one-to-one, those concerns are much smaller, and the live questions become settlement finality, operational resilience, custody and supervision.

It also sharpens the policy trade. Bermuda is relying on licensed private issuers and supervised intermediaries rather than building public payment infrastructure itself. That brings speed and global interoperability. It also brings concentration and counterparty dependence, which is why the regime around the issuers matters more than the issuers themselves.

The view

Bermuda is not yet a transformed onchain nation. It is a small, controlled test of whether regulated digital dollars can lower the cost of a small economy plugged into a large one, measured one guesthouse, one supplier payment, one converted balance at a time. If it works, the lesson will likely not be about any single token or company. One view, and it is only a view: lasting change tends to happen in the rails, in who settles, who supervises and who holds the record.

Own the layer.