Bermuda recently played host to Hub Culture’s Innovation Sprint. It was an exciting and busy couple of weeks that gave a bit of an idea of the potential for Bermuda in the fintech industry.

Although it is still early days, it cemented that there are players out there looking to build legitimate businesses on top of this technology that can and want to choose Bermuda as their home. Bermuda has a real opportunity to leverage its position and strengths to be a leader in the space.

The challenge is that the line between defining Bermuda as being held high as an example of a leading global standard for legitimacy and being bestowed with the moniker of “Scam Island” is thin and must be carefully managed.

One of the big concerns with the fintech industry and cryptocurrencies is that thus far it has been rife with scams; there’s no denying it. There have been many people keen to use the lack of knowledge in this new technology to take advantage of others. Although there is opportunity in the space, we need to ensure that only legitimate ventures qualify for the Bermuda Standard.

Thus, it is very important to draw a distinction between something that is a scam and simply a bad idea. It is the job of the Government and regulators to prevent scams, but not to stifle ideas. The challenge of trying to filter good ideas from bad is that it is really hard to tell the difference between what is a bad idea and what could change the world. For example, the Apple Newton was a bad idea and yet the iPhone changed the world. Both were incredibly similar.

Ideas are essential for fostering innovation. Regulators should not be focused on protecting an investor from taking a chance on an idea, but rather on preventing fraud. As an example, the job of casino regulators is not to prevent people from losing money, but to prevent people from being cheated out of it. To function efficiently, the market needs to be fair and transparent so that people are assured that they are getting what they paid for.

The recent announcement that Arbitrade has been granted permission to purchase a building has raised a lot of concern. There are many who outright claim them to be a scam and that we shouldn’t have any association with them. Considering how many of today’s tech giants were started in garages suggests that judging a company by its founding office is a poor benchmark. However, claiming relationships with licensed gold traders to back their tokens that turn out to be false doesn’t help their claims of legitimacy. Throwing money around and making grand pledges to buy the loyalty of Bermudians also seems a bit too good to be true.

Is Arbitrade a scam? It is hard to say with certainty without full transparency. They raised millions of dollars on the idea that they would invest in cryptocurrency mining machines, convert 50 per cent of the proceeds to gold, use 20 per cent to acquire more machines, 15 per cent to buy back their tokens and the remaining 15 per cent for operations. This was based upon the premise that cryptocurrency mining at the time could return your investment in less than a year. Was it a good idea? It is easy to say in hindsight of the cryptocurrency bubble popping that it wasn’t as lucrative as originally intended. Had the bubble not popped, however, it might well have played out in their favour.

Again, the job of the Government and regulators is not to protect people from bad ideas; it is to protect against fraud. A critical thing to consider with Arbitrade is looking at what they have claimed, what they have ultimately done with the money they raised and what they claim to do next. They have an obligation to their original investors to prove they haven’t defrauded anyone and have acted in their best interest. They have an obligation to their future investors to prove that all contracts and agreements upon which they will be raising money or selling products are legitimate. They have no obligation to prove their idea is a good one or to guarantee returns — that is a risk taken when investing, which they made clear in their disclaimer.

Thus, it is worthwhile to keep an open mind and let the evidence speak for itself. Companies and individuals make bad investments, bad decisions and say stupid things every day. No one is perfect. However, wilful misrepresentation for the purposes of fraud is not acceptable. If they can afford to buy buildings, fund tech hubs and throw money at charities, they have more than enough money to have their finances, contracts and overall business audited by a reputable “big four” firm. Subsequently, in the interest of showcasing that they are legitimate, it should all be published transparently. If that happens and they are given a clear bill of health, should it be the responsibility of the Government to get in the way?

Meanwhile, there is excitement to be had over some of the other players coming to the island that I had the chance to speak with personally. Companies such as Laureate Digital Securities and sister company Alpha Innovations aim to base their founding team of four in Bermuda, and conservatively aim to hire a small number of Bermudians in the coming months. It is not a splashy, hype announcement, but a realistic recognition that start-ups usually need to get established and grow their business before they can grow their staff.

There are others actively planning to bring jobs to the island and wanting to hire Bermudians. That will be announced in short order, although it isn’t my place to pre-empt them.

Then there is a wealth of companies waiting in the wings for a solution to the banking issue. This stands out as the big elephant in the room. Some already pledged to create jobs in flashy memorandums of understanding; others are playing “wait and see”. The key issue, however, is that if companies cannot bank here, then they cannot generate revenue here and thus will create no jobs. This is not an issue for Bermuda alone, but is instead a global one. Banking support is the big uncertainty holding back growth in the industry worldwide, over which a race is on to see who can solve it first.

It is also worth recognising that the bulk of the jobs in this industry will not require specialised tech expertise or vast industry knowledge. Saying everyone who wants a job in this industry will need to be a coder is like saying everyone in insurance needs to be an actuary. Sure, there are cases where specialised knowledge will be needed, but in the vast majority of cases, the kind of jobs that are being created are support roles suited to lawyers, accountants, compliance specialists, operations people, office administrators and the like. These are all roles for which we already have a pool of talent, which is an attractive bonus to those considering coming here.

If you did not go to the various events put on by Hub Culture’s Innovation Sprint, you missed out on a valuable opportunity to gain insight into this new industry. Representatives from IBM’s Hyperledger and MIT were on island, and open to chatting with those interested. The speakers and people attracted to talk and participate in the Liquidity Summit were industry leaders and wholly accessible to chat with at the various networking events.

It was a great showcase of the variety of approaches being experimented with and the interest people have in Bermuda’s participation in building the industry and helping it to grow. The only disappointment was that more Bermudians didn’t take advantage while it was here.

The overarching takeaway is that there is opportunity in this space if we’re willing to seize it. The key will be recognising our role as a host in ensuring we do everything in our power to prevent fraud, but not stifle ideas and innovation. We certainly have to be careful to avoid any situations that would result in us being labelled “Scam Island”, just as we cannot avoid every opportunity to be labelled the “Island of No”.

Success for our future will require a careful balance over the fine line of understanding how to say no to scams and yes to innovation. Hopefully, in doing so, we set the standard for legitimate business in this space, a Bermuda Standard, and that “Innovation Island” becomes the moniker most befitting our approach.

• Denis Pitcher is a software and technology solutions consultant with an interest in exploring the potential of blockchain and distributed-ledger technologies. He is also tech co-founder and chief architect of resQwest.com, a global tourism technology solutions provider. He can be reached at mail@denispitcher.com