SEC Nigeria Capacity Building Session by Blockchain Nigeria User Group
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The document outlines the efforts of the Blockchain Nigeria User Group (BNUG) to foster a pro-innovation environment for blockchain and cryptocurrency in Nigeria, focusing on regulatory frameworks and capacity building. It highlights the booming crypto industry in Nigeria, the need for regulatory clarity, and the risks associated with digital financial assets including money laundering and scams. Additionally, it emphasizes the importance of creating a knowledgeable regulatory ecosystem that supports blockchain innovation while addressing potential risks.
SEC Nigeria Capacity Building Session by Blockchain Nigeria User Group
- 1. SEC - NIGERIA CAPACITY BUILDING SESSION ON REGULATING INNOVATION The State of Blockchain & Digital Financial Assets in Nigeria www.blockchainnigeria.group www.blockchainusers.org Presented by: Blockchain Nigeria User Group
- 2. ABOUT BLOCKCHAIN NIGERIA USER GROUP A vibrant group of Blockchain and Cryptocurrency developers, enthusiasts and investors helping to drive adoption and awareness of the Blockchain industry in Nigeria and across Africa. The objective of Blockchain Nigeria User Group (BNUG) is simply to create a pro-innovation environment for the industry, meeting the growing global demand for accessible, transparent and democratic financial and technical systems. Blockchain Nigeria User Group is a sub-set of Organization of Blockchain Technology Users (OBTU), an association that desires Self-Regulatory Organisation (SRO) status for the Blockchain Industry in Nigeria and across Africa. 2
- 3. WHAT WE DO • - Support Policymakers in their need to tackle their challenges in understanding blockchain, both the functionality and risks of decentralized cryptocurrency, in order to create an appropriate legal and regulatory framework that will foster the community. • - Protect Enthusiasts and end users through training, public enlightenment, risks assessment and fraud alerts. • - Advocacy for the creation and maintenance of an enabling regulatory environment for Blockchain Project Development. • - Identification of Possible use cases for Blockchain Implementation and spur innovative Startups in that direction. • - Bridge Talent Gap through capacity building/ Incubation at Blockchain Innovation Centers (Blockchain Technology Hubs) • - Hold National Conferences and Regional Summits to raise Blockchain and Cryptocurrency Awareness. 3
- 4. BLOCKCHCAIN & DIGITAL FINANCIAL ASSETS IN NIGERIA T H E L A N D S C A P E SEC - Nigeria CAPACITY BUILDING SESSION ON REGULATING INNOVATION 4 44% Exchanges/ Financial Services 35% Education/ Media & Advocacy 18% Supply Chain/ Real Estate/ Consulting
- 6. NIGERIA’S BLOCKCHAIN LANDSCAPE 6 Birrion.io Kudi Exchange KurePay Quidax Belfrics Xendbit Kubitx Bitmama Bitfxt Tradefada Sabiii Busha NairaEX Wallet.ng Links to Exchanges
- 7. ECONOMIC FUNDAMENTALS DRIVING THE DEMAND FOR CRYPTOCURRENCIES IN NIGERIA. • The prospect of wealth creation. • The prospect of solving the long- standing in-bound and outbound remittances problems. • The prospect of using blockchain technology to leapfrog solutions. • The prospect of filing the country’s infrastructure and social innovation gaps. COMMON CRYPTOCURRENCY TRANSACTION ENGAGED BY NIGERIANS • OTC (over-the-counter) Cryptocurrency pairs Trading (Brokering) (Day Trading) • Exchange of one token for another — for example, using Ethereum in exchange for Litecoin or Bitcoin; vice versa. • Receiving crypto payments in exchange for products, goods and services or as salary. • Air drops (typically new product lunch) • Peer 2 Peer Transaction • Mining/ minting coins • Initial Coin Offerings (ICO) • Lending services, etc. SEC - Nigeria CAPACITY BUILDING SESSION ON REGULATING INNOVATION 7
- 8. A BOOMING CRYPTO INDUSTRY H I G H T R A D I N G V O L U M E S Several foreign crypto Exchanges operating in Nigeria, have a combined transaction trade volume exceeding N4 Billion naira weekly! 8 LOCALBITCOINS.COM, PAXFUL.COM, LUNO.COM REMITANO.COM, COINCOLA.COM, BINANCE.COM
- 9. REGULATORY UNCERTAINTY • Cryptocurrencies & Blockchain Technologies bear a peculiar significance for Nigeria therefore creates considerable opportunities for both local and foreign investors. • Government and her agencies has to find a way to intelligently “legalize and regulate” crypto-businesses so that the industry can thrive. • There is currently no definitive regulation from the SEC, or CBN on investment in crypto- businesses or on Initial Coin Offerings (ICOs). • There is a need to determine whether cryptocurrencies should be classified as a currency or as a commodity, or whatever. Currently no one has a classification for these instruments. • There are also tax considerations that arise from a classification, either way. • But you cannot Tax what you have not defined. You cannot define what you do not understand. You cannot understand what you do not know! 9
- 10. DIGITAL ASSETS INVESTIGATION & TAXATION How Cryptocurrencies are viewed will determined how they would be taxed. A classification as a commodity will take cryptocurrencies out of the Exclusive Legislative List in the Nigerian constitution — not being legal tender- and provide state governments with the legislative competence to regulate and TAX cryptocurrencies. Different countries view Cryptocurrency in different ways. In some countries, it is viewed as Property, Asset, Security, Commodity, Foreign currency or Barter Items. Assuming cryptocurrencies be classified as currency by the Nigeria government, for instance, then CBN can rightly exercise regulatory control. SEC - Nigeria CAPACITY BUILDING SESSION ON REGULATING INNOVATION 10 NAVIGATING REGULATORY CONCERNS
- 11. 11 OF MLM, SCAMS & PONZIS 11 1. BTCInvestments 2. MMMBTC Online 3. Donation Hub 4. Naira Donation 5. Zigma 6. 247Helpers 7. Foster Funds 8. TwinKas 9. Liberty Funds 10. Loopers Club 11. PairMe 12. RevoSquad 13. NNN Nigeria 14. Loom
- 12. BLOCKCHAIN TECHNOLOGY IN ACTION Today, Blockchain technology is helping to improve Nigeria’s funding ecosystem for small businesses, where the traditional banking system seems to have failed woefully. SureRemit raised $7m Kora.Network raised $12 Projects NIGERIA CUSTOM SERVICE: The solution is expected to increase NCS revenue by approximately 50%. It will also help build global trust for Nigerian businesses through irrefutable data on goods manufactured in the country. It’s the first know public sector blockchain deployment in Africa. INTERSWITCH & MICROSOFT DLT FOR SUPPLY CHAIN 12
- 13. SEC - Nigeria CAPACITY BUILDING SESSION ON REGULATING INNOVATION THE NATION AWAITS 13 The Blockchain and Cryptocurrency communities across Nigeria are expecting the relevant agencies to make pronouncements regarding: • Security standards, • Customer service standards, • Risk management standards, • Standards for deployment of cryptocurrencies, and issuing ICOs, STO etc. • Industry-specific AML/CFT/ KYC, • Privacy issues, • Inward and outward remittances, • Exchange rate regulation, • A clear and UNAMBIGUOUS definition of ‘cryptocurrency’, • A clear delimitation of crypto-activities that are subject to regulation, • Decentralized and centralized repositories.
- 14. SEC - Nigeria CAPACITY BUILDING SESSION ON REGULATING INNOVATION ADEDEJI OWONIBI IS THE SENIOR PARTNER - FINANCIAL FORENSICS AND DIGITAL CURRENCY GOVERNANCE/ INVESTIGATIONS AT A&D FORENSICS LLC. 14 Digital Financial Assets Risks, Investigation and Forensics in Nigeria. To be handled by Adedeji Owonibi Advisory Board Member (OBTU) 10 mins -Max
- 15. DIGITAL FINANCIAL ASSETS RISKS ANTI-MONEY LAUNDERING AND COUNTERING FINANCING OF TERRORISM • Crypto Asset activities raise significant regulatory concerns for regulatory authorities and law enforcement agencies worldwide, particularly in relation to Money Laundering (“ML”) and Financing of Terrorism (“TF”). International bodies, such as the International Monetary Fund, the Financial Action Task Force (“FATF”), the Bank for International Settlements and the International Organisation for Securities Commissions (“IOSCO”), have issued different Digital Asset (including Crypto Asset and ICO) warnings to investors and market participants advising of the significant risks, including ML and TF risks, and the possibility of Digital Assets being used for illegal purposes. 15 • DIGITAL ASSET ANONYMITY/PSEUDONYMITY • EASY CROSS BORDER TRANSFER/PAYMENTS/ TAX EVASION • DARKNET TRANSACTION • FRAUDULENT PUBLIC OFFERS (ICOs) ETC.
- 16. DIGITAL FINANCIAL ASSETS RISKS PRIVACY COINS 16 Verge Zcash Dash Pivx Cloak Komodo NavCoin
- 17. DIGITAL FINANCIAL ASSETS RISKS DARKNET OPERATIONS 17 Verge Zcash Dash Pivx Cloak Komodo NavCoin AlphaBay, Hansa closed, Hydra opens in Russia, Deep Dot Web
- 18. DIGITAL FINANCIAL ASSETS RISKS ICO EXIT SCAMS 18 Verge Zcash Dash Pivx Cloak Komodo NavCoin $3M Frozen from Pure Bit Exit Scam in South Korea, Founder Apologized Pincoin ICO iFan Exit Scam Steals $660 Million from Vietnamese Investors – 48% monthly return BitConnect Promoter Arrested in Dubai on Suspicion of milking Cryptocurrency Investors Out Of Millions Of Rupees $14.5 with a promised 1% daily return MapleChange – $6M 912 btc Exit Scam “Due to a bug, We cannot refund anything and are closing down, including all our social media” Sky Mining – $35M Lost in Vietnam Mining scam – Founder disappeared NIGERIA: TAS MINER ($100 daily return), 2 Bitcoins in Poverty Alleviation Random Email Address Ballot (PAREAB), BITCOIN GENERATOR (Double Bitcoin after 100, 50 or 24hrs), The Billion Coin (TBC)
- 19. 19 Verge Zcash Dash Pivx Cloak Komodo NavCoin DIGITAL FINANCIAL ASSETS RISKS INVESTIGATION – HOW WE DO IT
- 20. SEC - Nigeria CAPACITY BUILDING SESSION ON REGULATING INNOVATION BOULEVARD ALADETOYINBO SECURITY TOKEN/ STO/ ICO/ IEO/ TGE LEGAL ADVISOR, FOUNDING PARTNER AT LEX FUTURUS GROUP, LLC., A FULL-FLEDGED BLOCKCHAIN TECH LAW FIRM. 20 Navigating Regulatory & Policy Concerns in Nigeria’s Blockchain & Cryptocurrency Ecosystem To be handled by Boulevard A. Aladetoyinbo Advisory Board Member (OBTU) 10 mins -Max
- 21. IN NAVIGATING THE REGULATORY AND POLICY CONCERNS REGARDING BLOCKCHAIN AND CRYPTOCURRENCY IN NIGERIA 21 Verge Zcash Dash Pivx Cloak Komodo NavCoin SEC has to; • Follow examples from other jurisdictions on how they deal with crypto-asset regulation. • Embark wholesale on a stakeholder industry consultation exercise. • Do more education, awareness, enlightenment, and capacity building as it is being done here today. • Define and taxonomize the crypto-asset class in a guideline/guide/guidance. What are crypto- assets? How can they be registered and regulated? • Register and regulate Crypto-assets Trading Platforms (CTPs)/Trading Venues(TVs). • Apply the extant securities regulation in the short term, but adopt a functional approach, where new issues are encountered, because of the peculiar nature of the blockchain/DLT atop which crypto-assets issue, list, trade, settle, clear and custody.
- 22. IN NAVIGATING THE REGULATORY AND POLICY CONCERNS REGARDING BLOCKCHAIN AND CRYPTOCURRENCY IN NIGERIA 22 Verge Zcash Dash Pivx Cloak Komodo NavCoin • Measures to instil confidence, preserve market integrity, protect crypto-asset investors, create & sustain liquidity events should be put in place. • Having regulatory remit over national, public currency operation system, the CBN should take the lead, so that the SEC will follow: CBN • Like many of its central bank counterparts, it should do a DLT PoC to determine whether or not it wants to introduce a CBDC or simply take a stand, so that the emerging crypto-asset investor ecosystem can begin to burgeon, knowing that it is government-backed & thus protected, and that there are regulatory clarity and certainty.
- 23. QUESTIONS/ COMMENTS 23 Matters arising from the presentation.
- 24. THANK YOU CHIMEZIE CHUTA FOUNDER/ COORDINATOR BLOCKCHAIN NIGERIA USER GROUP Protem Chairman, Organization of Blockchain Technology Users(OBTU) 24