Two solid days of quality engagements with SEC Nigeria on the best approach to regulating Fintech, Cryptocurrency and virtual financial assets, facilitated by SEC Nigeria, fsdAfrica, EFInA, and UKaids.
"Regulate, but don't stifle innovation".
That was our message.
This is by far the most fruitful deliberation with any Regulatory Agency on this subject matter.
It was an awesome experience.
Nigeria will get it right in this Blockchain stuff!
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.
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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.
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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
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!
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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!
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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
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
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13. SEC - Nigeria CAPACITY BUILDING SESSION ON REGULATING INNOVATION
THE NATION AWAITS
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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.
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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.
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• DIGITAL ASSET ANONYMITY/PSEUDONYMITY
• EASY CROSS BORDER TRANSFER/PAYMENTS/ TAX EVASION
• DARKNET TRANSACTION
• FRAUDULENT PUBLIC OFFERS (ICOs) ETC.
17. DIGITAL FINANCIAL ASSETS RISKS
DARKNET OPERATIONS
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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
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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.
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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
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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
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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.