Crypto assets - Afrikan Heroes

IMF Warns That Crypto Assets May Displace Local Currencies in Developing Countries

December 12, 2021

The International Monetary Fund has said some emerging markets and developing economies face immediate and serious risks of currency substitution by crypto assets.

The IMF disclosed this in a report titled, ‘Global Crypto Regulation Should be Comprehensive, Consistent, and Coordinated’ released on Thursday.

In the report, the IMF said its mandate is to safeguard the stability of the international monetary and financial system.

The global lender said, “Some emerging markets and developing economies face more immediate and acute risks of currency substitution through crypto assets, the so-called cryptoisation.

“Capital flow management measures will need to be fine-tuned in the face of cryptoisation. This is because applying established regulatory tools to manage capital flows may be more challenging when value is transmitted through new instruments, new channels and new service providers that are not regulated entities.”

According to the IMF, crypto assets will soon pose systemic financial stability in some countries as policy makers struggle to monitor risks.

It added that crypto assets were drastically changing the financial system it was trying to protect.

Read also How Rising Cybercrimes are Impacting on Business Output in South Africa

The IMF said, “Crypto assets and associated products and services have grown rapidly in recent years. Furthermore, inter linkages with the regulated financial system are rising.

“Policymakers struggle to monitor risks from this evolving sector, in which many activities are unregulated. In fact, we think these financial stability risks could soon become systemic in some countries.”

“While the nearly $2.5tn market capitalization indicates significant economic value of the underlying technological innovations such as the blockchain, it might also reflect froth in an environment of stretched valuations.”

According to the international fund body, identifying, monitoring, and management of crypto-related risks continues to defy regulators and firms.

It added that in developing economies for instance, cryptoisation was threatening to replace domestic currency, and circumvent exchange restrictions and capital account management measures.

The IMF said, “Such risks underscore why we now need comprehensive international standards that more fully address risks to the financial system from crypto assets, their associated ecosystem, and their related transactions, while allowing for an enabling environment for useful crypto asset products and applications.”

The IMF added that crypto’s cross-sector and cross-border remit limits the effectiveness of national approaches. The body said, “Countries are taking very different strategies, and existing laws and regulations may not allow for national approaches that comprehensively cover all elements of these assets.

“Importantly, many crypto service providers operate across borders, making the task for supervision and enforcement more difficult. Uncoordinated regulatory measures may facilitate potentially destabilising capital flows.”

According to the IMF, there is a need for a global regulatory framework that provides a level playing ground along the activity and risk spectrum.

It said crypto-asset service providers that deliver critical functions should be licensed or authorised.

The IMF said, “These would include storage, transfer, settlement, and custody of reserves and assets, among others, similar to existing rules for financial service providers.

“Licensing and authorisation criteria should be clearly articulated, the responsible authorities clearly designated, and coordination mechanisms among them well defined. Requirements should be tailored to the main use cases of crypto assets and stablecoins.”

The IMF added there was an urgent need for cross-border collaboration and cooperation to address technological, legal, regulatory, and supervisory challenges.

“Crypto assets are potentially changing the international monetary and financial system in profound ways,” it added.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Spanish Banks Interested in Offering Crypto Assets to Their Customers

October 23, 2021

Spanish banks are preparing for the possibility of offering crypto assets directly to their customers. According to new regulations, the Bank of Spain must formulate a list of virtual asset service providers and custody companies. However, these institutions are still not sure if they must apply, because banks already comply with anti-money laundering directives derived from other laws.

Spanish banks are interested in offering cryptocurrency services to their customers and will be making arrangements to comply with upcoming regulations. Spanish banks are already on track to register for the list of virtual asset service providers and custody organizations that must be compiled by the Bank of Spain before October 29.

The Bank of Spain announced it would release the paperwork and instructions for interested parties in the upcoming registry, but failed to do so. This has made banks uncertain whether they need to register again under applicable laws. Banks in Spain already comply with anti-money laundering laws, so for some experts, re-registering should not be necessary for banks to offer crypto services.

According to Gloria Hernández Aler, a partner of the regulatory advisory firm Finreg, “It would not make sense for a bank to have to go through the requirements imposed by the standard. However, it does make sense for them to notify that they are going to provide this type of service and, probably, they will need to change their money laundering policy”.

Some banks that operate in Spain have already established plans to open crypto operations or are already operating with cryptocurrencies abroad. This is the case for BBVA, which has already established a commercial crypto asset in Switzerland that offers exchange and custody services. Caixabank, another Spanish bank, is starting a pilot program offering these services in partnership with Onyze, a company that offers a custody-as-a-service program for enterprises. However, this pilot will not be offered to customers for the foreseeable future.

The cryptocurrency regulatory framework for the European Union, called MICA (Markets In Crypto Assets), is still under development. Sources state that while it will be difficult for the framework to be ready this year, all signs point to a release in early 2022.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

South Africa Says It Has No Plans To Ban Trading In Crypto Assets

June 6, 2021

As more individuals invest in crypto-assets, South Africa’s National Treasury says it is evaluating a range of possible regulatory paths in South Africa. The Treasury noted that crypto assets have expanded significantly in South Africa over the previous five years, with consumers predominantly investing in 12 main crypto-asset trading platforms such as Luno, Altcoin Trader, and VALR, in a recent presentation to parliament.

“Crypto-assets have become too big to ignore and pose a number of risks for consumers if not sufficiently regulated,” it said.

Here Is What You Need To Know

Treasury believes that there are at least two million retail investors in the nation using these platforms, with daily transaction volumes of R2 billion.

However, it is feared that at least half of these investors do not completely comprehend how these assets function, preferring to focus on returns of 50% or more, according to the report.

Likely Approaches To Be Adopted By The Regulator

According to Treasury, authorities in South Africa now have a choice of essentially three approaches:

A Complete Ban: A comprehensive ban is not recommended, according to Treasury, because South Africa is far past the point where this is a possible, given the broad acceptance of crypto-assets. It cautioned that a prohibition would push activities underground and need increased policing. South Africa is also a member of the Financial Action Task Force (FATF), an intergovernmental organization that mandates the country to regulate cryptocurrency service providers.

Do nothing — Treasury has stated that given South Africa’s participation in the FATF and local organizations that require consumer protection, such as the Financial Sector Conduct Authority, this is not an option (FSCA).

Regulate — According to Treasury, regulating crypto-asset operations is the only viable solution. Rather than the commodity itself, this should control the services, such as wallets and exchanges. It did warn, however, that regulation is not the same as endorsement, and that the public should be made aware of cryptos’ intrinsically volatile and dangerous character. It also recommends that crypto-assets stay unregistered as legal currency and unrecognized as electronic money.

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Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning write

Nigeria Goes After Cryptos, Now Requires All Traded Crypto Assets To Be Registered. What Does This Mean For Crypto Startups In The Country?

September 15, 2020

Nigeria ’s Securities and Exchange Commission, in charge of regulating investments and securities in Nigeria has some new words for all crypto traders, including crypto advisors in the country: all crypto assets are securities and must be registered! In a new statement, the commission is challenging anybody who says that the type of cryptos they offer are not securities (and therefore should not be registered) to prove so to it. This would be a very long process, including having to go through a legal battle — in the country’s Investments and Securities Tribunal — if need be.

What Do The Rules Say?

The rules are sweeping in their entirety. First, it says that all virtual crypto assets issued in Nigeria are securities, unless proven otherwise. In Nigeria, under the Investments and Securities Act, which establishes SEC, securities simply mean any shares or other instruments offered by a company, usually to members of the public.

Who Exactly Will Be Regulated Under The Rules?

The rules say that any person who renders any form of blockchain-related and virtual digital asset services must be registered by the Commission. Such services include, but not limited to receiving, transmitting or executing any crypto orders on behalf of other persons whether on a personal account or on a public platform. Activities also covered include advising generally on cryptos; rendering crypto-related custodian or nominee services.

Are All Crypto Assets To Be Registered?

By Section 54 of Nigeria’s Investment And Securities Act, SEC is only mandated to register all securities of a public company and all securities or investments of a collective investment scheme. A public company in Nigeria is one which has more than 50 members and which can invite members of the public to subscribe to its shares. A collective investment scheme is a scheme whereby members of the public are invited or permitted to invest money or other assets in a portfolio.

It follows therefore that SEC still retains the power to register crypto assets under a collective investment scheme, even though the crypto company is not a public company and does not invite members of the public to subscribe to its shares.

In any case, SEC is not registering crypto assets held by individuals unless the individual holding it trades generally in cryptos; that is to say, the individual runs a platform or a medium for receiving and dealing in cryptos.

The most important words are that the cryptos are traded on a recognised exchange or dealt with as an investment. Therefore where it is not traded on a recognised exchange or dealt with as an investment, it may not be registered with the commission.

Generally, utility tokens or “Non-Security Tokens” (e.g., virtual tokens, which provide users with a product and/or service) need not be registered, unless they are traded on a recognised investment platform.

Nigeria crypto registered Nigeria crypto registered

What Happens To Existing Security Offerings?

By the new rules, all Digital Assets Token Offering (DATOs), Initial Coin Offerings (ICOs), Security Token ICOs and other Blockchain-based offers of digital assets within Nigeria or by Nigerian issuers or sponsors or foreign issuers targeting Nigerian investors will have three (3) months to either submit the initial assessment filing or documents for registration.

What Happens If The Issuer Of Cryptos Is Based Outside Nigeria, But Offers Cryptos In Nigeria?

By the new rules, the Commission may require Foreign or non-residential issuers or sponsors to establish a branch office within Nigeria. However foreign issuers or sponsors will be recognized by the Commission where a reciprocal agreement exists between Nigeria and the country of the foreign issuer or sponsor.

A recognition status will also be accorded, where the country of the foreign issuer or sponsor is a member of the International Organization of Securities Commissions (IOSCO).

The implication of this is that, under the new rules, it may be difficult getting foreign-based crypto issuers to register in Nigeria unless SEC forces them to open offices in Nigeria.

What Is The Process Of Registration

Registration is simple. First, the applicants are given the opportunity of proving that the virtual assets offered by them do not constitute securities by making an initial assessment filing.

However, where the finding of the Commission is that the virtual assets are indeed securities, then the issuer or sponsor must register the digital assets.

Are There Exemptions?

Yes. If the cryptos are offered through crowdfunding portals or other exempt methods.

What Happens If The Securities Are Not Registered?

Under Section 13(x) of ISA, SEC may seek judicial order to freeze the assets (including bank accounts) of any person whose assets were derived from the violation of the laws.

The Implication Of These For Crypto Startups In Nigeria

Those who will be most affected by the new rules are established Nigeria-based crypto platforms offering crypto-related services in the West African country. However, there is still ambiguity around the rules as the rules state that crypto assets are neither issued nor guaranteed by any jurisdiction, — they fulfill their functions only by agreement within the community of users of the crypto Asset. In others words, is it possible to legitimize what has no background in law? That is, shouldn’t crypto assets be treated as matters of personal contracts between parties? In any case, while the latest regulation may be an edge for platforms that are able to append the badge of legitimacy from SEC, nobody is really sure of how the government wants to wield its new cudgel. Anybody dissatisfied with the decisions of SEC may go to the Investment And Securities Tribunal.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer