$400M African fertilizer deal executed on blockchain.

A state-owned Moroccan fertilizer company has executed a $400 million transaction using blockchain technology, in what it says is a first for intra-African commerce.


In a deal facilitated by the Eastern and Southern African Trade and Development Bank, OCP Group sold phosphate fertilizer exports to Ethiopia using blockchain technology, in a deal worth an initial $270 million. The remaining deals will be executed in the coming months, taking the full transaction value to $400 million, reports Global Trade Review.

Trade finance deals which are typically executed over a matter of weeks can be finalized in hours using blockchain, according to OCP Group. TDB previously used distributed ledger technology to facilitate the export of $22 million worth of sugar from India to Ethiopia. The companies say that the use of blockchain tech simplifies the supply chain process, making it easier to validate documentation and improve transparency.

TDB CEO Admassu Tadesse said the bank has been focused on maintaining liquidity while cross-border trade slowed down due to the COVID-19 pandemic. 

“As part of our response to the pandemic, we have been providing liquidity to our clients to curtail cross-border trade and supply chains disruptions, and ultimately, to help our member states continue working towards their development objectives,” Tadesse said.

Tadesse stated that the utility of blockchain technology had made itself known during the logistics slow-down. “With transport logistics slowing down, blockchain has been instrumental in making this happen.”

Non Fungible Tokens (NFTs) EXPLAINED.


Non-fungible tokens, or NFTs, are the latest cryptocurrency phenomenon to go mainstream. And after Christie’s auction house sold the first-ever NFT artwork — a collage of images by digital artist Beeple for a whopping $69.3 million last week — NFTs have suddenly captured the world’s attention.

NFT

NFTs offer a blockchain-created certificate of authenticity for a digital asset such as an artwork, a piece of music or a video. The interest has created a digital market that boasted $250 million in sales in 2020, with NFTs reaching new levels of hype after a digital artwork went for $69.3 million at a Christie’s auction last week. The craze has also driven scores of people to put up their own digital art and tweets for sale as NFTs, and even toilet paper companies are trying to ride the wave.

What’s an NFT? 

This is the part that takes a bit of open-mindedness. An NFT is a unique digital token, with most using the Ethereum blockchain to digitally record transactions. It’s not a cryptocurrency like Bitcoin or Ethereum, because those are fungible and exchangeable for another Bitcoin or cash. NFTs are recorded in a digital ledger in the same way as cryptocurrency, so there’s a listing of who owns each one.

What makes an NFT unique is the digital asset tied to the token. This can be an image, video, tweet or piece of music that’s uploaded to a marketplace, which creates the NFT to be sold. The technology started in 2015 when unique tokens were created for the Ethereum blockchain, but they became a big deal in February.

Osinachi Jacon is a Nigerian Artist, and he publishes his Artworks on a websites where buyers bid in Ether,,for the privilege of owning an Osinachi’s artwork. That makes the 29-year-old one of Nigeria’s and Africa’s leading lights in the current wave of crypto art and Non-Fungible Tokens (NFTs).

Last Sunday, Osinachi’s Mirror Mirror and Am I Pretty sold on SuperRare for 9 ETH and 13.2 ETH respectively – $16,227 and $23,633 as at when the bids ended. The most expensive yet? This sold nine days ago (also on SuperRare) for 20 ETH which was $35,919.

So buying an NFT means I own the asset, right?

Nope. 

That’s the real kicker to understanding the whole concept. The person who buys the NFT doesn’t own the actual asset. 

“NFTs challenge the idea of ownership: digital files can be reproduced infinitely and you do not (usually) buy the copyright or a license when purchasing an NFT,” said Jeffrey Thompson, associate professor at the Stevens Institute of Technology in Hoboken, New Jersey. 

For example, the creator of the Nyan Cat meme sold an NFT of it for $590,000. The person who bought the token owns the token but doesn’t actually own the meme. That still belongs to the creator, who held onto the intellectual and creative rights. 

What the owner of the token has is a record and a hash code showing ownership of the unique token associated with the particular digital asset. People might download Nyan Cat and use it on social media if they want, but they won’t own the token. This also means they can’t sell the token like the owner can. 

Why are NFTs going for such high prices? 

As with physical collectibles such as Beanie Babies, baseball cards and toys, there’s a market for NFTs. The buyers tend to be tech-savvy individuals who understand the idea of wanting to purchase a digital good and likely made a killing this past year with cryptocurrencies. Ethereum, for example, went from just over $100 last March to a current price of about $1,800. In some cases, buyers are just flexing their digital wallets to show off how much crypto they have, but for others, there’s a deeper interest. 

“Specifically for art-related NFTs, there is a huge surge in demand due to their novelty and creativity of early artists,” Jason Lau, chief operating officer of crypto exchange OKCoin, said in an email. “Whether it’s a physical work with an attached NFT (think of it as a digital autograph and proof of veracity), or an entirely digital work (where the NFT is the art), this new medium is opening new ways for collectors and artists to explore their relationship with the artwork itself.”

It’s also great for the artists, says Lau. By selling digital art directly to those interested, an artist can begin monetizing work without having to try to sell it in a gallery. 

What kind of NFTs are there? 

NFTs can be tied to any digital asset. Twitter CEO Jack Dorsey sold the first-ever tweet, as an NFT, for $2.5 million. Tampa Bay Buccaneers tight end Rob Gronkowski created his own limited-edition trading cards that sold as NFTs for a total of $1.8 million. Kings of Leon sold NFTs of their newest album and made over $2 million. There’s even one guy who sold NFTs for his farts.

If you don’t want to jump right in bidding six figures, there are multiple NFT marketplaces out there, with Opensea being the biggest. Buyers can search for art, domain names and random collectibles to bid on without having to break the bank. 

Basketball fans might want to check out NBA Top Shot, where they can buy video highlights via packs, similar to how collectible trading cards are sold. A rare highlight like a two-handed reverse windmill slam by Lebron James sold for $179,000. 

As the hype for NFTs grows, expect more digital assets to come up for sale and bring in some big money. 

What are the downsides?

A drawback is the hundreds of dollars in fees required to create an NFT. If you’re making your own token on the Ethereum blockchain, you need to use some Ethereum, which as mentioned earlier is kind of pricey. Then after you make an NFT, there’s a “gas” fee that pays for the work that goes into handling the transaction and that’s also based on the price of Ethereum. Marketplaces simplify the process by handling everything for a fee when an NFT is sold. 

WHAT IS A STABLE COIN? PART 1

A stablecoin is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price.

Stablecoins try to tackle price fluctuations of cryptocurrencies by tying the value of cryptocurrencies to other more stable assets – usually fiat. Fiat is the government-issued currency we’re all used to using on a day-to-day basis, such dollars and euros, and it tends to stay stable over time. 

Usually the entity behind the stablecoin will set up a “reserve” where it securely stores the asset backing the stablecoin – for example, $1 million in an old-fashioned bank (the kind with branches and tellers and ATMs in the lobby) to back up one million units of the stablecoin. 

This is how a digital stablecoin and a real-world asset are tied together. The money in the reserve serves as “collateral” for the stablecoin. A user can theoretically redeem one unit of a stablecoin for one unit of the asset that backs it. 

There is a more complex type of stablecoin that is collateralized by other cryptocurrencies rather than fiat yet still is engineered to track a mainstream asset like the dollar. 

Maker, perhaps the most famous stablecoin issuer that uses this mechanism, accomplishes this with the help of Collateralized Debt Positions (CDPs), which lock up a user’s cryptocurrency collateral. Then, once the smart contract knows the collateral is secured, a user can use it to borrow freshly minted dai, the stablecoin.

A third variety of stablecoin, known as an algorithmic stablecoin, isn’t collateralized at all; instead, coins are either burned or created to keep the coin’s value in line with the target price. Say the coin drops from the target price of $1 to $0.75. The algorithm will automatically destroy a swathe of the coins to introduce more scarcity, pushing up the price of the stablecoin. 

This type of stablecoin is much less popular so far. One of the most popular stablecoins following this model, basis, shut down in 2018 due to regulatory concerns. 

Types of stablecoin collateral

Using this framework, stablecoins come in a range of flavors, and the collateralized stablecoins use a variety of types of assets as backing:

  • Fiat: Fiat is the most common collateral for stablecoins. The U.S. dollar is the most popular among fiat currencies, but companies are exploring stablecoins pegged to other fiat currencies as well, such as BILIRA, which is pegged to the Turkish lira.
  • Precious metals: Some cryptocurrencies are tied to the value of precious metals such as gold or silver.
  • Cryptocurrencies: Some stablecoins even use other cryptocurrencies, such as ETHER, the native token of the Ethereum network, as collateral.

Bitcoin ETF Explained

Photo by Pixabay on Pexels.com

A bitcoin ETF is an exchange-traded fund that specifically tracks the price of the leading cryptocurrency and allows traders to purchase or sell the security on a stock exchange throughout the day. They can be cash-settled or physically settled, meaning investors will receive either fiat currency or actual bitcoin (BTC+4.03%) upon exiting, respectively.

ETFs are regulated traditional financial products and can be bought through a number of retail-friendly mobile trading apps, including Robinhood, Trading212, TD Ameritrade and Fidelity. The most popular ones track major stock indexes, such as the Standard & Poor’s 500 Index, or other traditional assets and commodities like oil and gold.

Bitcoin ETFs have been a hot topic in the crypto space for many years, ever since the Winklevoss twins “Coin” Bitcoin ETF filed with the U.S. Securities and Exchange Commission (SEC) in 2013 was rejected. It was widely believed that a bitcoin ETF would usher in a new wave of institutional investment into the crypto industry, bringing much-needed maturity and stability to the market. Seven years on, however, the SEC still has yet to approve a bitcoin ETF despite dozens of proposals from multiple companies including a second Winklevoss Twin ETF in 2018, one from Bitwise, five from Direxion, two from GraniteShares and many more.

The main arguements given by the SEC for these repeat rejections have been that the bitcoin market is too volatile, lacks sufficient surveillance and is too easily manipulated.

Things may be about to change, however, as Canada’s financial regulator, the Ontario Securities Commission (OSC), recently approved the world’s first two bitcoin ETFs in quick succession. The Purpose Bitcoin ETF (BTCC) and the Evolve Bitcoin ETF (EBIT) are both physically settled ETFs and have applied to be listed on the Toronto Stock Exchange. TradeBlock, a CoinDesk subsidiary, is the index provider for the Purpose ETF.

With the arrival of a bitcoin ETF in North America, many are optimistic the SEC will follow suit soon in the United States especially if Gary Gensler, former commissioner of the Commodity and Futures Commission (CFTC) and MIT blockchain tutor, is confirmed by the US senate to replace former SEC Chairman Jay Clayton.

“My guess is we get an ETF this year, says Mike Novogratz, CEO of Galaxy Digital and former colleague of Gensler at Goldman Sachs in the late 1990s.

“Gary taught a class on blockchain at MIT and on crypto. He understands it cold. He’s progressive, right? And progressives broadly are going to go after … the rent takers. Crypto is not a rent taker… Crypto is trying to disrupt the rent takers.”

Bloomberg Senior ETF analyst, Eric Balchunas,tweeted his support for the new bitcoin ETFs, adding, “U.S. usually follows shortly after. Good sign for U.S. bitcoin ETF.”

Sui Chung, CEO of CF Benchmarks, also anticipates pressure will now be on the SEC to follow suit. “Now that the OSC has said that if a product is well constructed enough the crypto market is sufficiently mature for these types of financial products, the industry’s attention inevitably turns south of the border to the U.S.”

Bitcoin ETF FAQs

Who can invest in ETFs and how do you trade them?

You don’t need to be an accredited investor to purchase ETFs. Anyone can invest in them.

All you need in order to begin investing in ETFs is to set up an online brokerage account or download one of the many mobile trading apps. From there, you’ll be able to buy and sell a wide range of ETFs that track a number of different markets. A list of leading mobile trading services can be found here.

What are the pros and cons of trading ETFs?

While it might seem counterintuitive to invest in a bitcoin ETF rather than buy actual bitcoin, there are a number of advantages to doing it this way, namely:

  • No need to go through the process of having to store crypto safely yourself
  • Buying an ETF through an online broker is significantly more secure, faster and less prone to outages than purchasing digital assets directly from a crypto exchange
  • There are much clearer tax implications and guidance for traditional financial products than digital assets
  • Stock exchanges are more liquid than crypto exchanges so it’s much easier to buy and sell ETFs

There are, however, a number of disadvantages to investing in a bitcoin ETF as opposed to buying the asset directly.

  • ETFs can only be bought and sold during market trading times, whereas crypto markets run 24/7. This means that if the price of bitcoin moves sharply, you could potentially have to wait hours before you have the chance to offload to buy up more.
  • It’s free to hold your own bitcoin but ETFs charge management fees.
  • Buying ETFs requires you to complete know-your-customer (KYC) checks but bitcoin can be bought anonymously peer-to-peer.
  • ETFs require you to trust third-party custodians.

Press Release Issued by Blockchain Industry Coordinating Committee of Nigeria(BICCoN) Concerning the CBN circular on crypto.

Outline of our response to the CBN circular and press statement
We respond as follows:

  1. Nigeria’s blockchain & crypto industry is shocked and disappointed by the directive in
    the CBN circular;
  2. Emerging technologies, financial technology (FinTech), blockchain, cryptocurrency,
    bitcoin, and adoption across the world;
  3. The growth of Nigeria’s blockchain & crypto industry to No. 1 in Africa and a global
    leader in terms of crypto adoption and market volume;
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  4. The crypto industry’s contributions to Nigeria’s economy and competitiveness on the
    global crypto map;
  5. Legitimate threats and risks of cryptocurrency adoption and the regulatory approach to
    mitigating them;
  6. Opportunities Nigeria and Nigerians will miss with the CBN ban and unintended
    negative consequences; and
  7. Availability of industry stakeholders for a dialogue with the CBN in Nigeria’s best
    interest.
  8. Nigeria’s blockchain & crypto industry is shocked by the directive in the CBN
    circular.
    Firstly, it is with shock that the emerging blockchain & crypto industry in Nigeria received the
    news of the directive in the CBN circular of 5 February 2021. Before the authenticity of the
    letter was eventually confirmed, a number of industry stakeholders were hoping that the letter
    was not by the CBN. Sadly, it turned out to be.
    Secondly, contrary to the CBN’s claim in its follow-up 7 February 2021 letter that “the CBN
    circular of February 5, 2021 did not place any new [emphasis ours] restrictions on
    cryptocurrencies”, it in fact does. By the latest circular, the CBN has effectively banned DMBs,
    NBFIs, and OFIs from providing banking and other financial services to persons and/or
    entities transacting in cryptocurrency or operating cryptocurrency exchanges within their
    systems. This is not a mere reiteration of the CBN circular of 12 January 2017. In the 12
    January 2017 letter which though prohibited DMBs, NBFIs, and OFIs from using, holding,
    trading and/or transacting in cryptocurrencies, the CBN permitted these DMBs, NBFIs, and
    OFIs to provide banking services and other financial services to virtual currency
    exchangers/customers subject to ensuring that these exchangers/customers have effective
    Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) controls
    that enable them comply with customer identification, verification, and transaction
    monitoring requirements. As required in that circular, it is only when banks and other
    financial institutions are dissatisfied with the controls put in place by the virtual currency
    exchangers/customers should the customer relationship be discontinued immediately. The
    CBN also required that any suspicious transactions should be immediately reported to the
    Nigerian Financial Intelligence Unit (NFIU).
    Thirdly, without any adequate notice or court order of any court of competent jurisdiction,
    the CBN directed all DMBs, NBFIs, and OFIs to identify persons and/or entities transacting
    in cryptocurrency or operating cryptocurrency exchanges within their systems and close such
    persons’ or entities’ accounts immediately. Since 5 February 2021, a number of persons and
    3
    entities accounts have been closed. In one strange and exceptional case, the funds in the two
    corporate accounts of a cryptocurrency exchange were wiped out and then eventually closed.
    Though as the regulator, the CBN has the statutory authority to delimit banking operations,
    but ordering banks and other financial institutions to freeze accounts suspected to be in use
    for cryptocurrency may not be supported by law. This is because there is currently no
    legislation by the National Assembly criminalizing or illegalizing trade in cryptocurrency in
    Nigeria. Therefore, it is questionable whether the CBN has the statutory power to order the
    (permanent) freezing of these accounts. Besides, Nigeria’s money laundering and
    anti-terrorism laws contemplate the freezing of individual or specific accounts, not a blanket
    closure of the accounts of a set of persons, entities, or entire industry by virtue of their
    involvement in cryptocurrency trading or services, a lawful business. If the CBN’s circular is
    not reviewed, it will set a dangerous precedent in the country.
    Ordinarily, the CBN circular—while shocking and disappointing—should have at least
    stipulated a reasonable period within which affected customers’ accounts should be closed. By
    the way, we are not unaware of the illegality and sharp practices of some service providers,
    including quite unfortunately so-called fintech platforms—that indefinitely freeze or deny
    customers access to their funds with flimsy reasons without authority, any notice, or
    explanation at all. We use this opportunity to appeal to the CBN, other regulatory authorities,
    law-enforcement agencies, and our courts to always address such cases, whenever reported to
    it, with dispatch.
    Lastly, the CBN’s sudden and drastic directive was neither without any prior engagement with
    industry players nor notice. The CBN’s approach falls short of expectations and will not
    inspire confidence in our financial system.
  9. Emerging technologies, financial technology (FinTech), blockchain,
    cryptocurrency, bitcoin, and adoption across the world
    The 4th Industrial Revolution is driven by technological innovations, including emerging
    technologies. These emerging technologies include artificial intelligence, Big Data, blockchain,
    Internet of Things (IoT), quantum computing, and others. In a data-driven global economy,
    blockchain technology will increasingly play a key role. Regulators should be manifestly seen
    leveraging on innovative technologies to boost Nigeria’s global competitiveness through
    regulatory approaches that make our investment climate friendly.
    I. Financial Technology (fintech): This is the application of new and emerging
    technologies to enable and improve financial products and services. Including
    digitization and digitalization, fintech continues to automate and improve the delivery
    4
    and use of financial services and products. From banking services to insurance, lending
    to investments, fintech is enabling new business models and adding value for businesses
    and customers.
    II. Blockchain Technology: Blockchain technology has been described as a distributed
    ledger or database—which can be private, public, or hybrid—where anything of value,
    including currencies, identities, information, intellectual property, securities, votes, etc.
    can be stored, moved, and managed efficiently, securely, and transparently, without a
    central authority or third party. Though more popularly associated with its financial
    applications such as decentralized cryptocurrencies including bitcoin, Ether, Litecoin,
    etc., blockchain technology also applies in various sectors and industries.
    III. Virtual Asset: Also known as “digital asset”, a virtual asset, according to the Financial
    Action Task Force (FATF), is “a digital representation of value that can be digitally
    traded, or transferred, and can be used for payment or investment purposes”. Virtual
    assets do not include the digital equivalence of fiat currencies.
    IV. Cryptocurrency: Cryptocurrency is digital money or internet money. It has no
    physical equivalence, whether in the form of a note or coin. A cryptocurrency is
    secured using crypto graphy, a method of protecting data and communications through
    the use of codes . To own a cryptocurrency, you buy directly from a willing seller
    (peer-to-peer), through a crypto-wallet service, or through a cryptocurrency exchange.
    Depending on the particular cryptocurrency, a cryptocurrency may be bought with fiat
    currency such as the Naira, Dollar, etc. or through the use of other cryptocurrencies, or
    other virtual assets. Though numbering thousands, bitcoin is the most popular
    cryptocurrency.
    V. Bitcoin: Inspired by the need to have an electronic-payment system that is optimized
    for commerce on the Internet without reliance on intermediaries, bitcoin was invented
    by Satoshi Nakamoto in 2008. Bitcoin is a type of digital currency that is not issued by
    any central or reserve bank. Bitcoin is built on open source and it is a public
    blockchain. Limited to a fixed supply of 21million, bitcoin’s value is driven by both
    retail and institutional demand, increasingly making bitcoin a digital gold—an asset
    class.
  10. The growth of Nigeria’s crypto industry to No. 1 in Africa and a global leader
    in terms of crypto adoption and market volume
    Nigeria is Africa’s largest cryptocurrency market and one of the world’s fastest-growing
    cryptocurrency markets in terms of bitcoin volume at the time of writing this statement. In
    2020, estimates from BuyCoins showed that total volumes of bitcoin traded in Nigeria stood
    at $200 million monthly. According to Useful Tulips , Nigeria’s daily trading volume of over
    5
    $2.8 million on Paxful, a peer-to-peer bitcoin marketplace, tops the rest of African countries,
    with South Africa ranking over $400,000 and Kenya ranking over $700,000.
    By mid-November 2020, according to Coin Dance , a crypto-statistics platform, Nigeria has
    traded 60,215 bitcoins ($566 million) in the last 5 years. This figure represents the second
    largest volume on Paxful, next to the United States. As captured by Quartz Africa , since May
    2015 to mid-November 2020, bitcoin trade in Nigeria has increased at a minimum yearly rate
    of 19% in volume since 2017.
    Nigeria’s mobile and young population is adopting crypto, making the country number one in
    crypto adoption by young people. According to CoinMarketCap’s Q1 2020 report on global
    cryptocurrency adoption, Africa is the second highest with a percentage youth growth of
    91.47%. This is driven by Nigeria’s 210.6% growth in young crypto users, far ahead of
    Australia (+158.07%), Spain (+120.71%), Canada (+112.45%), and Mexico (+97.33%) on the
    top 5.
    In the wake of the CBN circular, crypto trading in Nigeria is expected to be pushed to
    peer-to-peer crypto platforms, a decentralized world further away from regulation.
  11. The crypto industry’s contributions to Nigeria’s economy and competitiveness
    on the global crypto map
    Nigeria’s emerging blockchain & crypto industry has been contributing to the growth of
    Nigeria’s economy. While crypto remittances through the informal economy understandably
    hurt inflows that should have passed through the traditional banking system and use of crypto
    for illicit transactions create risks for the financial system, the CBN circular may further
    worsen the situation for the country if not reviewed. What Nigeria needs is a nuanced,
    risk-based approach to the issue. As industry stakeholders, we are also concerned and we
    believe that ad hoc or knee-jerk reactions will further exacerbate the problem regulators may be
    trying to solve.
    Below are the major ways crypto adoption in Nigeria has been benefiting the Nigerian people
    and the nation:
    I. Stimulation of Economic Activity: Beyond the crypto-trading volumes from
    Nigeria, an entire industry has been built on cryptocurrencies in the country. From
    local and foreign crypto-wallet services to crypto exchanges; crypto-remittance services
    to crypto investments; crypto education services to crypto advisory services, the crypto
    industry in Nigeria has witnessed growth particularly in the last 4 years. Notably, this
    6
    development is against the background of a lack of policy and regulatory support in the
    country.
    II. Enabling and expanding financial inclusion: Cryptocurrencies are enabling and
    expanding access to finance to millions of people across Africa, including Nigeria. Up
    to 40% of the adult population in Nigeria do not have access to basic banking services.
    Savings, loans, and other essential banking services in the traditional finance system are
    out of reach. With relatively high fees, poor digital identity, and low trust in the
    traditional financial system, cryptocurrencies particularly Decentralized Finance
    (DeFi), an open, community-driven, and peer-to-peer alternative to centralized finance
    (CeFi), offer amazing opportunities for enabling and expanding financial inclusion in
    Nigeria. This is making millions of Nigerians more financially connected to the global
    internet economy.
    III. Job creation: The emerging crypto industry in Nigeria is creating jobs for our
    ever-growing youth population. In a biting Covid-19 period as well as the background
    of Nigeria’s dwindling economy, the crypto industry has provided job opportunities in
    the country, directly and indirectly. In a number of the local and global brands in the
    industry, Nigerians are chief executive officers (CEOs), chief technology officers
    (CTOs), country directors, marketing managers, community managers, legal &
    compliance officers, etc. Local blockchain & crypto authors, educators, forensic
    experts, journalists, lawyers, presenters, programmers, reporters, researchers, software
    developers, writers, etc. have also emerged, bringing about an ecosystem of innovation,
    collaboration, and growth.
    IV. Foreign Direct Investments (FDIs): Billions of dollars have been invested in
    blockchain and crypto projects globally. Between January and mid-July 2018, $16.9
    billion was raised globally through Initial Coin Offerings (ICOs), according to
    Coinschedule. An ICO, a form of crowdfunding, is often used by early-stage startups
    to raise capital. Apart from ICOs, a number of foreign-owned crypto businesses carry
    out business in Nigeria. A number of Nigerian crypto startups get funding through
    foreign investors or from Nigerians in Diaspora. While regulation will help Nigeria take
    better stock of blockchain- and crypto-related FDIs into Nigeria, banning will most
    likely limit it to the informal economy.
    V. Equipping and empowering the knowledge economy: From zero blockchain
    developers in Nigeria a few years ago, the country now has a number of indegenous
    blockchain developers, thanks to investments in learning and capacity building in
    blockchain technology and development. For example, Binance, a global crypto
    company, recently launched a masterclass on blockchain development where it is
    equipping and building up to 1000 African blockchain developers. This is one of the
    number of capacity building programs in the industry.
    7
    VI. Social developments: A number of crypto brands in the space, through their
    charitable and philanthropic initiatives, continue to contribute to education,
    healthcare, and poverty alleviation in the country. Some of them include Paxful’s
    BuiltWithBitcoin initiative through which it is funding the building of Early
    Education Centre, Ankara, Nandu Village, Kaduna State; and Binance’s Crypto against
    Covid donations in hospitals and schools in Lagos States and Oyo States, Nigeria.
    Policy and regulation should not stifle innovation. This is one of the major thrusts behind the
    proposed National Blockchain Adoption Strategy, an initiative of the National Information
    Technology Development Agency (NITDA) in Nigeria’s emerging blockchain industry.
    NITDA, working with the Federal Ministry of Communications and the Digital Economy
    (FMoCDE) had recently exposed a draft national adoption strategy to all stakeholders. It
    enjoys the support of FMoCDE and the Federal Government of Nigeria. As one of the key
    stakeholders in this initiative—which include the CBN, SEC, and other relevant regulators
    and public agencies—we remain committed to the vision and mission adopted in the proposed
    National Blockchain Adoption Strategy which is ongoing.
    As communicated by NITDA in November 2020, the Federal Government plans to earn $6
    billion from blockchain technology by 2030. We strongly believe that this is achievable. To
    enable Nigeria achieve this target, we appeal to the CBN to reconsider its cryptocurrency
    policy. A reconsidered approach that does not stifle innovation will help significantly boost
    the Federal Government’s policies on diversification of the Nigerian economy, digital
    economy, and digital transformation, not forgetting the CBN’s financial-inclusion policy and
    target.
  12. Legitimate threats and risks of cryptocurrency adoption and the regulatory
    approach to mitigating them
    We acknowledge the CBN’s critical role in the Nigerian financial system and the Nigerian
    economy. It is the CBN’s objective to ensure monetary and price stability, issue legal tender in
    Nigeria, maintain external reserves to safeguard the international value of the legal tender
    currency, promote a sound financial system in Nigeria, and act as a banker and provide
    economic and financial advice to the Federal Government.
    As responsible industry stakeholders, we also acknowledge the risks that transacting in
    cryptocurrencies portend, such as illicit fund flows, money laundering, terrorism financing,
    and other criminal activities. However considerable the risks cryptocurrencies portend may be,
    these risks are not peculiar to cryptocurrencies. Fiat currencies continue to be used globally to
    fund the same fraudulent and illegal activities. Compared to cryptocurrency-related crimes,
    8
    the latter is titanic. The problem therefore is not the cryptocurrency or the fiat currency, but
    the actors and users of cryptocurrency and fiat currency. And this is where a risk-based
    regulation comes in. We believe that the purpose of regulation is to essentially maximize the
    opportunities that innovations provide while minimizing the threats they portend, not stifle
    innovation.
    Firstly, contrary to the CBN’s assertion that cryptocurrencies are completely banned in China,
    i t is not illegal to buy, sell, or hold cryptocurrencies in China. Individuals and entities who
    buy, sell, and hold cryptocurrencies still have access to banking services. In fact, the People’s
    Bank of China (PBOC) and other government agencies continue to explore application of
    blockchain technology for the purpose of making China’s financial system globally
    competitive. Though China banned ICOs and cryptocurrency exchanges, it is developing its
    own Digital Yuan, a Central Bank Digital Currency (CBDC). Similarly, in Canada, it is
    noteworthy that neither the central bank nor any government agency restricted
    cryptocurrencies in Canada. The reported bans were the independent decisions of a number of
    banks who wished to protect themselves. In fact, Royal Bank of Canada (RBC), the largest
    bank in Canada by market capitalization with over 16 million customers, was reported in 2019
    to be opening a cryptocurrency exchange. Also, while the Saudi Arabia Monetary Authority
    (SAMA) banned cryptocurrencies, the central banks of Saudi Arabia and the United Arab
    Emirates (UAE) have concluded a digital currency (CBDC) pilot, which found that
    distributed ledger technology can improve cross-border transactions and meet the demands of
    financial privacy in a digital economy.
    Secondly, while we respect Warren Buffet’s investment principles and decision regarding
    bitcoin, it may be worth pointing out that bitcoin recently surpassed Buffet’s own Berkshire
    Hathaway’s net value when bitcoin market value hit $544 billion, $1 billion above Buffet’s
    multinational company’s capitalization. Earlier last year, the same “rat poison” and “gambling
    device” surpassed JPMorgan Chase and Mastercard Inc, and it is recently more valuable than
    Visa Inc. Also, note that:
    I. at least eight publicly-traded companies, including Grayscale Investments,
    MicroStrategy, CoinShares have bought billions of dollars in bitcoin and select
    cryptocurrencies;
    II. Paypal announced in late October 2020 that its over 300 million active customers will
    be able to buy, hold, and sell bitcoin (BTC) and other virtual assets using their Paypal
    accounts;
    III. Mastercard will allow merchants to accept select cryptocurrencies on its network later
    this year;
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    IV. Tesla announced in a SEC filing this week that it has bought $1.5 billion worth of
    bitcoin and would start accepting payments in bitcoin; and
    V. Many more institutional adoption of bitcoin and select cryptocurrencies.
    Thirdly, the issue Andrew Bailey, the Governor of the Bank of England, has with
    cryptocurrencies is whether due to their price volatility they are safe to perform the function of
    money. Bailey prefers that cryptocurrencies be regulated. In ‘Reinventing the Wheel (with
    more automation)’, a speech by Bailey in a Brooking Institution virtual event on 3 September
    2020, Bailey stated:
    ” Innovation is a good thing. As authorities and regulators it is not in our interest – the
    broad public interest – to stop innovation. Moreover, when supported by clear standards
    and expectations, innovation can support the pursuit of public interest objectives such as
    greater inclusivity and network resilience. Making such standards clear early is much
    preferred to attempting to claw back the ground later, and particularly if that comes after
    things go wrong.” [page 2]
    We have reached the point in the cycle of innovation in payments where it is essential that
    we set the standards and thus the expectations for how innovation will take effect. It
    should not happen the other way round, with the standard setting playing catch up. The
    answer is not to strangle innovation, and it does therefore require a strong dialogue
    between the parties, which I think we have.” [page 10]
    The statements above resonate with the position of the Central Bank of England under Mark
    Carney, former Governor, when he said: “[a] better path would be to regulate elements of the
    crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the
    safety and soundness of the financial system.” [‘Carney calls for crackdown on
    crypto-currency ‘mania’’, BBC, 2 March 2018]
    Fourthly, concerning the CBN’s assertion that the use of cryptocurrencies in Nigeria
    contravenes existing law in Nigeria, this is with due respect not very correct. While the CBN is
    of course statutorily empowered to issue the legal tender by virtue of section 2(b) of the CBN
    Act, by the very meaning of a “legal tender” cryptocurrencies are not legal tender.
    Consequently, the fact that a cryptocurrency is accepted by voluntary parties as a means of
    payment in Nigeria does not make it a legal tender. Besides, the fact of the Naira being
    stipulated by the CBN Act as legal tender does not exclude the adoption of other media or
    exchange between contracting parties. Parties may decide to exchange goods and services for
    cryptocurrencies or even for nonmonetary considerations without contravening the provisions
    10
    of the CBN Act relating to the Naira as legal tender. This is why the proviso in section 20(5)
    of the CBN Act has given the CBN “the powers to prescribe the circumstances and conditions
    under which other currencies may be used as medium of exchange in Nigeria” [emphasis ours].
    Fifthly, concerning the CBN’s assertion that the anonymous nature of cryptocurrencies is a
    deliberate design for illegality, this is also incorrect. Essentially, most cryptocurrencies are
    pseudonymous rather than anonymous. Besides, “anonymity” in cryptocurrencies essentially
    serves the purpose of privacy and security. Digital signatures serve as identities of the parties
    involved in cryptocurrency transactions. These digital signatures are essentially composed of
    the private key and the public key. With these keys, transactions can be signed. Because
    different identities are created for the same person for different transactions, a lot of people
    wrongly think that the real identities of users may not be linked to the transactions. Contrary
    to that wrong belief, real-life identities can be linked to addresses of these cryptocurrencies and
    transactions. In other words, wallet addresses act as a placeholder for the wallet owner’s
    identity. Silk Road emphasized this point when Robert Ulbricht was eventually arrested and
    convicted. In the FBI complaint against Ulbricht, it stated: “bitcoins are not illegal in and of
    themselves and have known legitimate uses”. This is a strong statement about the legality of
    bitcoin. Bitcoin’s immutable and transparent ledger provides a record of every transaction,
    enabling law enforcement to track illegal transactions. Bitcoin and most other
    cryptocurrencies are not untraceable. At BICCoN, we set up an industry-wide Anti-Scam
    Task Force in January 2021 to come up with a framework for preventing and checking
    crypto-related scams in Nigeria. This is an effort that supports ongoing collaboration with the
    SEC and industry stakeholders on addressing the risks posed by cryptocurrencies. Upon the
    CBN’s invitation, we will be happy to share our insight and be of any assistance towards
    keeping our industry and Nigeria’s financial system safe.
    Sixthly, while it may be true that today a number of cryptocurrencies including bitcoins are
    mainly used as a speculative investment and not as an alternative currency or medium of
    exchange, adopters are not a “conglomeration of desperate, disparate, and unregulated actors”.
    In the 2017 bull run, JPMorgan’s chairman and CEO, Jamie Dimon, once dismissed bitcoin as
    a “fraud”. JPMorgan presently banks two of the largest United States cryptocurrency
    exchanges, Coinbase and Gemini. By the way, it must be a misunderstanding of fact when the
    CBN claimed that ether fell from US$320 to US$0.10 in June 2017. The flash crash only
    happened on GDAX cryptocurrency exchange and lasted a second. According to GDAX , this
    was due to stop-loss orders and margin-funding liquidations on the exchange. In any case,
    where cryptocurrencies are considered by the CBN as speculative investments and not
    alternative currencies, this falls under the regulatory purview of the SEC. Commendably, the
    SEC has been doing some work in collaboration with relevant stakeholders, leading to the
    11
    SEC’s statement on the classification and treatment of digital assets in Nigeria 11 September
  13. In that statement, the SEC classified cryptocurrencies as crypto assets to be treated as
    commodities if traded on a Recognized Investment Exchange and/or issued as an investment.
    Sadly, the SEC has suspended, as one of the many consequences of the CBN circular, its
    Regulatory Incubation Framework and Regulatory Incubation Guidelines for fintech firms.
    Indeed, this is just one of the far-reaching, negative effects of shutting out an entire industry
    from access to banking and other financial services.
    Lastly, the CBN’s position that cryptocurrencies do not have intrinsic value and therefore are
    unlike fiat currency which are backed by the “comfort of a country or Central Bank ” deserves
    a note. Fiat currency such as the Naira or Dollar has no intrinsic value either. Fiat currency is a
    government-issued currency that is not backed by a physical commodity, such as gold or silver.
    The value of such fiat currency is derived from the relationship between supply and demand
    and the stability of the issuing government. Similar to fiat currency, most cryptocurrencies do
    not have intrinsic value because they are not also backed by gold, silver, or any other
    commodity. The value of any currency essentially comes from the level of trust that people
    have in them. Cryptocurrencies, including bitcoin, run on blockchain which is essentially a
    trustless technology. Bitcoin, for example, may be said to derive its value from its three
    components: (i) database or ledger comprised of transaction records which are distributed
    across a peer-to-peer network without a central authority; (ii) peer-to-peer network comprising
    participants whose job is to validate transactions before those transactions are recorded and
    added to the chain; and (iii) a cryptocurrency which is a form of electronic cash that is not
    minted by any central bank but mined using cryptographic or mathematical algorithms.
    Therefore, bitcoin—to borrow the CBN’s words—is accompanied by the full faith and
    comfort of a community or network that trusts it.
  14. Opportunities Nigeria and Nigerians will miss with the CBN ban and
    unintended negative consequences
    We appeal to the CBN to review its position. The CBN circular is capable of setting Nigeria’s
    global competitiveness as leading crypto industry back by at least 5 years. We believe that the
    consequences of this—particularly for the already depressed Nigerian economy—does not
    hold any promise but economic regression in the second wave of a biting Covid-19 pandemic.
    If not reviewed or reversed, the CBN ban on banking and other financial services to persons
    and/or entities involved in cryptocurrency trading and cryptocurrency exchange services in
    Nigeria may make Nigeria lose out on the following opportunities:
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    I. Become a powerhouse for global blockchain & crypto industry, attracting investments
    into the country and creating jobs for the ever-growing young and innovative
    population of Nigeria;
    II. Boost remittances to Nigeria by adopting an innovative, risk-based regulation of
    cryptocurrencies in other to better capture cryptocurrency inflows into the country;
    III. Become a business-friendly hub for blockchain & crypto innovations from all across
    Africa;
    IV. Leverage on cryptocurrencies to enable and expand financial inclusion in the country;
    V. Encourage and challenge Nigeria to invest in research in blockchain & cryptocurrency
    use cases in the financial services industry, including cross-border transactions, clearing
    and settlements; crowdfunding; credit reporting; digital identity verification against
    fraud; stock exchange and share trading; syndicated lending; accounting, bookkeeping,
    and audit; peer-to-peer transfers; and trade finance platforms;
    VI. Encourage and challenge Nigeria to invest in learning, capacity building, and
    development, underscoring the need for a national blockchain policy in order to
    achieve economic competitiveness; and
    VII. Make Nigeria better prepared and positioned for a new global system of CBDCs,
    stablecoins, and other applications of blockchain & cryptocurrency innovations.
    If not reviewed or reversed, the CBN ban may have the following unintended consequences:
    I. Eventual death of centralized cryptocurrency exchanges in Nigeria, particularly
    indigenous cryptocurrency exchanges who should be getting regulatory support to
    become globally competitive;
    II. Job losses, directly and indirectly;
    III. Stifling crypto innovations across the entire ecosystem;
    IV. Limiting crypto trading to wholly unregulated decentralized platforms where
    unenlightened and unsuspecting members of the public will be more vulnerable to
    scams, making the Nigerian crypto space a den of criminals;
    V. Pushing all crypto-based remittances to the informal economy, away from the formal
    economy that would have benefited the country;
    VI. Cutting out transaction fees for DMBs, NDMBs, and OFIs who should be facilitating
    cryptocurrency transactions for customers who wish to buy or sell cryptocurrencies or
    other virtual assets through centralized exchanges;
    VII. Cutting out centralized cryptocurrency exchanges who are the traditional gateway to
    the cryptocurrency world and who should be the most reliable ally to regulators for the
    purpose of AML/CFT regulations and customer identification, verification, and
    monitoring;
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    VIII. Practically illegalizing and criminalizing cryptocurrency trading and cryptocurrency
    exchange services, resulting in further discrimination, harrassment, extortions, and
    unlawful arrests by ill-advised, unethical, and opportunist law-enforcement officers;
    IX. Opening DMBs, NDMBs, and OFIs to avoidable litigations in a country where justice
    administration continues to suffer the plague of delayed justice, lack of rule of law, and
    lack of trust in the judicial system;
    X. Foreign blockchain & crypto businesses will move out of Nigeria to other countries
    where the business and investment climate is less hostile or more friendly to crypto
    innovations;
    XI. A number of indigenous blockchain & crypto businesses will shut down completely
    while others may explore setting up their businesses offshore, costing Nigeria not only
    loss of income but also loss of its talents to other countries;
    XII. Increase in cybercrimes due to lack of economic opportunities available to young
    people to channel their energy, innovation, and talents positively; and
    XIII. many more.
    While we do not suggest that the CBN should treat cryptocurrencies as legal tender in Nigeria,
    it is our position that CBN should at least at this stage require DMBs, NBFIs, and OFIs to
    continue to apply KYC, AML/CFT policies and regulations on persons and/or entities
    dealing in cryptocurrencies or involved in cryptocurrency transactions or services. The CBN
    may introduce other risk-management policies it deems fit based on its regulatory authority.
    This is the CBN’s position under its earlier January 2017 letter to DMBs, NBFIs, and OFIs in
    Nigeria. Besides, BICCoN is open to working with the CBN to help drive the
    implementation of such risk-management policies in the crypto industry.
    The CBN, working closely with the SEC, should consider integrating these cryptocurrency
    exchanges into its risk-management system. This will ensure that relevant regulators have
    effective control and management of cryptocurrency transactions in the financial system.
    Cryptocurrency exchanges particularly occupy a critical place in the cryptocurrency ecosystem
    and value chain. Of all the cryptocurrency services, exchanges suffer the effects of the present
    ban the most. If not reviewed or reversed soon, a safe and self-regulated gateway to the
    cryptocurrency market may be destroyed. This will further endanger consumers and investors.
  15. Availability of industry stakeholders for a dialogue with the CBN in Nigeria’s
    best interest
    While we commend the CBN for its innovations in the areas of payment systems, open
    banking, and regulatory sandbox for innovative financial products, we appeal to the CBN to
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    adopt a risk-based regulation, not an outright ban on DMBs, NBFIs, and OFIs from providing
    its services to Africa’s no. 1 crypto industry by volume and a leading market in the world.
    At a time when the Federal Government’s national policies include growing Nigeria’s digital
    economy and improving financial inclusion, the CBN circular has effectively denied banking
    services—one of the most critical services in any modern economy—to an entire set of persons
    and/or entities which make up Nigeria’s emerging crypto industry. The rapid growth of
    Nigeria’s blockchain & crypto industry is a development that should be studied and
    understood in line with the desire of the Federal Government to develop a digital economy
    and diversify the Nigerian economy.
    As the blockchain & crypto industry’s intercommunity working group, we are available for a
    dialogue with the CBN. We will be happy to share insights that will hopefully assist the CBN
    in reviewing its policy on cryptocurrencies in Nigeria, helping our dear nation maximize the
    opportunities while minimizing threats. We are ready to work with the CBN to ensure that its
    management of the risks of cryptocurrencies do not affect the stability of Nigeria’s financial
    system.
    Also, with the National Assembly’s intervention in this vital matter, we at BICCoN will be
    happy to appear before the Committees on Banking, Insurance and other Financial
    Institutions, ICT and Cybercrimes, and Capital Market set up to determine the opportunities
    and threats of cryptocurrency on the nation’s economy and security.
    Beyond crypto, this is about the future of this country.
    ……………………….
    Senator Ihenyen
    General Secretary
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