Gambaryan, a former U.S. law enforcement agent, was no stranger to the risks associated with his line of work. Aware of the potential dangers, he had previously evacuated Nigeria with his colleagues due to fears of detainment by local authorities. Despite the risks, Gambaryan reassured his wife that this trip would be different – he would “get in and get out.”

However, the reality proved to be starkly different. A month and a half later, Gambaryan found himself confined within the walls of Kuje prison in Abuja, Nigeria, a facility notorious for housing members of extremist groups like Islamic State and Boko Haram.

The ordeal began on 26 February, when Gambaryan and his Binance colleague, Nadeem Anjarwalla, were taken into custody by Nigerian security officials following a meeting with government representatives. The two were held in a guesthouse under the control of these officials for nearly a month, with no formal charges brought against them.

The situation took a dramatic turn when Anjarwalla, Binance’s regional manager for Africa, managed to escape under mysterious circumstances. Reports suggest that he fled Nigeria after being allowed to leave the guesthouse for Ramadan prayers.

Unforseen consequences

In the wake of Anjarwalla’s escape, the Nigerian government leveled charges of tax evasion and money laundering against Gambaryan, Anjarwalla, and Binance. This move effectively accused the company and its two employees of committing the same crimes.

Binance, in an official statement dated 3 April, denied that Gambaryan held any “decision-making power” within the company. The company argued that he should not be held responsible while discussions between Binance and Nigerian government officials were ongoing.

This incident marks the latest in a series of legal troubles for Binance, the world’s largest crypto exchange. The company is currently in the process of rebuilding its reputation after agreeing to pay $4.3 billion in penalties last year to settle charges by several U.S. agencies. The charges alleged that Binance violated economic sanctions against Syria, Cuba, and Iran, and facilitated criminal activity on its platform.

Gambaryan’s predicament underscores the challenges faced by the crypto industry in navigating the complex landscape of global law enforcement. Despite its origins in technology designed to bypass the traditional financial system, the industry continues to grapple with staying on the right side of the law in countries worldwide. This struggle is exemplified by the recent legal issues faced by Binance and its founder, Changpeng Zhao.

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Welcome to the crypto archipelago

The International Monetary Fund (IMF) released a working paper analysing cross-border bitcoin flows. The findings revealed a remarkable trend: Seychelles’ on-chain bitcoin inflows from 2019 to 2022 amounted to nearly 2.5 percent of its Gross Domestic Product (GDP). This figure starkly contrasts with the global average, where most countries’ inflows don’t exceed 0.1 percent of GDP. The “Seychelles effect” describes the nation’s outsized influence in the crypto sphere, dwarfing the contributions of larger economies like Venezuela and Moldova.

The allure of tax havens is not unique to the crypto industry; traditional finance also capitalizes on these countries. However, Seychelles stands out due to the intense international scrutiny faced by many of its crypto operators. The local regulatory body estimates that around 50 unlicensed virtual-asset service providers operate within its jurisdiction—a conservative count, by all accounts.

Several high-profile crypto exchanges have called Seychelles home, including Bybit and OKX. These platforms have leveraged the country’s lax regulations to facilitate their growth, although not without controversy. Incidents involving legal challenges and accusations of anti-money-laundering violations have marred the reputation of some Seychelles-based exchanges. Moreover, the country has been implicated in various scandals, ranging from the OneCoin pyramid scheme to the pursuit of infamous figures in the crypto world.

Despite these challenges, Seychelles remains very attractive for crypto traders, with its impact on the industry undeniable. As the integration of cryptocurrencies into the mainstream financial system develops, Seychelles’ role as a crypto archipelago continues to evolve, shaping the future of digital assets on a global scale.

Tax policy in Seychelles

A unique tax system operates in Seychelles, playing a crucial role in its economic structure. The system is composed of several elements, each serving a distinct purpose.

Historically, Seychelles operated under a territorial tax regime, taxing only income sourced within its borders. However, in September 2021, the law was revised for covered companies, adopting an economic substance test for passive income received from a non-resident.

The Corporate Tax, for instance, varies in its application, with rates oscillating between 0 percent? and 33 percent. This tax is designed to ensure that corporations contribute their fair share to the nation’s coffers. On the other hand, the Personal Income Tax, which stands at a standard rate of 16 percent, is levied on the income of individuals and employees, providing a significant source of revenue for the government.

The Value Added Tax, commonly known as VAT, is another integral part of the system. Applied at a standard rate of 15 percent, it adheres to principles that are common to VAT systems worldwide. This tax is imposed at each stage of the supply chain, from production to the point of sale, ensuring a steady stream of revenue.

In December 2017, Seychelles introduced the Income and Non-Monetary Benefits Tax. This tax is levied on the personal emoluments of an individual, payable by employees or their employer. Additionally, employers are required to pay the Non-Monetary Benefits Tax on any benefits provided to an employee, such as accommodation, meals, transport, and insurance.

The Seychelles Revenue Commission, or SRC, oversees the administration of these revenue laws. It mandates that all new businesses register with the SRC within 28 days of commencing trade. Furthermore, businesses are required to maintain records, including books, sales ledgers, expenses, assets, cash receipts, purchases, and banking records, for a period of seven years.

It’s worth noting that tax laws are subject to change, and the specifics can vary based on circumstances. Therefore, it’s always advisable to consult with a tax professional or the Seychelles Revenue Commission for the most accurate and up-to-date information.

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In a bold move to regulate the expanding cryptocurrency industry, Nigeria’s Securities and Exchange Commission (SEC) has proposed a staggering 400 percent increase in registration fees for crypto firms. This hike is part of a broader crackdown as the Nigerian government grapples with economic challenges, including a weakening currency and concerns over illegal capital outflows.

Regulatory reforms during economic strife

The SEC’s proposal comes at a time when the Nigerian naira is hitting record lows against the dollar, prompting the government to scrutinize the crypto sector for its role in exacerbating the situation. The new fee structure would see crypto firms paying 300,000 naira for every application and a hefty 150 million naira for registration, up from the previous 100,000 and 30 million naira, respectively.

This regulatory overhaul aims to provide market clarity and incorporate feedback from industry stakeholders, especially in light of recent discussions with the central bank of Nigeria. The SEC is also considering doubling the minimum paid-up capital requirement for crypto service providers to 1 billion naira, further intensifying the financial burden on these firms.

The focus on Binance, a leading exchange platform accused by officials of influencing the naira exchange rate, highlights the government’s intent to rein in the influence of cryptocurrencies. With two Binance executives detained and potential penalties looming, the SEC’s actions signal a decisive, albeit controversial, stance on crypto regulation in Nigeria.

Nigeria’s approach mirrors a global conundrum on how to govern cryptocurrencies in a way that doesn’t stifle innovation. The country’s stringent measures have sent shockwaves across borders, leading other nations to reconsider their stance on crypto governance. With Nigeria’s substantial influence in the Bitcoin marketplace, its regulatory choices hold the potential to shape international policies. As governments worldwide struggle to navigate the management of decentralized digital currencies, which are intrinsically designed to operate beyond centralized oversight, these developments underscore the intricate task of balancing technological progress with the maintenance of financial stability and integrity in the international financial arena.

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As the deadline of 30 November 30, 2023, approached, a wave of applications was submitted to the FSCA, reflecting the growing interest and investment in the crypto space. Out of a total of 355 applicants, 262 are currently being processed, with the initial 59 approvals granted on 12 March. This regulatory milestone is expected to pave the way for more approvals and increased stability in the crypto ecosystem.

The licences are regulated under the Financial Advisory and Intermediary Services Act (FAIS), which aims to provide robust customer protections and empower regulators with enforcement capabilities. The act also authorizes the South African Reserve Bank’s Financial Surveillance Department to oversee the operations of these platforms.

FSCA Commissioner Unathi Kamlana has indicated that the licensing process is not only about compliance but also about discovery. “As we license and supervise, we will discover that perhaps there are gaps that cannot be closed by the existing regulatory framework, the FAIS Act. And we might need to build on that as we discover what those are,” Kamlana stated.

This proactive approach to regulation is a testament to South Africa’s commitment to fostering a secure and transparent crypto market. The country has been deliberating on the appropriate regulatory framework since 2021 and has now declared cryptocurrency a financial product, rather than a currency, aligning with regulations set to be finalized in 2023.

South Africa paves the way for crypto stability

The FSCA’s actions signal a new era for crypto in South Africa. By including stablecoins in its definition of crypto assets, the South African National Treasury is adapting its policies to accommodate the evolving nature of digital currencies. This policy change, announced in February’s annual budget review, further integrates crypto into the nation’s financial landscape.

As South Africa leads the way in crypto regulation on the African continent, it offers a model for other nations to follow. The licensing of crypto exchanges not only enhances consumer protection but also establishes a foundation for sustainable growth in the digital economy. With this regulatory clarity, South Africa positions itself at the forefront of crypto innovation, providing its citizens with a stake in their financial future and the global crypto narrative.

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The Traditional Energy System

Ayman began by shedding light on the traditional energy system, where utility companies act as intermediaries between energy producers and consumers. This centralized model, while providing energy, lacks transparency, negotiation opportunities, and often leads to dependence on a single point of failure. Consumers are left in the dark about the source and nature of their energy, with little control over pricing.

Blockchain and Decentralization

Ayman emphasized how blockchain technology introduces decentralization to the energy sector. By eliminating the need for a central utility company, producers can directly trade energy with consumers, with the utility company handling settlement processes. This revolutionary shift enables real-time tracking of transactions on the blockchain, fostering transparency and flexibility in energy trading.

Peer-to-Peer Energy Trading

Sun Contract has successfully implemented peer-to-peer energy trading on a national scale in Slovenia. Ayman explained how individuals and companies can participate in this system, setting their own prices for excess energy and allowing consumers to secure their energy consumption at fixed rates for extended periods. This model enhances autonomy, flexibility, and efficiency in the energy market.

Cross-Border Peer-to-Peer Energy Trading

Blockchain’s borderless nature allows for cross-border peer-to-peer energy trading. Ayman shared an example of a Japanese multinational with factories in different cities in Slovenia, utilizing solar panels to produce energy in one location and consuming it in real time in another. This concept extends to individuals owning summer houses in neighboring countries, showcasing the versatility and potential of blockchain in global energy trading.

Tokenization of Real-World Solar Panels:

A recent development in the blockchain space involves the tokenization of real-world solar panels. Ayman highlighted a platform that enables the fractional ownership of solar panels through NFTs (non-fungible tokens). NFT holders receive benefits such as revenue and actual energy from the underlying solar panels, creating a novel way for individuals to participate in renewable energy even if they can’t install physical panels.

Innovative Comic Book Concept

To make the tokenization experience more engaging, Ayman introduced a unique twist—a comic book. The comic not only tells the story of solar panel installations but also becomes a form of ownership for NFT holders. The story remains a mystery, accessible only to the community of NFT holders who collaborate to unveil it. This gamification approach adds an exciting layer to the ownership experience.

Ayman’s keynote paints a vivid picture of the transformative power of blockchain technology in the renewable energy sector. Sun Contract’s innovative solutions, from peer-to-peer trading to tokenization and gamification, showcase a promising future where individuals have more control, transparency, and engagement in the energy market. As blockchain continues to disrupt traditional systems, the marriage of blockchain and renewable energy opens doors to a more sustainable and decentralized future.

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The Current Landscape:

David Palmer begins by highlighting the remarkable success story of mobile phone penetration in Africa, showcasing the region’s ability to adapt and embrace technology. With over 90% mobile phone penetration, Africa stands at the forefront of the mobile revolution. However, he notes that while mobile money has seen substantial growth, there is untapped potential in other emerging technologies.

Cryptocurrency and Blockchain:

Addressing the burgeoning cryptocurrency market, Palmer points out the impressive growth, with the cryptocurrency market size reaching $2.77 trillion. He stresses the significance of this industry, comparing it to the market capitalizations of major corporations and even entire countries. Palmer urges African businesses to explore opportunities in blockchain technology, digital wallets, and smart contracts, presenting them as pivotal components of Web3.

Web3’s Role in Financial Inclusion:

Palmer explores the potential of Web3 technologies to enhance financial inclusion in Africa. With nearly 50% of the population unbanked, he poses the question: Can Web3 accelerate financial inclusion? The integration of mobile money wallets with cryptocurrencies is suggested as a key strategy to bridge this gap. Palmer envisions a future where the mobile money wallet becomes a gateway to decentralized finance, providing access to investment opportunities and loans.

AI and the Metaverse:

Turning the spotlight on artificial intelligence (AI) and the metaverse, David Palmer foresees a $15 trillion opportunity in AI and a $5 trillion opportunity in the metaverse by 2030. He emphasizes the interconnectedness of these technologies, especially in the context of the evolving digital operating system. As AI becomes increasingly prevalent, the metaverse is poised to become the primary interface between users and AI-driven experiences.

Challenges and Opportunities:

While Palmer acknowledges the challenges ahead, including regulatory considerations and the need for robust infrastructure, he remains optimistic about the potential for African businesses to lead in the adoption of these transformative technologies. He urges businesses to explore the opportunities presented by Web3, AI, and the Metaverse, emphasizing that Africa can play a significant role in shaping the future of the global digital economy.

David Palmer’s keynote underscores the imperative for Africa to embrace Web3, AI, and the Metaverse to drive economic growth. The potential to leverage these technologies for financial inclusion, infrastructure development, and business innovation is vast. As Africa stands at the crossroads of technological evolution, the time is ripe for businesses and entrepreneurs to seize the opportunities presented by the digital revolution.

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Two executives from Binance were arrested earlier this week in Nigeria. However, Binance has yet to respond to these allegations. Nigeria, being Africa’s largest economy, is also one of the world’s biggest markets for cryptocurrency.

The Central Bank Governor of Nigeria, Olayemi Cardoso, (picutred above), stated that Binance Nigeria had moved $26 billion worth of untraceable funds. “These allegations are weighty,” said Tilewa Adebajo of CFG Advisory. “That’s a huge sum – even more than the annual Nigeria diaspora remittances of $24 billion.”

Cryptocurrency transactions equivalent to about 12 percent of Nigeria’s total income, or GDP, took place in the year to June 2023. While cryptocurrencies are not illegal in Nigeria, firms must register to operate there. A special advisor to Nigeria’s president revealed that Binance had failed to do this.

President Bola Tinubu, after assuming office last year, scrapped the policy of pegging the naira to the dollar, allowing traders to buy and sell the currency at market-determined rates. However, special advisor Bayo Onanuga stated that the recent collapse was not the result of normal activity.

Collapse of Naira

Binance, one of the most popular cryptocurrency platforms in the country, along with several other firms, have been suspended in recent weeks in an attempt to halt the slide of the naira. This has caused frustration among Nigerian users.

The government also claims that cryptocurrency is used for money-laundering and funding terror. A recent report by the Nigerian Financial Intelligence Unit stated that the “anonymity and privacy inherent in the cryptocurrency system are what draw individuals, particularly those with illicit intentions, towards its use.”

In a bid to curb foreign-currency trading, Nigeria has closed thousands of bureaux de change. The Central Bank has been under pressure to stabilize the national currency, the naira, which currently exchanges at 1,595 naira to US$1, compared to about 460 a year ago.

The collapse of the naira has exacerbated the cost-of-living crisis in Nigeria. High prices for food, fuel, and transport have led to protests in recent weeks.

Several African countries have shown a?favourable regulatory environment?for cryptocurrencies. This includes nations such as Nigeria, Kenya, South Africa, Ghana, Tunisia, Sierra Leone, Senegal, Central African Republic, Morocco, Cameroon, Zimbabwe, Ethiopia, Egypt, Botswana, and Uganda. These countries have either implemented progressive regulations, or lack restrictive laws, thus facilitating the growth and operation of cryptocurrency-related activities.

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The backdrop to this development is Egypt’s ongoing economic crisis, characterized by a chronic scarcity of foreign currency inflows. This situation has led to a sharp depreciation of the Egyptian pound against the dollar in informal exchange markets. Amidst this challenging economic landscape, the Egyptian government has been actively seeking ways to attract foreign investment and boost its forex reserves.

The Ras al-Hikma project, described by Prime Minister Mostafa Madbuly as the “largest foreign direct investment deal” in Egypt’s history, is a strategic response to these economic challenges. The project, which will span an area of 170 million square kilometres on the northwest coast, is expected to bring in a total of $150 billion in foreign investments.

The forex implications of this project are manifold. Firstly, the UAE will pay $24 billion of the upfront investment in liquid foreign currency. This influx of foreign currency will provide a much-needed boost to Egypt’s forex reserves and could potentially stabilize the Egyptian pound’s exchange rate.

Secondly, the UAE will convert $11 billion of its existing deposits in the Central Bank of Egypt into investments for ADQ to use in establishing the project. This conversion of deposits into investments will not only reduce Egypt’s debt repayment burden but also inject additional foreign currency into the economy.

Generating forex inflows

The project is also expected to generate substantial forex inflows in the long run. With plans for residential areas, hotels, resorts, a free zone for light and tech industries, a financial and business district, and an international marina for yachts and cruise ships, the city is poised to attract foreign tourists and businesses, thereby earning valuable foreign currency.

Moreover, the establishment of an international airport south of the city will further facilitate foreign tourism and trade, leading to increased forex earnings. The Egyptian government’s 35 percent stake in the project also ensures that a significant portion of these forex inflows will directly benefit the country’s economy.

In conclusion, the Ras al-Hikma project represents a strategic move by Egypt to attract foreign investment, boost its forex reserves, and stabilize its currency. By leveraging the power of forex, Egypt is not only addressing its immediate economic challenges but also laying the foundation for long-term economic growth and stability.

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The Intergovernmental Fintech Working Group (IFWG), a consortium of South African regulators, is set to publish a document in very soon that categorizes stablecoins as a specific type of crypto asset. This move is part of the country’s broader efforts to understand and regulate the rapidly evolving digital currency landscape.

IFWG’s role in shaping crypto regulations

The IFWG, which includes regulators such as the Financial Sector Conduct Authority (FSCA) and the Financial Intelligence Centre (FIC), is not new to the crypto space. In 2021, they released a position paper proposing 25 recommendations on the regulation, policy, and legal stance towards crypto assets that South Africa should adopt.

This year, the group plans to supplement this position paper with a new document focusing on stablecoins. The IFWG is also expected to conduct analytical work to understand the applicable use cases of stablecoins, further demonstrating their commitment to fostering a well-regulated crypto environment.

In line with the IFWG’s recommendations, the FSCA designated crypto assets as financial products in November 2023. However, the IFWG emphasized that such a classification does not equate to an endorsement of crypto assets.

The IFWG is expected to propose an appropriate policy and regulatory response once again, ensuring that its recommendations align with global standards.

Exploring the impact of tokenization

Beyond stablecoins, the IFWG is also considering the impact of tokenization on domestic financial markets. By June 2024, the group plans to publish a paper providing an overview of tokenization.

By December 2024, a discussion paper will be published outlining the policy and regulatory implications of tokenization and blockchain-based financial market infrastructure. This initiative is a part of the National Treasury’s 2024 Budget Review.

South Africa’s proactive approach towards understanding and regulating crypto assets, including Bitcoin and stablecoins, signals a promising future for the country in the digital currency landscape. As the IFWG continues its work, the world will be watching closely to see how these developments shape South Africa’s financial markets.

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