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Stablecoin Adoption and The Future of Financial Inclusion



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Institutional interest in crypto is growing, confirmed by a Goldman Sachs survey, which found that 40% of the company’s high-net-worth clients were already exposed to cryptocurrencies. Stablecoins — which offer a more secure and steady option in the crypto space — have experienced hyper-growth, reaching a $119 billion market cap. The volatility of crypto has attracted more conservative investors to asset-backed stablecoins.

Stablecoins are a form of private money. As Christina Segal-Knowles, executive director for financial markets infrastructure at the Bank of England, points out, modern money is a combination of public and private funds, up to 95% of which in developed economies is private.

She adds, “If new forms of digital money can be made safe, they could potentially contribute to faster, cheaper and more efficient payments with greater functionality. They could increase the resilience of payments. And they could even have long-term benefits for financial stability.”

True stablecoins, which are non-interest-bearing coins designed to have a firm value against a reference currency or asset, have an important role in the future of global finance. They offer low-cost, safe, real-time payments. Doing so makes it cheaper to accept payments and easier for governments to run conditional cash transfer programs while lowering the cost of remittances and connecting the unbanked to the financial system.

We grew up with the gold standard; creating new financial instruments backed by gold and other real-world assets that protect the value and allow people to borrow against their assets makes sense. The global monetary system as we know it is not that old — it’s only been 75 years since Bretton Woods.

Only 50 years ago, however, President Richard Nixon announced that the U.S. dollar would no longer be backed by gold as it had been since Bretton Woods. Now that system is under threat, not only from governments printing money as if there is no tomorrow and the resurgence of inflation but also from stablecoins.

In particular, Facebook’s announcement of the Libra project in 2019 made regulators sit up with its potential to become global and access billions of users through its social network platform. China is exploring cross-border payments in its digital yuan development, which could extend to the more than 50 lower-middle-income countries part of the Belt and Road Initiative. These countries are home to the majority of the world’s population. The rollout of the digital yuan could potentially unseat the U.S. dollar as the backbone of the global financial system.

Stablecoins and Emerging Economies
On the other hand, the potential positive value of stablecoins is in emerging economies and for populations under threat. Think of people watching the value of their hard-earned savings erode or citizens of countries like Venezuela and Lebanon watching their currencies nosedive. Think of how the global COVID-19 pandemic has exposed the urgent need for low-cost, direct digital transfers.

In a recent paper, Katherine Foster and other researchers highlighted that stablecoins carry the potential to facilitate secure and convenient transactions without volatility at a lower cost than mobile money held in a wide variety of non-bank wallets. That positive value is badly needed as global remittances, a critical development finance flow, have fallen during the pandemic due to job losses for migrant workers. Remittances saw their most serious decline in recent history, falling by almost 20% from $554 billion in 2019 to around $445 billion in 2020.

The humanitarian community also sees the potential and has pushed the boundaries on blockchain technology to improve the effectiveness and efficiency of its interventions. Ric Shreves, director of emerging technology at Mercy Corps, sees stablecoins as a compelling use case: “Imagine if we had a low volatility low-cost coin that was acceptable globally. How could that impact our work? It could impact our work from everything, from back-office operations, us moving money into difficult places, to actually doing direct distributions, to our program participants, there’s a number of really compelling use cases for that technology.”

Developing countries are already embracing crypto. The 10 top countries with cryptocurrency users globally include Kenya, Nigeria, South Africa, Venezuela, Colombia and Vietnam. The latest crypto report from Finder, a financial product comparison website, also reports that emerging economies like Vietnam, India and Indonesia are leading in the crypto adoption race. The trend of consumers from emerging markets in Latin America, Africa and East Asia turning to crypto may preserve savings they may otherwise lose to economic turbulence.

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Nigeria’s SEC to Enforce Weekly, Monthly Reports from Crypto Service Providers



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The Securities and Exchange Commission (SEC) has announced a new regulatory framework requiring Virtual Assets Service Providers (VASPs) to submit weekly and monthly trading statistics.

This move is part of a broader effort to monitor and regulate Nigeria’s burgeoning crypto market, according to a document released by the SEC titled “A Framework on Accelerated Regulatory Incubation Program for the Onboarding of Virtual Assets Service Providers (VASPs) and other Digital Investments Service Providers (DISPs).”

The framework aims to bring more structure to the country’s crypto ecosystem by amending existing rules on digital asset issuance, offering platforms, exchanges, and custodians.

The SEC’s initiative is seen as a significant step toward enhancing oversight and ensuring compliance within the rapidly evolving digital asset space.

Accelerated Regulatory Incubation Program

The Accelerated Regulatory Incubation Program (ARIP) will provide a special window for onboarding VASPs. The SEC has outlined specific reporting requirements for participants in the ARIP, including:

  • Weekly and monthly trading statistics.
  • Quarterly financials.
  • Compliance reports demonstrating adherence to the SEC’s conditions.
  • Reports on key issues such as misconduct, fraud, or operational incidents.
  • Actions taken to address customer complaints and emergent risks.

A Growing Market

Nigeria boasts one of the largest peer-to-peer (P2P) crypto markets globally. According to blockchain analytics firm Chainalysis, crypto transactions in the country amounted to $56.7 billion between July 2022 and June 2023, averaging $1.09 billion weekly.

Industry and Regulatory Insights

Senator Ihenyen, lead partner and head of blockchain and virtual assets practice at Infusion Lawyers, emphasized the importance of regulating digital assets for economic and security reasons.

“Nigeria can no longer afford to keep pushing digital assets underground for obvious economic and security reasons,” Ihenyen said.

He noted that the Central Bank of Nigeria’s (CBN) recognition of the SEC’s regulatory role marks a positive shift for the sector, with regulators now working together to ensure consumer protection and investor safety.

Comparisons have been drawn with regulatory practices in South Africa, where a similar approach has been adopted to meet Financial Action Task Force (FATF) standards on anti-money laundering and counter-terrorism financing for digital assets.

“Execution is what will make the difference,” said an industry expert. “We’ve never been lacking in regulations.”

Government and Industry Reactions

Earlier in July, Wale Edun, Nigeria’s minister of finance and coordinating minister of the economy, urged the SEC to address the complexities of crypto regulation.

“The SEC board should be willing to accept the challenge of regulating these new areas, particularly crypto, as they are fast-moving complex areas,” Edun stated.

The Senate Committee on Capital Markets also emphasized the need for crypto regulation to ensure accountability and protect investors’ funds.

Osita Izunaso, chairman of the committee, pointed out, “The issue of cryptocurrency must be regulated because Nigerians are trading in crypto. Since Nigerians are trading in crypto, why are we not regulating it? Where is the money going if we don’t regulate activities in the crypto market?”

Compliance and Challenges

The new regulatory framework aims to facilitate the onboarding of entities willing to engage in virtual asset activities and enhance the SEC’s understanding of digital asset business models.

However, some industry insiders have raised concerns about the practicality of certain requirements, such as the need for a physical presence for crypto companies.

Chimezie Chuta, founder and coordinator of the Blockchain Nigeria User Group, highlighted the potential benefits of regulation for tax revenues.

However, others worry about over-regulation. “We are now like banks that are over-regulated. Between 2020 and now, we have had new regulations and changes to existing rules, but where has that taken us to?” questioned a Lagos-based crypto player.

As Nigeria’s crypto market continues to evolve, the SEC’s new regulatory framework represents a crucial step towards ensuring transparency, accountability, and consumer protection in the digital assets space.

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KuCoin Announces New 7.5% VAT on Transaction Fees for Nigerian Customers




KuCoin has announced the implementation of a 7.5% Value-Added Tax (VAT) on transaction fees.

This new regulation will take effect on July 8th, 2024, impacting all users whose Know Your Customer (KYC) information is registered in Nigeria.

KuCoin, one of the world’s leading cryptocurrency exchange platforms, revealed this update in a statement addressed to its Nigerian users.

The tax will be applied exclusively to transaction fees, not the overall transaction amount.

For example, a user buying 1,000 USDT worth of Bitcoin will incur a fee of 1 USDT at the standard 0.1% fee rate.

The new VAT at 7.5% will apply to this fee, resulting in an additional charge of 0.075 USDT.

Consequently, the net amount available for the transaction will be 998.925 USDT.

KuCoin clarified that the VAT would cover all types of transactions on its platform. The move aligns with recent regulatory updates and demonstrates the company’s commitment to complying with local tax laws.

The announcement has garnered mixed reactions from the Nigerian cryptocurrency community. Some users express concern over the added cost to their transactions, while others recognize it as a necessary step towards greater regulatory compliance and legitimacy for cryptocurrency trading in Nigeria.

KuCoin encourages affected users to seek assistance through their Telegram group or by contacting the online support team for further guidance on the new tax regulations.

As Nigeria continues to evolve its regulatory framework for digital assets, this development underscores the importance for traders to stay informed about local laws and their potential impacts on trading activities.

The KuCoin team expressed their gratitude for users’ cooperation and understanding, reiterating their commitment to providing a secure and compliant trading environment.

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Bitcoin Eyes Gains with Seasonal July Boost After Slump



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After several months of declines and rangebound trading, Bitcoin (BTC) bulls have reason to cheer as the largest cryptocurrency is poised for a potential seasonal upswing this July.

Historical data and recent market movements suggest a positive outlook for Bitcoin, following a period marked by billions in sales, upcoming selling pressure, and outflows from exchange-traded funds (ETFs).

Since April, Bitcoin has been trading within a narrow band of $59,000 to $74,000, weighed down by market dynamics and peak negative sentiment among retail traders.

However, July has historically been a bullish month for Bitcoin, and early indicators show a possible reversal of recent trends.

On the first day of July, U.S.-listed ETFs recorded nearly $130 million in inflows, their highest since early June.

This influx comes after a significant $900 million outflow in the previous month, signaling renewed investor confidence in the cryptocurrency.

“Bitcoin has a median return of 9.6% in July and tends to bounce back strongly, especially after a negative June,” said Singapore-based QCP Capital in a recent Telegram broadcast.

“Our options desk saw flows positioning for an upside move last Friday into the month-end, possibly in anticipation of the ETH spot ETF launch. Many signs point to a bullish July.”

Historical data supports this optimistic outlook. Over the past decade, Bitcoin has gained an average of more than 11% in July, with positive returns in seven out of the ten months.

A 2023 report by crypto fund Matrixport highlighted significant July returns in recent years, with gains of around 27% in 2019, 20% in 2020, and 24% in 2021.

Seasonality, the tendency of assets to experience regular and predictable changes that recur annually, appears to be a driving factor.

These seasonal cycles can be influenced by various factors, such as profit-taking around tax season in April and May, leading to drawdowns, and the generally bullish “Santa Claus” rally in December, which reflects increased demand.

As the cryptocurrency market enters July, Bitcoin traders and investors are optimistic about a potential rally. While the market remains cautious of underlying pressures, the historical trends and recent inflows suggest a favorable environment for Bitcoin’s resurgence.

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