Experts have called for legal professionals involvement in digital assets to checkmate fraud and shed light on the sector.
The call was made at the 2022 Legal Business Conference, themed: ‘Regulating Blockchain and Fintech Innovations: Finding the Balance’ organised by Legal Business Network (LBN) in Lagos.
Chief Executive Officer (CEO), Global Digital Assets and Cryptocurrency Association, Gabrielle Kusz, called for transparency in terms of regulatory participation.
She harped on the need to strike a balance with regulation and development to attract resilience and global competiveness.
Convener of the conference, Ifeoma Ben, said the recent unveiling of the eNaira by the CBN has exposed many legal issues and the inherent opportunities in blockchain and financial technology ecosystem.
She stated that technology is the future, adding that there is need for regulators to strike a balance between regulation and innovation, hence, the theme of the conference.
Ben noted that the advent of technology has revolutionised the way lawyers sell legal services, while adding that lawyers must keep up with technological changes that impact the practice of law.
She emphasised that there are opportunities for lawyers in the blockchain space. So, there is a need for lawyers to acquire the skills needed to create legal solutions for their clients in the technology space.
Chief Executive Officer (CEO), Kumo Africa, Abikure Tega, noted that a way to regulate digital assets is to have an open mind because one cannot regulate what he or she has no part in, and having an understanding of what the space is all about.
President, Stakeholders in Blockchain Technology Association of Nigeria (SIBAN), Senator Ihenyen, harped on the need for regulation to prevent fraudulent activities with digital assets.
He noted that in 2017, the CBN disclosed that there were lots of risks involved in the cryptocurrency space, but wanted all banks to conduct Know Your Customer (KYC) through compliance and transaction monitoring, adding that in 2021 the apex bank changed that policy.
He urged banks and other financial institutions should conduct more KYC processes and procedures for every person that transacts in crypto using their bank accounts, to have their data, from Binance, guider and bundle because “this brings a level of transparency and traceability.”
He explained that the Financial Action Task Force (FATF), which is the global body, had already evaluated Nigeria poorly in terms of compliance with global standards in the areas of money laundering and Combating the Financing of Terrorism (CFT) compliance in August, 2021.
Ihenyen revealed that the global body concluded that the country doesn’t have adequate or effective mechanism to checkmate money laundering and financial terrorism in the financial services and virtual assets sectors and other sectors.
He hinted that the Securities and Exchange Commission (SEC) issued a regulation to ensure that virtual assets providers are registered and licensed to ensure that they are AML/KYC compliance mechanisms.
“There is a new money laundering act, which was issued recently. Everything is happening so fast because the FATF has given Nigeria up to October 2022, to ensure that it complies with the global standards otherwise, Nigeria will end up in the grey list.
“The grey list is a list where you find countries that have been rated poorly in terms of KYC, countries that are believed to be aiding or financing terrorism. So, what we are saying is that we need to engage every stakeholder, this is not the time to say one regulator has all the answers. This is the time to ensure that Nigeria has safe and sound financial system, but it also has an inclusive financial system that ensures that players and innovators play in that space.
“It is important to note that virtual assets such as bitcoin can be used by bad actors to carry out illicit transactions. There is no question about that. The issue is how do we approach these issues where people use virtual assets to carry out these transactions? We should examine what is the role of CBN in ensuring that the financial and banking systems is not being used as corridor for perpetuating these acts.
“It is noteworthy to state here that the CBN has responded in February, 2021, by saying that we have to block or stop all cryptocurrency transactions in the banking and entire financial systems, that is the temporary solution that the CBN has provided. Over the last one year, how has that solution ensured that this issue is nipped in the bud?
“If you check all facts and data, you will realise that since that pronouncement was made, there has been more adaption of bitcoin and other cryptocurrencies by Nigerians and non-Nigerians alike,” he said.
Founder, Blockchain Nigeria User Group (BNUG), Chuta Chimezie, while calling for more lawyer involvement in digital assets, stressed that technology is evolving and how scalability is a concern in blockchain space.
“Scalability is a concern among block chain tech. Speed is there but because it has to deal with decentralised system, it causes some delays. To solve the problem of scalability, you also create another problems. You sacrifice full decentralisation for speed,” he said.
He noted that investment scams thrive due to the policies available.
“Punishment for people involved in scam is not efficient. They are fined a million naira irrespective of what they have defrauded people of,” he said.