Connect with us

News

Nigeria’s Fintech Regulatory Hurdles: SEC’s New Rule And CBN’s BVN Validation Suspension

Published

on

Nigeria



On Thursday, 8th of April, 2021, the Securities and Exchange Commission (SEC) issued a warning to “unregistered” investment platforms, asking them to desist from offering Nigerians access to foreign securities. The Commission stated that only registered platforms can offer foreign securities to Nigerians. According to SEC’s published statement, “The Commission categorically states that by the provisions of Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations, only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public.”

The regulatory battle between investment-tech platforms and the SEC has been ongoing for a while. In December 2020, the Commission issued a statement which stated that investment platform, Chaka, would be restricted from offering stocks to the Nigerian public. However, on March 26, 2021, Chaka announced that it had taken necessary steps to obtain a newly created license. An excerpt from the company’s announcement says:
“We are pleased to inform our stakeholders and the general public that Chaka has taken the necessary steps to register with the Securities & Exchange Commission of Nigeria (SEC) for a newly created license, as SEC continues to maintain its avowed intention to encourage innovation within the market space.” With the SEC’s recent statement on the “proliferation of unregistered online investment and trading platforms,” things are a bit blurry on the state of regulations for investment platforms like Chaka.

The existence of investment platforms like Chaka, Trove, and Bamboo, has caught the attention of many Nigerians who are excited about having access to a simple means of investing in foreign securities. This has provided a path to financial freedom for many Nigerians, as well as a means to hedge against the constant devaluation of the Naira.

The regulatory hurdle plaguing these investment platforms may, however, wipe away the benefits that the platforms offer to Nigerians, thereby, threatening the streams of income that some Nigerians generate from trading foreign securities through these platforms, as well as leveraging the platform’s services to hedge their wealth against the devaluation of the naira. This would also directly affect the core of the business model of these investment companies, thereby, threatening their survival.

At the moment, the Nigerian fintech space is facing multiple struggles with regulations. The issue between the SEC and investment-tech platforms is one out of many. Just this week, news broke that the CBN suspended the provision of BVN validation service to fintechs and non-bank financial institutions. According to an email sent by Paystack, CBN’s directive will affect every third-party partner. The email reads thus:
“We’ve recently been made aware of a regulatory directive from the primary custodian of Nigeria’s BVN service to all their partners to suspend the provision of the BVN validation service to their third-party partners. In light of this news, we’re hereby informing you that the BVN Resolve service will be temporarily unavailable starting at midnight, today, April 8.”

This directive may have significant negative effects on the operations of fintechs in the country because identity verification or Know Your Customer (KYC) is critical for any financial institution to engage in any business with a customer. The verification system of many fintech startups in Nigeria is centered around BVN. Thus, banning BVN validation for these startups may adversely affect their operations.

Building an alternative identity verification system that does not require BVN could be more expensive because identity verification alternatives like ID verification cost more, which could increase the running costs of fintechs in Nigeria or lead to an increase in the cost of accessing their services by users. However, cheaper available KYC alternatives could suffice for the verification of identity for many platforms.

It is presently unclear why CBN is issuing this directive or why the SEC has been coming for Chaka and other investment platforms. However, we do know that the fintech space has been apparently under intense heat from regulatory bodies in recent times.

Comments

Kehinde is a driven human who is passionate about leveraging technology to transform the future of humanity and the way we all live. His interest lies in constantly getting valuable information and being part of a mission that seeks to create a transformative radical shift.

Continue Reading
Click to comment

Leave a comment:

Bitcoin in Africa

Crypto Regulation or CBDC? What Africa’s Biggest Crypto Hotspot Requires?

Published

on

Crypto in Nigeria
Image Credit: Kabiru Yusuf

On February 5, 2021, the Central Bank of Nigeria rolled out an order urging financial institutions to close the accounts of persons or entities that transact in or operate a cryptocurrency exchange.  According to the apex bank, digital currencies generated by unregulated or unregistered firms raise legal concerns because they can be used to perpetrate illicit affairs; money laundering and terrorism. While this gives partial explanations to the clampdown on cryptocurrency in Nigeria, there were uproars from various quarters. Questions were raised on whether or not the ban of crypto was the way forward to the growing interest in digital currencies. The clamour for regulation of cryptocurrency was not only limited to the masses, it includes Senators, Honorable members of the House and the intervention of Vice President Yemi Osinbajo.

About 5 months after the supposed ban on crypto was made, CBN made another giant stride. At the Monetary Policy Committee Meeting (MPC) held on Tuesday, July 27, the CBN Governor, Godwin Emefiele, confirmed that a digital currency (CBDC) will be launched in October. What exactly is the CBN digital currency about? How does it affect Nigerians, especially crypto traders? Why does the CBN have to launch digital currency when regulations can be made for the existing cryptocurrency? These and other questions still linger in the minds of financial analysts and crypto enthusiasts.  Thus, the need for this article. 

What is CBDC?

The CBDC is an ‘e-Naira’ that is supported by law and can be used as legal tender. Due to this, it is usually considered as the central bank’s liability.   CBDCs are blockchain-based but centralized and supervised by bank regulators. This is the distinguishing factor between cryptocurrency and CBDC; while the former is highly decentralized, the latter is centralized and regulated by the central bank that created it. To achieve its centralization, every bank connected to the blockchain system can collate transaction data that can be aggregated and relayed to the CBN. Just like stable coins, the digital currencies will be pegged to the fiat Naira at 1:1.  The currency would most likely be issued to commercial banks which in turn be made available to customers. The CBN started research on CBDC in 2017 alongside 80% of other central banks. However, only the Bahamas, the Eastern Caribbean and China have implemented it in practice. The CBDC is set to be Africa’s first digital currency as it is closest to being pulled through. Other countries like South Africa, Ghana, Morocco and Kenya are working on introducing digital fiat currencies. 

How CBDC affects Nigerians: a Gift or a Curse? 

Any Nigerian operating a business will certainly be concerned about the effect of the CBDC on the financial market. For crypto enthusiasts, it is another form of witch-hunt put in place by the central bank to clamp down on cryptocurrency. Since digital currency is the future and cryptocurrency is “evil” as proposed by the apex bank, CBDC will enable faster transactions and promote the development of e-commerce. It will create innovative opportunities in the financial system as new business opportunities will arise from emerging business models, financial products and services. While there seem to be endless advantages of CBDC, its curses are no doubt evident in the ways it will be regulated. Transparency and centralization of the digital currency will enable the central bank to know who is holding what money at a particular point in time. With such regulation in place, the government can use CBDC to surveil the citizens, determine how much they earn, what they use the money for, where they save the money. Since it can be used to determine the amount a particular person earns, it allows the government to leverage tax on citizens. These are the ‘ill’ cryptocurrency permits, hence, its ban. 

Crypto Regulation or CBDC? 

 You may wonder why the central bank is interested in creating its digital currency when it could tap into the existing cryptocurrency. The reason behind this is not far-fetched. One of the important reasons for the ban on cryptocurrency was because it is highly decentralized. Not only because the government does not have control over it but because transactions are only known to the two parties involved without the parties knowing each other. This allows some users to carry out fraudulent activities; cybercrime and money laundering through cryptocurrency. A call for the regulation of cryptocurrency is quite impossible due to its decentralization, to solve the problem of anonymity, there is a need to launch a digital currency that can be monitored. To the Nigerian government, CBDC has the same function as cryptocurrency (except the issue of anonymity which is unimportant if one has nothing to hide). It is the government’s way of regulating crypto and embracing the opportunities the new system provides. 

In conclusion, while the CBDC may seem like a plot by the Nigerian government to further clamp down on cryptocurrency and to monitor the citizens, it is rather counter-productive to critique before it gets launched. For now, it is an idea that is yet to see the light of the day, the loopholes can only be confirmed after its launch in October.  

Comments
Continue Reading

Crypto Assets

How to Approach Cryptocurrency Investment in 2021

Published

on

Years have gone by and many cryptocurrencies have come to be. Speculators and Investors now see cryptocurrency as an alternative to universal currencies like the dollar, euro, and naira. Today, virtually everyone wants to learn how to invest. If you’re looking to invest in cryptocurrency, this article is for you. 

Before diving into the crypto journey, it is important to be aware of what is at stake. For everyone who has acquired immense wealth trading crypto, there is also someone who has lost massive finances while trading. Nevertheless, if you’re still focused on cryptocurrency investment, keep reading. 

Only Invest Money You’re Prepared To Overlook 

Needless to say, you should only invest money you can afford to lose. The main purpose of any form of investment is to add to your fortune. If an individual invests his entire savings, and the said investment doesn’t work out as planned, that is a big loss. So, when investing in Cryptocurrency, whatever amount you put in is completely up to you, but it should only occupy a small percentage of your income, such that, if there is a hiccup, you’re not left completely stranded. 

Make Your Choice 

Choose your cryptocurrency or cryptocurrencies. There are tons of cryptocurrencies to select from and while it’s fine to make good with just one, it’s also not a bad idea to invest in as many as you want, as long as you’re not spending above your means. That way, you gain some, and you lose some. However, if you would rather invest in one, Bitcoin seems to be the most reliable, followed closely by Ethereum.

A downside to trading in cryptocurrencies is that you can’t just walk into a bank or an investment brokerage firm to get them. You have to find sites dedicated to cryptocurrency exchanges. There are several sites like eToro, Coinbase, Gemini, Binance, etc. dedicated to this cause. 

Save Your Cryptocurrency 

Cryptocurrency is mainly stored in either a hot or cold wallet. This wallet permits users to keep and reclaim their digital assets. A user can store cryptocurrencies like Ethereum in their wallet and from there, use it to perform transactions. You have access to your wallet through a public key and a private key. The public key is referred to as your cryptocurrency address and it can be used by the other party in the transaction, while the private key is for you alone. It is important to have both keys to finalize a transaction. In addition, your wallet provides a history of all your transactions, as well as your present balance. 

Safeguard Your Cryptocurrency 

Keeping your cryptocurrency secure after buying it is principal. To encrypt your data, make use of VPNs, like NordVPN and ExpressVPN. These help in securing your transactions and making sure that your purchases are kept a secret from prying eyes. 

Just as with other forms of investment, in cryptocurrency investment, it is important to focus less on what is being said, but rather carry out your own research and study the market to the best of your ability. Do your own fact-finding instead and select the strategy that works best for you. This will help you to have a clear picture of what it is you’re jumping into.

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading

Artificial Intelligence

How AI Is Helping Fintechs Provide Intelligent And Better Financial Services

Published

on

AI fintech services

We live in an era of data. In today’s world, data is the new gold. The quality of services now significantly depends on how much insight can be extracted from data to help in the creation of the services. For fintech organizations, building services that harness the power of data and artificial intelligence has now become necessary to ensure that the services are tailored to meet the needs of customers. Artificial intelligence is now being used in various ways to help fintech companies provide intelligent and improved services. Some of the major areas of AI application in fintech are discussed in this article.

Risk Assessment

From insurance companies to banks and other fintech institutions, assessing credit worthiness and estimating the level of risk associated with every transaction has become very crucial. Now, many fintech companies employ the use of AI in determining the credit profiles of clients which helps to minimize financial losses when customers fail to repay loans or meet other financial commitments. 

Predicting and preventing fraudulent transactions is another challenge that fintechs are using AI to solve. Using machine learning algorithms, fintech organizations are able to build more accurate fraud detection mechanisms to curb the activities of scammers. The advantage of using machine learning for fraud detection in financial systems is that the machine learning model can learn from the financial data by itself. Thus, it is able to uncover hidden patterns and make a more robust prediction compared to traditional fraud detection algorithms. AI-based fraud detection algorithms can also be used to verify insurance claims and flag fraudulent ones. 

Churn Prediction

Customer churn is an important Key Performance Index (KPI) for any organisation. Preventing customer churn is aimpoaaaustomers and improve customer engagement. Many fintechs across the world now use AI to increase customer retention by understanding customer behaviour and making data-driven decisions to retain the audience of customers.

Intelligent Customer Service

Customer service is an aspect of fintech that has been significantly transformed by AI. The use of AI in this area has drastically reduced the need for human customer care representatives and the cost associated with employing these representatives. With AI, more customers can be attended to more efficiently via chatbots, virtual assistants etc. 

Chatbots are, particularly, one of the most common uses of AI in fintech customer service. Chatbots are sophisticated conversational AI applications that can engage with customers, address complaints and basically fill in the gap of a human employee. Chatbots have now become faster and easier means for customers to fix issues they have while using fintech services.

The Future of Fintech With AI

The use of AI in financial technology extends beyond risk assessment, churn prediction and intelligent customer service. Areas like payment processing and sentiment analysis are also being transformed by AI. Organizations like MasterCard and Visa have been able to improve the quality of their services by leveraging AI to achieve this. Personalized banking and financial services will define the future of financial technology. Better experiences will be developed for each customer in a unique and personalized manner. This may be impossible without AI. The future of fintech is geared towards smarter and more intelligent services, with AI steering the wheel to this future.

Comments
Continue Reading

TRENDING

%d bloggers like this: