Although there are controversies around cryptocurrency, lawyers should learn about the risks and opportunities of such technologies while keeping an eye on varied government and regulatory responses, says Nicholas Kuria, Counsel in the British Virgin Islands (BVI) office of Conyers.
“We’ve really had to get to grips with what’s a rapidly evolving sector in the economy,” said Kuria, noting that he expects digital assets regulation to be adopted in BVI later this year. “It’s about staying on top of developments in the commercial context, but also from a regulatory perspective and being able to advise clients accordingly.”
While Bitcoin was established as a decentralised, digital alternative to government-issued money, governments across Africa and the world are responding to the growing popularity and use of cryptocurrencies in various ways. Last year the Central Bank of Nigeria banned cryptocurrency users from accessing banking services. Conversely, in 2022 the Central African Republic made Bitcoin an official currency alongside the CFA franc.
Kuria believes a balance needs to be found between harnessing the underlying benefits of cryptocurrency and blockchain technology, while simultaneously protecting businesses and individuals.
“The challenge is that it’s a fast-changing space and, talking about crypto, it’s pretty volatile,” he commented. “Regulators are having to play catch up, and what would have been permissible 18 months ago may not be permissible today. Clients looking to step into that space need to understand whether they’re going to be on the right side of law and regulation.”
Conyers is a leading firm with expertise in the largest transactions involving BVI entities (including businesses operating across a variety of sectors in Africa), and can advise clients on using BVI entities as investment vehicles in crypto or owning blockchain technology.
“One of the things we always say is this is an area that’s in a state of flux. It’s not like traditional financial services, where things can remain static for several years. This is a very new industry and technology, and the risks and the attitudes of governments and regulators are changing, depending on how it evolves. We are still at the beginning.”
Blockchain offers an innately transparent and supposedly immutable decentralised register that – used correctly – gives greater transactional security, noted Kuria. For businesses, it’s potentially a more efficient system for moving funds, impacting settlements, banking and finance, and allowing use of smart contracts. It also offers financial inclusiveness for unbanked individuals.
“On the African continent we see crypto and blockchain having an impact on small and medium size enterprises (SMEs) and startups,” Kuria explained. “It gives smaller businesses an affordable and efficient avenue to make and receive payments, access investments and savings products, and build credit history. Enabling this access to technology can foster growth for SMEs on the continent, and on a macro level lead to greater job creation and economic development.”
Kuria has seen plenty of interest from clients and believes bans such as the one in Nigeria risk pushing people into unregulated areas which pose greater risk to the financial system.
“The challenge is to find a middle ground between the necessity for some regulation to protect investors and people and users of the system, versus not stifling innovation.”
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