There are widely differing opinions about blockchain and cryptocurrency. Business and TMT expert Nicholas Kuria recently spoke to Africa Legal about the impacts of technology on business, nations and lawyers.
Although there is controversy surrounding cryptocurrency, lawyers should learn about the risks and opportunities of such technologies while keeping an eye on varied government and regulatory responses, said Nicholas Kuria, counsel at the British Virgin Islands (BVI) office in Conyers.
“We’ve really had to address what is a rapidly evolving sector of the economy,” Kuria said, noting that he expects digital asset regulation to be enacted in the BVI later this year. “It’s about staying on top of developments in a commercial context, but also from a regulatory perspective and being able to advise customers accordingly.”
While Bitcoin was established as a decentralized, digital alternative to government-issued money, governments across Africa and the world are responding to the growing popularity and use of cryptocurrencies in different 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 there must be a balance between leveraging the underlying benefits of cryptocurrency and blockchain technology, while protecting businesses and individuals.
“The challenge is that it’s a rapidly changing area and when we talk about crypto, it’s quite volatile,” he commented. “Regulators have to play catch-up and what would have been allowed 18 months ago may not be allowed today. Clients looking to enter this space need to understand if they are going to be on the right side of the law and regulation.”
Conyers is a leading firm with expertise in the largest transactions involving BVI entities (including businesses operating across a range of sectors in Africa) and can advise clients on the use of BVI entities as crypto investment vehicles or owning blockchain technology .
“One of the things we always say is that this is an area that is changing. It’s not like traditional financial services, where things can remain static for years. This is a very new industry and technology, and the risks and attitudes of authorities and regulators change, depending on how it evolves. We’re still at the beginning.”
Blockchain offers an innately transparent and supposedly immutable decentralized ledger that — used correctly — provides greater transaction security, Kuria noted. For businesses, it is potentially a more efficient system for moving funds, influencing settlement, banking and finance, and allowing the use of smart contracts. It also offers financial inclusion for unbanked individuals.
“On the African continent, we see crypto and blockchain having an impact on small and medium enterprises (SMEs) and startups,” Kuria explained. “It provides smaller businesses with an affordable and efficient way to make and receive payments, access investment and savings products and build credit history. Enabling this access to technology can foster growth for SMEs on the continent and, at a macro level, lead to greater job creation and economic development.”
Kuria has seen a lot of interest from customers and believes bans like the one in Nigeria risk pushing people into unregulated areas that pose greater risks to the financial system.
“The challenge is finding a middle ground between the necessity of some regulation to protect investors and people and users of the system, versus not stifling innovation.”
