Finding a balance between decentralization and regulation: key takeaways from Techpoint’s #TABS22

Last weekend (Saturday, May 21, 2022), African tech media company, Techpoint hosted a blockchain technology and Web3 event named Techpoint Africa Blockchain Summit (#TABS2022). The event which was held in Lagos had founders, regulators and key stakeholders in the blockchain ecosystem gather in a room to discuss the future of the developing ecosystem.

The theme of the conference was – “Web3: Engineering Tomorrow’s Internet”. Web3 is a current buzzword and is considered the future of the internet.

Seasoned speakers and experts of the industry at the event shared thoughts about how Africa could harness the opportunities the new internet age presents. For instance, Chris Izu Okafor, COO of Patricia Technologies in his keynote address shared some opportunities Africa can leverage on the Web3.

According to Chris, one of the major problems startups in Africa face includes raising capital and web3 solves just that.

“One of the opportunities that web3 gives is connectivity. Tokenization and DAOs solve the issue of access and raising of capital. I believe it’s going to be the future of venture capital.”

Chris urged the audience to continue to tell stories of how the blockchain can change a lot of things in Africa. He admitted that Africa is doing so well in the Web3 space and “Nigeria is number 2 among countries that are adopting NFTs. This means that Africans are leveraging the opportunities presented by web3.”

He said that he is excited to see that economies that are tagged ‘developing’ are having one of the fastest adoption rates of mobile money. 

“We saw the launch of CBDC, this is a testament to the fact that digital money is real, although it may not be decentralized. It’s only a matter of time before DeFi takes over fully.”

According to him, Decentralized Autonomous Organizations (DAOs) are one of the best ways to harness the opportunities that Web3 affords. 

“In Africa, we must not be afraid to leverage web3 technology. The technology is still nascent and we are still building. We must also build communities, there are so many enriching and helpful communities across the web3 space. We should build DAOs especially locally”. 

In conclusion, Chris encouraged Web3 enthusiasts to build products that create solutions to common problems in Africa. He believes that before Web3 can have any significant impact on the continent, the average man should feel the wave and be affected positively:

“If we cannot use web3 for our economy, if our solutions do not relate to the common problems that we have, if the normal person cannot feel the impact of what we’re doing in the space, then we are not doing anything. It’s important to keep telling the story, it’s important to keep educating people about it in order for them to adopt it. 

Conversations about web3 and regulation 

The panel session is probably the most interesting part of the conference.

Speakers on the panel include Senator Ihenyen – President of Stakeholders In Blockchain Technology Association Of Nigeria(SIBAN), Barr. Buki Ogunsakin – Principal/Head Satoshi, BBO Solicitors and Chimezie Chuta – Founder/Coordinator, Blockchain Nigerian User Group. 

Interestingly, #TABS2022 came at the back of a week that the Nigerian Securities and Exchange Commission (SEC) rolled out a regulatory framework for entities in the Nigerian digital asset space. 

Notably, it is also intriguing that two government agencies are having contradictory stances as regards the legality of cryptocurrency in the nation. Recall that the Central Bank of Nigeria (CBN) placed a ban on crypto activities from February 2021 and the apex bank still sanctioned 6 commercial banks for engaging in crypto transactions in April 2022. 

However, the speakers tried to find a balance between the opposing stances of CBN and SEC and also proposed ways how Decentralization and Regulation can coexist. 

In the opinion of Chimezie, the Nigerian SEC regulations are key. However, the SEC is not interested in innovative blockchain technology. 

“The SEC regulations point directly to areas that are important. SEC wants to have investors’ protection and confidence. Secondly, they want to encourage a balanced market where they will not be a single dominating party. They are not interested in the technology at all and they’ve made that clear.”

Chimezie believes the SEC is not looking at the broader perspective. In the process of regulation, they are trying to stifle innovation because an average local participant cannot come up with the exorbitant registration fee of an operator. 

Buki Ogunsakin comes in from a legal standpoint. For any emerging tech, there is incoherence. People do not understand and are fearful of the market. There are also bad players in the market as well. People are afraid, and in order to allay the fears, the SEC needed to come out with a regulatory framework. 

“SEC coming out with a regulatory framework is key to the acceptance of crypto in Nigeria. It’s important because before there is mass adoption, there is a need for regulation. The rules are necessary, we should understand where they are coming from but the SEC needs to also consider that this is a new technology.”

Senator, President of SIBAN, says the rules are progressive. According to him, prior to this moment, no single entity had officially recognized the virtual assets sector in the country. And that coming to fruition at this time is key. 

“It is the first time ever that a government entity is recognizing you, players, in the space, no one has ever said crypto exchanges are players in the Nigerian economy.”

Senator also spoke about the rule recognizing Initial Coin Offerings(ICOs).

“No African country except Mauritia recognizes ICO in the capital markets. That means businesses, entities can raise capital through digital assets. Lastly, the sec is saying if you play in the virtual asset space, you will come under what they call Virtual Asset Service Provider. This is beautifully progressive.”

Now at a crossroads, the question resonating in everyone’s mind is how can the SEC regulation exist besides the CBN ban?

Buki says the CBN will need to come up with a policy on how banks can work with crypto. Besides, the regulatory framework states that registration payments have to be made through a registered bank account – so that automatically brings CBN in.

In the words of Senator, one of the accusations CBN made when it wanted to place a restriction was crypto being used for money laundering, terrorism financing, investment scams and other fraudulent transactions. And now, the CBN will be forced to change its stance as regards crypto being used for fraudulent activities due to the new SEC rules. 

“In terms of crypto being used for investment scams, it’s the Securities and Exchange Commission that has the statutory roles under the investment and security act of 2007 to ensure that any scam in the investment space is taken care of. Thankfully, we now have the SEC rules, we didn’t have this 15 months. Now the CBN is bound to review its stance as far as crypto being used for investment scams is concerned. Whatever CBN stance was 18 months ago, something has to change now.”

As regards the regulation of blockchain in the country, Chimezie believes that the technology can be regulated. He however admits it’s difficult to regulate open, decentralized blockchains technology. But there are going to be uses of more centralized blockchains by entities looking to deploy solutions as the technology progresses.

“When the policy document comes out, it will clearly define how people, startups and businesses that want to deploy decentralized applications/protocols can have rules to guide them. When we enter the mass adoption stage, it’s not gonna be open, decentralized protocols all the way. The mass adoption would utilize private networks.”

The controversy 

As much as the speakers and panellists tried as much as possible to work out a common ground for the two opposing concepts – Decentralization and Regulation – the debate lingers and it will forever be unending. 

The core basics and essence of the revolutionary blockchain technology is bitcoin and other cryptocurrencies being used in a decentralized way so that no single person or group has control—rather, all users collectively retain control.

In a situation where we now have authorities, entities and corporate institutions trying to own a monopoly of the industry and dictate how it is run in the name of ‘Regulation’, where is the decentralization we are talking about?

Although the two concepts are at the extreme end, it would be interesting to see what plays out in the battle between decentralization and regulation in the near future.