🟠 KPMG: Banks and crypto firms need each other

KPMG encourages Nigerian banks to embrace blockchain and crypto firms

Topline:​ Big Four firm KPMG has encouraged Nigerian financial institutions to embrace blockchain technology and collaborate with cryptocurrency firms instead of keeping them at a distance. (Details)

Driving the news: In a joint publication with blockchain analytics firm Chainalysis, KPMG highlights how the Central Bank of Nigeria’s (CBN) 2021 ban on banks from facilitating crypto transactions failed to curb adoption. Instead, Nigeria’s share of global crypto inflows continued to grow.

• Between June 2022 and July 2023, Nigeria was one of only six countries globally to record year-on-year (YoY) growth in crypto transactions.

KPMG’s recommendation: KPMG said the recent shift towards regulation and integration could offer advantages for traditional banks and crypto companies. 

• It encouraged financial institutions to maximize blockchain technology’s capacity to improve legacy monitoring systems with one that “far exceeds traditional monitoring capabilities.” 
• Conversely, crypto exchanges can benefit from the expertise of traditional institutions in risk management to enhance their financial integrity and strengthen anti-money laundering controls. 

Why this matters: In February 2021, the CBN banned Nigerian financial institutions from transacting with cryptocurrencies or firms dealing in them.

• It ordered banks to close accounts suspected of facilitating crypto transactions or belonging to individuals or businesses involved in crypto trading.
• However, Nigerians shifted to peer-to-peer trading, which kept crypto adoption strong.
• The CBN reversed the ban in December 2023, allowing banks to work with licensed crypto firms for the first time in nearly three years.

Rwanda introduces draft crypto regulations

Topline: Rwanda’s Capital Markets Authority (CMA) and National Bank of Rwanda (NBR) have issued draft crypto regulations, requiring all virtual asset service providers (VASPs) to register for licenses or face penalties. (Details)

The details: The new regulations became effective on March 3, with public comments open until March 14.

• The draft places virtual assets and crypto firms under the CMA’s jurisdiction and establishes a licensing framework.
• The law also enforces the travel rule, requiring exchanges to collect and share user transaction details for anti-money laundering compliance.
• Unlicensed crypto operators face fines of up to $21,000 and up to five years in jail.
• However, cryptocurrencies remain illegal as legal tender, with crypto mining and ATMs also banned.

Before Now: Rwanda’s government has historically been cautious about crypto, banning digital currency transactions while allowing informal peer-to-peer use.

• In 2023, the country’s Investigative Bureau arrested a financial executive for illegal currency trading involving crypto.
• Rwanda’s central bank previously hinted at crypto-friendly regulations but these new rules suggest a stricter, more controlled approach.

South Africa’s taxman targets crypto tax defaulters

Topline: The South African Revenue Service (SARS) is intensifying its crackdown on tax defaulters, targeting crypto investors who failed to disclose their earnings over the past five years. (Details)

The details: SARS has launched a specialized crypto tax unit to issue tax default notices to individuals who failed to disclose their taxable cryptocurrency holdings, and target those who attempted to evade their obligations.

• Thomas Lobban, the legal manager at Tax Consulting South Africa, said that SARS’ crypto unit has been auditing individual crypto activity for the past five years. 
• To enforce compliance, SARS is collaborating with crypto exchanges to obtain user data and compare it with tax filings.

Key quote:

“SARS has the authority to approach anyone and demand information about your tax matters, including from cryptocurrency platforms. The SARS team is highly knowledgeable about cryptocurrency, operates with sharpness, is diligently fulfilling its duties, and has ample resources to pursue its goals.” 

Before Now: South Africans long believed crypto was tax-free until SARS clarified that crypto gains are subject to taxation.

• Profits from crypto trades are taxed at 18% (capital gains tax), while income from crypto mining and airdrops is taxed at 45%.
• Last year, SARS announced it was exploring AI-driven tools to improve tracking and enforcement.

Catch up

🇳🇬 Binance blocks Nigerian users access to free token rewards and airdrops (Mariblock)

🇿🇦 Luno chief calls for regulatory clarity around bitcoin’s onshore status in South Africa (Mariblock)

🇿🇦 SA Parliament’s social media accounts hacked to promote the launch of $Ramaphosa token (Daily Maverick)

🇳🇬 Nigeria moves gingerly to tame Africa’s biggest crypto market (AFP)

🇬🇭 President Mahama: Solana and crypto are key to Africa’s financial future (Binance)

Opportunities

• VISA opens applications for Cohort 4 of its Africa Fintech Accelerator Program. Deadline: March 25, 2025. (Details)
• African blockchain talent firm Web3Bridge has opened the waitlist for its 13th cohort. Join the waitlist here.
• USAID announces the Women Entrepreneurship Incubator program in Kenya. Apply here.

That’s it for this week.

Until next time, stay informed.

Ogechi.