Lebanon Financial Crisis: Banks Torched After Pound Taps New Low Versus the US Dollar

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The Lebanese pound’s fall to its lowest ever versus the U.S. dollar, 80,000 to 1, has piled more misery on residents whose local currency-denominated savings have been decimated by inflation. The ongoing strike by banks demanding the passage of capital control legislation has compounded matters for residents.

Lebanese Pound Devaluation

According to several local media reports, Lebanon’s currency recently plunged to a new all-time low of 80,000 per U.S. dollar on the unofficial foreign exchange market. The Lebanese pound’s fall on the parallel market came less than a month after it was devalued by more than 90% on the official market.

Although the currency’s devaluation from 1,507 to 15,000 per dollar was seen as monetary authorities’ attempt to unify the pound’s multiple exchange rates, some experts have argued that the new official exchange rate is pegged way below the rates where most trade takes place.

The currency’s latest plunge meanwhile has piled more misery on Lebanese residents who have already seen the country’s high inflation rate decimate their pound-denominated savings. As previously reported by Bitcoin.com News, the country’s residents have been unable to withdraw their savings after banks froze their accounts.

Capital Control Reforms

To compound matters for residents, the country’s banks recently went on strike and are demanding the passage of capital control laws that restrict foreign and local currency withdrawals. The International Monetary Fund (IMF), which reached a bailout deal with the Lebanese government in April 2022, has reportedly asked for capital control reforms to be carried out before it releases funding.

However, in response to the move by banks as well as the pound’s latest plunge, Lebanese residents reportedly attacked the closed banking outlets. In one video shared on social media, angry Lebanese protesters are seen attempting to set on fire the home of the president of the Association of Lebanese Banks.

On Twitter, some users shared pictures and videos of burning bank buildings while crypto enthusiasts used the Lebanese banks’ ability to block clients’ access to funds to highlight the risks of using a digital currency issued by central banks.

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Report: South African Startup Momint Seeks to Boost Electricity Generation Using Blockchain-Based Solution

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Using a solution that is based on blockchain technology, the South African startup Momint has said the recently launched Suncash initiative aims to ease the country’s power generation challenges. For about $9, investors can reportedly buy non-fungible tokens (NFTs) linked to solar cells which are then leased to institutions such as schools and hospitals.

Momint Pilots Solution at One Local School

A South African startup, Momint, recently said it has launched a blockchain-powered solution that can ease the African country’s energy woes by installing more rooftop solar systems at public institutions like hospitals and schools. According to a News 24 report, the startup’s solution has already been piloted at Delmas High School in South Africa’s Mpumalanga province.

As explained in the report, investors that wish to participate in this project can do so by acquiring non-fungible tokens (NFTs) which are linked to solar cells and are sold for a minimum price of just under $9. The solar cells are then leased to institutions that agree to purchase the generated electricity via a so-called standard power purchase agreement.

Commenting on his company’s solution to South Africa’s power generation crisis, Ahren Posthumus, the CEO of Momint, said:

We are a technology company that’s trying to build for the next 15 years, but what we realised is we can’t build a technology company in a country that doesn’t have electricity.

Posthumus also claimed that his company does not expect to profit from the project which he described as “not financially sustainable.” The CEO claimed, however, that his organization chose to pursue this project because it wants to help South Africa overcome its power generation challenges.

Blockchain Solution Lowers Risks for Momint

On why the startup chose blockchain, Posthumus insisted that this not only makes the project transparent but it also lowers risks for Momint.

“We take legal contracts that represent ownership of each individual cell, and we put those legal contracts into a file that’s typically referred to as ‘the token’ on the blockchain. It’s called a smart contract. That smart contract says, ‘whoever owns this token has the right to the underlying asset’ and they have the right to the revenues that the underlying asset generates,” the CEO reportedly said.

While the blockchain-based solution is seen as one of the most appropriate ones, it nevertheless comes with its own drawbacks. According to Posthumus, one such drawback is the risk of public institutions defaulting.

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African Fintech Startups Raised $1.45 Billion in 2022 — Sector’s Share of the Continent’s Total Funding Drops

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African Fintech Startups Raised $1.45 Billion in 2022 — Sector's Share of the Continent's Total Funding Drops

Despite seeing their share of Africa’s startup funding drop from 48.3% seen in 2021 to 43.4% in 2022, fintech still managed to raise 39.3% more capital in 2022 ($1.45 billion) than they did in 2021 ($1.04 billion). Nigeria was again the best-funded country after 180 of its startups raised a combined US$976,146,000 or 29.3% of the African continent’s total.

Big Four’s Share Drops

According to Disrupt’s 2022 African tech startup funding report, fintech startups were able to secure $1.45 billion in funding in the past year. The sector’s total capital raise represented an increase of 39.3% from the approximately $1.04 billion that was secured in 2021. Despite this increase in fintechs’ overall funding, the sector’s share of total capital raised by African tech startups still dropped from 48.3% seen in 2021 to 43.4% in 2022.

As was the case in 2021, Nigeria is again the best-funded country after 180 of its startups raised a combined US$976,146,000 or 29.3% of the African continent’s total. Both the West African nation’s number of funded startups and their share of the continent’s total dwarfs those of Egypt, Kenya and South Africa.

Also, according to the report, while the year 2022 was a record-breaking year of funding for countries like Ghana and Tunisia, the continent’s so-called big four — namely Egypt, Kenya, Nigeria and South Africa — again accounted for a disproportionate share of the continent’s fintech startup funding. However, the study data seemingly points to more evenly distributed startup funding in the future.

“Whereas in 2021, 80.1% of funded ventures hailed from either of Egypt, Kenya, Nigeria or South Africa, in 2022 that declined to 75.8%. Meanwhile, the proportion of total funding raised by these markets is also decreasing. In 2022, ‘big four’ startups raised 80.8% of the annual total, down from a bumper 92.1% in 2021,” the Disrupt report stated.

Debt Financing the Least Preferred Form of Funding

Concerning the most popular funding methods, the report said that out of the 310 disclosed funding rounds, more than 70% of these “were at the seed and pre-seed stage.” On the other hand, the number of startups that disclosed Series B funding or higher only accounted for under 5% of the total.

Meanwhile, the study findings suggest that debt financing is the least favored funding method with just 33 from a total of the 633 startups having revealed an “element of debt as part of any of their rounds.” While this total is marginally higher than the 26 seen in 2021, according to the report, such a meager figure could mean companies remain “much more likely to raise equity capital” than debt capital.

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Zambia Testing Technology to Regulate Cryptocurrency — Government Minister

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The Bank of Zambia and the country’s securities regulators are currently testing the technology to regulate cryptocurrencies, a Zambian government minister has said. According to Felix Mutati, cryptocurrency is a revolutionary technology that embodies a future his country desires to achieve.

Achieving an Inclusive Digital Economy

The Zambian central bank and the country’s Securities and Exchange Commission are in the process of “testing” technology to regulate cryptocurrencies, the country’s minister of Technology and Science, Felix Mutati, has said. In his remarks published on the ministry’s website, Mutati argued that Zambia needs to regulate this “revolutionary technology” because it encapsulates “the future the country desires to achieve.”

Mutati also revealed that the testing of the regulatory technology will soon be upscaled as part of measures to help Zambia attain an “inclusive digital economy.” In addition, the minister said Zambia, which is seeking to become the region’s technology hub, is already putting in place the infrastructure needed to help the country achieve such a goal.

While the Bank of Zambia has in the past discouraged the use of cryptocurrencies like bitcoin, the remarks by Mutati suggest that President Hakainde Hichilema’s government is embracing cryptos.

Meanwhile, the minister also claimed that Zambia has established itself as an investment destination of choice for many investors.

“Zambia has created magnetism that attracts investments and it is one of the countries in Africa that is becoming a must-be place for investment,” Mutati said.

Bringing Zambia’s Financial Exclusion Gap

According to the minister, once the envisioned digital payments infrastructure is in place, he foresees a future in which cryptocurrency is the “driver for financial inclusion.” as well as the “change-maker for Zambia’s economy.”

In addition to using cryptocurrencies to advance the country’s financial inclusion agenda, Zambia hopes to achieve this through the yet-to-be-launched central bank digital currency (CBDC). As reported by Bitcoin.com News in Feb. 2022, the Bank of Zambia began exploring the pros and cons of using a CBDC and was expected to complete this in the fourth quarter of the past year.

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Nigerian Crypto Payment Gateway Fluidcoins Acquired by Seychelles-Based Crypto Exchange

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The Nigerian crypto payment gateway Fluidcoins was recently bought for an undisclosed sum by Blockfinex, in a deal which the former’s CEO Lanre Adenowo described as an “acquihire deal.” Blockfinex reportedly said it will leverage the acquisition to launch its own platform known as Blockpay.

Scaling Blockfinex’s Crypto Payment Processing Business

The Nigerian crypto payment gateway, Fluidcoins, was recently acquired for an undisclosed sum by the Seychelles-registered crypto exchange company Blockfinex. According to a Techcabal report, Blockfinex’s acquisition of a 100% stake in the Nigerian firm came some 18 months after Fluidcoins’ last capital raise of $150,000.

Commenting on the acquisition that was facilitated by Dan Holdings Limited, Blockfinex founder and CEO Danny Oyekan reportedly said:

This acquisition was driven by a decision to venture into wallet as a service business and crypto payment processing and scale it across the world.

Blockfinex reportedly said it will leverage the acquisition to launch its own platform known as Blockpay. Besides being a payment processor and application programming interface (API) wallet-as-a-service provider, Blockpay will facilitate payments for Fluidcoins’ existing clients such as Accrue, The Peer, and Getequity, the report added.

Meanwhile, Fluidcoins CEO Lanre Adenowo is quoted describing his firm’s reported acquisition by Blockfinex as an “acquihire deal” that will not result in management or staff changes. The deal nonetheless allows Fluidcoins to keep operating.

According to the report, the acquisition deal includes all of the Nigerian crypto payment gateway’s entities including Flip and Fluidshops.

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Moody’s Says Forex Shortages May Force Nigerian Central Bank to Delay Repaying Local Banks

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The persistent scarcity of foreign exchange may force the Nigerian central bank to delay repaying the $10.4 billion owed to local banks, analysts at Moody’s Investors Service have concluded. The central bank’s failure to pay its debts on time will likely force the affected financial institutions to similarly delay paying back their own forex-denominated debts.

Nigeria’s Declining Oil Revenues

Nigeria’s perennial shortage of foreign exchange may likely result in the country’s central bank failing to repay domestic lenders on time, the rating agency Moody’s Investors Service has said. As reported by Bloomberg, the Central Bank of Nigeria (CBN) owes the West African nation’s so-called rated commercial lenders about $10.4 billion which the bank received in the form of swaps and forwards.

According to Moody’s analysts that include Mik Kabeya and Lynn Merhi, the anticipated central bank debt repayment delay may similarly force the affected banks to delay settling their own offshore obligations.

“A material delay in repayment could well lead to the banks facing their own foreign-currency shortages and could constrain their ability to repay their own foreign-currency liabilities,” the analysts reportedly said.

Despite being one of Africa’s biggest oil producers, Nigeria’s oil revenues have gradually declined from a peak of $62 billion seen in 2008 to $36.6 billion seen by December 2022. This sharp drop in revenues, which is blamed on oil theft and vandalism, has in turn increased pressure on Nigeria’s forex reserves.

Persisting Local Currency Shortages

The prospect of the CBN delaying repayment its debts comes at a time when Nigeria is also grappling with shortages of local currency. The shortages stem from the CBN’s so-called naira redesign policy — an initiative which, in part, seeks to starve the country’s forex of naira banknotes.

However, reports and scenes of Nigerians storming and vandalizing banks eventually forced the country’s president, Muhammadu Buhari, to extend the life of the recently demonetized naira banknotes. In his televised address to Nigerians on Feb. 16, Buhari said he had extended the life of the old 200-naira notes by 60 more days.

In the address, President Buhari insisted the naira redesign policy is a necessary step that had to be taken in order to strengthen the monetary policy. The Nigerian leader also cited money laundering and terrorism funding concerns as some of the reasons why he okayed the CBN’s currency demonetization exercise.

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Oman Capital Markets Regulator Plans to Establish a Virtual Assets Regulatory Framework

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The Oman Capital Market Authority (CMA) has said it plans to establish a regulatory regime to govern as well as develop the country’s virtual assets market. The regulator said the envisaged regulatory regime enables it to avail an “alternative financing and investment platform for issuers and investors while mitigating the risks associated with this asset class.”

‘An Alternative Financing and Investment Platform’

The Oman financial markets regulator, the Oman Capital Market Authority, has said it plans to establish a virtual assets framework to “regulate and develop the market in the Sultanate of Oman.” According to the regulator, this plan demonstrates its “proactive approach to develop the digital assets and fintech industry in Oman.”

Also as explained in the regulator’s Feb. 14 press release, the creation of the so-called virtual assets regulatory framework will enable the CMA to avail an “alternative financing and investment platform for issuers and investors, while mitigating the risks associated with this asset class.”

As previously reported by Bitcoin.com News in Jan. 2022, CMA initially revealed plans to establish the regulatory regime after it invited bids from “specialized companies” interested in helping Oman set up a regulatory framework for virtual assets. However, after spending more than one year working on this, the organization revealed in the latest press statement that it is now working on defining the framework.

“The CMA is in the process of defining a comprehensive and facilitative regulatory framework, which will include a new regulation to cover all virtual assets activities, a licensing framework for all VASP categories and a supervisory framework to identify, assess, and mitigate ongoing risks,” the regulator said.

The regulator added that the objective of the envisaged regulatory regime is to establish rules which help prevent market abuse.

Meanwhile, the press release also revealed that the CMA had chosen Xreg Consulting Limited, an international policy and regulatory consultancy specializing in virtual assets, as its adviser. The regulator has similarly appointed the Omani law firm Said Al-Shahry and Partners, Advocates & Legal Consultants (SASLO), the press release added.

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Report: South Sudan Government Bans US Dollar Transactions

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The government of South Sudan has reportedly prohibited U.S. dollar-based transactions and has directed that all local payments be settled in the local currency. The Salva Kiir Mayardit government reportedly said it also wants all signed commercial contracts to be based on the local currency.

South Sudan’s Economic Meltdown

As part of initiatives aimed at reviving South Sudan’s war-torn economy, the government of Salva Kiir Mayardit recently outlawed U.S. dollar-based transactions, a report has said. In place of the greenback, the government reportedly directed that all local payments be settled with the local currency, the South Sudan pound (SSP).

According to a report in The East African, the move by the South Sudan government is likely to negatively impact the operations of importers and regional banks stationed in the hyperinflation-hit country.

Prior to banning dollar transactions, Slava Kiir’s government had set up a committee charged with recommending measures to resuscitate South Sudan’s hyperinflation-stricken economy. However, despite the presence of the committee, South Sudan still saw its worst economic meltdown in 2022. This, combined with the crippling hyperinflation, has now left as many as 7 million South Sudan residents facing severe food shortages and possible starvation.

Meanwhile, in addition to outlawing U.S. dollar-based transactions, the South Sudan government said it wants all signed commercial contracts to be based on the local currency.

“That is a clear directive from the Central Bank that all the transactions in South Sudan must be done in our currency. So all commercial contracts must be signed in our local currency,” Michael Makuei Lueth, the country’s information minister, reportedly said.

Despite sitting on top of the largest known crude oil reserves in Sub-Saharan Africa, the civil war as well as the continuing violent clashes between different groups has ensured that South Sudan remains one of Africa’s poorest and least stable countries.

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Rwanda Government Orders Banks to Stop Facilitating Crypto-Related Transactions

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According to the National Bank of Rwanda, the country’s regulated financial services providers are now prohibited from facilitating crypto-related transactions. In her Jan. 31 letter justifying the decision, the acting governor Soraya Hakuziyaremye cites the unregulated status of most crypto assets and how this leaves users without the “guarantees and safeguards associated with regulated financial services.”

Rwanda’s Growing Interest in Crypto

The National Bank of Rwanda (NBR) has said the country’s financial services providers are forbidden from engaging in “any crypto-related activities until a regulatory framework has been put in place.” In a letter addressed to managing directors and CEOs of financial services providers, the NBR’s acting governor Soraya Hakuziyaremye suggested that the prohibition would help to ensure “efficient and sound financial services.”

Despite the central bank’s 2018 warning against crypto-related activities, Hakuziyaremye acknowledged in her letter that Rwandan residents have continued to trade digital assets like bitcoin. According to the letter, available data suggest that “more than three million U.S. dollars were traded on [the] Rwanda market since January 2020.”

Meanwhile, in the same letter, Hakuziyaremye sought to justify the central bank’s decision to bar financial services providers from facilitating crypto-related transactions.

“Although crypto asset activities are still limited and therefore, do not pose substantial risks to [the] financial and monetary system of Rwanda, the NBR is concerned about the involvement of the financial institutions in crypto activities,” Hakuziyaremye said.

Crypto-Related Activities Lack ‘Guarantees and Safeguards Associated With Regulated Financial Services’

In the Jan. 31 letter, the acting NBR governor cites the unregulated status of most crypto assets and how this leaves Rwandese users without the “guarantees and safeguards associated with regulated financial services.” The letter also points to how crypto investors elsewhere have been defrauded by scammers like Ruja Ignatova of Onecoin and Gerald Cotten of Quadriga crypto exchange.

Hakuziyaremye’s letter also attempts to draw Rwandan crypto investors’ attention to the decisions that some regulators have taken against unregulated crypto entities.

“For example, Binance, whose presence was noticed in Rwanda, is under investigation in the United States of America over money laundering allegations. The same company has been banned by the Financial Conduct Authority (FCA) due to weak consumer and investor protection mechanisms,” the acting governor said.

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