šŸ’ŽBlockchain Battles Blood Diamonds,šŸš€Asia's $3 Trillion Tokenization Boom,ā—Report Slams El Salvador's Bitcoin Practices

November 04, 2023

Your 5 minute emerging markets web3 weekly update

In This Issue

Africa
šŸ”øBlockchain Battles Blood Diamonds in Botswana
šŸ”øBitcoin Adoption in Cape Verde: A Tool For Progress

Asia
šŸ”øUnlocking a $3 Trillion Opportunity: The Rise of Asset Tokenization in Asia
šŸ”øZodia: Institutional Custodyā€™s New Kid on the Block in Hong Kong

Latin America and the Caribbean
šŸ”øTrouble Inā€¦Paradise? Report Criticizes El Salvadorā€™s Bitcoin Purchases and Highlights Risks of Embezzlement
šŸ”øBrazilā€™s CBDC Focus for 2024: Asset Tokenization and Integration With Public Blockchains

Eastern Europe
šŸ”øTurkey's Regulatory Challenges: New Crypto Laws Aim to Shed 'Grey List' Status
šŸ”øRipple Tapped As Official Technology Partner To Develop Georgia's Digital Lari

Catch up on the latest episodes and clips from the second season of the EmergingVoices Podcast on YouTube!

Africa

Image Credit: Dall-E 3

Botswana, the second-largest diamond producer globally, is partnering with De Beers to leverage blockchain technology through the Tracr platform, which aims to track the diamond supply chain and has registered over one million rough diamonds at source. Speaking at 'The Facets 2023' conference in Botswana, the country's President, Mokgweetsi Masisi, highlighted the potential of blockchain technology to enhance transparency and traceability in the diamond supply chain. The president emphasized that blockchain's decentralized ledger can assure consumers that diamonds have been sourced ethically, addressing concerns over 'blood diamonds' and Botswanaā€™s diamond mining industry, which has faced criticism in the past over human rights violations, exploitation, and environmental harm.

Cointelegraph's global reporter, Joe Hall, explores Cape Verde - the island nation off the west coast of Africa - its economic challenges and opportunities, and the potential of Bitcoin as a tool for progress in a video documentary. Cape Verde faces challenges due to its small land mass, limited export capacity, heavy reliance on tourism, and high remittance costs for its diaspora. High transaction fees from Mastercard and Visa, as well as high ATM and bank access fees, pose additional hurdles for the local economy, and inflation remains higher than in the eurozone. Despite these issues, Renato Evarchi, one of the first business owners in Cape Verde to accept Bitcoin, highlights the growing interest in decentralized digital currencies among Cape Verdeans seeking an alternative to traditional financial systems.

Asia

Image Credit: Dall-E 3

On-chain asset tokenization in Asia is seen as a $3 trillion market opportunity. Private firms are exploring the tokenization of real-world assets such as carbon credits, art, premium wine, and palm oil to make these niche markets accessible to small retail investors. Strong regulatory frameworks in Asian financial hubs like Singapore and Hong Kong have instilled confidence in participants, driving interest in the tokenization of wealth assets, which are expected to see significant growth in the next 12 to 18 months, offering benefits like trading, price discovery, and liquidity while bringing real-world assets to blockchain platforms.

Banking giant Standard Chartered-owned Zodia Custody is expanding its services to Hong Kong, targeting institutional clients in a market driven by demand from financial institutions rather than retail customers. Zodia's expansion into Hong Kong is part of its broader push into the Asia-Pacific region, following recent openings in Japan, Singapore, and Australia, and it is currently in discussions with the Hong Kong Securities and Futures Commission (SFC) and Hong Kong Monetary Authority regarding regulation in the region. Hong Kong has been increasingly open to crypto assets, with the SFC launching a regulatory regime for digital assets earlier this year.

Latin America and the Caribbean

Image Credit: Dall-E 3

A report from Global Financial Integrity (GFI) raises security concerns regarding El Salvador's bitcoin (BTC) purchases, citing a lack of transparency in the management of public funds used for acquiring bitcoin since September 2021. The report criticizes President Nayib Bukele's strategy in buying Bitcoin, the lack of clarity regarding who has access to these funds, security measures, protocols for their use, and risks of embezzlement or misappropriation due to this opacity as information on the purchase value or current value of the funds is not publicly available. The GFI report recommends incorporating BTC purchase data into the central bank's balance of payments, implementing security protocols, and creating a transparent registry to safeguard funds and fight corruption in the government's BTC holdings, estimated at more than 3,000 BTC, worth over $105 million.

The Central Bank of Brazil plans to focus on asset tokenization and Drex (CBDC) integration with public blockchains in 2024. Additionally, the regulation of virtual asset service providers and the issues of interoperability, governance, and privacy are key areas of focus for Drex's development. The regulator will release a report in early 2024 discussing tokenization and its integration with other environments. The Central Bank aims to launch Drex once technological risks, particularly privacy concerns, are resolved, but there are ongoing challenges related to human resources due to a lack of hiring by the Central Bank in recent years.

Eastern Europe

Image Credit: Dall-E 3

Turkey is drafting new crypto-assets legislation in an effort to persuade the Financial Action Task Force (FATF) to remove it from the "grey list" of countries with insufficient anti-money laundering and anti-terror financing measures. Turkey was downgraded to the grey list in 2021, with the FATF finding the country fully compliant with most of its standards except those related to crypto-assets. The FATF had previously warned Turkey about various shortcomings, including the need to improve measures to freeze assets associated with terrorism and weapons proliferation. Finance Minister Mehmet Simsek announced that a law proposal on crypto-assets will be submitted to the parliament soon, aiming to address this concern and potentially remove Turkey from the grey list.

The National Bank of Georgia has partnered with Ripple Labs Inc. to develop the digital lari. The collaboration aims to implement a digital lari pilot initiative using Ripple's CBDC platform to assess its potential use cases and benefits for the state, businesses, and users. The National Bank of Georgia first announced plans to issue a digital lari in May 2021 and sought cooperation from technology companies, fintech companies, and financial institutions. The regulator selected Ripple Labs as the technology partner for its deep understanding of the project's goals and applications.

Thanks for reading and have a great week ahead!

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Written by Jon Lira. Connect with him on LinkedIn.

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