Emerging Nations Woo Crypto With Economic Zones
Binance is partnering with crypto-friendly Nigeria to create a digital economic zone aimed at luring blockchain and cryptocurrency companies to set up shop in Africa’s largest country.
The Nigeria Export Processing Zones Authority hopes to create a virtual free zone, a type of special economic zone where companies are headquartered, regulated and taxed under special rules to stimulate economic growth. And like the Dubai Virtual Free Zone it’s based on, companies don’t need to be physically located there.
Still, that makes Nigeria – which is also the absolute largest country to launch a digital central bank currency, the eNaira – the latest in a small but growing list of emerging nations looking to attract crypto entrepreneurs looking to establish themselves in a place with clear crypto rules and favorable tax treatment.
See also: Report: Binance in talks to create a Nigerian digital economic zone
While prosperous Dubai is hardly an emerging nation, Honduras, El Salvador and the Philippines have similar projects, as do the Cayman Islands and Belarus.
A piece of cake
Special Economic Zones (SEZs) are hardly unique to emerging nations, but they offer the opportunity to get a piece of the digital asset industry pie at a relatively early stage – when many wealthier nations are still struggling to set up clear regulatory regimes, or have rules that the industry considers burdensome.
By using special economic zones, emerging nations, which can focus their attention on getting regulations written quickly—generally with special tax treatment and innovation-friendly rules for the zones—can attract young industries. It is something crypto companies that tend to be virtual or virtual-friendly, and that seek clear driving rules, will be attracted to, the organizers believe.
Binance also partners with the Philippines’ Cagayan Economic Zone Authority (CEZA), which has been trying to establish itself as a hub for the crypto industry for several years.
At a hearing in the nation’s Senate on August 24, both joined the Central Bank of the Philippines (BSP), its Securities and Exchange Commission and the FinTech Alliance Philippines to advise on the development of regulations that protect consumers while providing a sandbox regulatory environment, according to Inquire. net, a local news channel.
It’s an approach that helped grow the nation’s FinTech and digital payments sector,” BSP Deputy Governor Chuchi Fonacier said at another Senate hearing last month. At the same time, the focus of an SEZ makes it easier to follow technological and industry developments that may require updated regulations, said Fonacier.
Crypto currency
Despite bitcoin becoming legal tender last year, El Salvador’s dream of a Bitcoin City crypto-enclave remains a pipe dream, and is likely to see the value of the No. 1 cryptocurrency rise to the point where the $1 billion Bitcoin Bond the country’s president , Nayib Bukele , has proposed to build it becomes feasible.
In April, Honduras doubled down on its Honduras Prospera special economic zone’s appeal to crypto companies by making bitcoin legal tender — only in the SEZ — and allowing municipalities, local governments and even international firms to issue bitcoin bonds from its jurisdiction, Reuters reported .
Tribal nations
It is not only countries that create SEZs. In the United States last month, the Catawba Indian Nation proposed regulations that would allow decentralized autonomous organizations, or DAOs, that manage decentralized finance (DeFi) projects to establish limited liability companies or unincorporated nonprofit organizations within the Catawba Digital Economic Zone (CDEZ) on his country, which is in South Carolina.
“With the support of a sovereign tribal government, CDEZ has an opportunity to become one of the first sovereign nations to build a legal structure for DAOs from the ground up,” the agency said in a June statement.
“The CDEZ is a regulatory sandbox protected by the high walls of US treaty obligations,” it added.
“Our goal with this rule around the DAO is to create a structure that enables innovation, rather than prohibiting it,” said Joseph McKinney, founder and CEO of CDEZ. “We want to take the best practices from regulatory environments around the world to make CDEZ the obvious choice for anyone looking to start a DAO.”
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