DERIV PROWESS

Empowering Lesotho Through Cryptocurrency Services in Deriv – A Seamless Payment Gateway with Tax, KYC, and AML Compliance

Introduction

As a proud Deriv affiliate in Lesotho, I am on a mission to bridge the financial gap by introducing cryptocurrency trading and developing a seamless payment gateway that integrates the local currency, the loti, with cryptocurrencies. This initiative aims to empower individuals, entrepreneurs, and freelancers by providing access to global financial markets and facilitating efficient currency exchange. However, to ensure the legitimacy, security, and long-term sustainability of this payment gateway, it is essential to comply with tax regulations, Know Your Customer (KYC) requirements, and Anti-Money Laundering (AML) measures.

This proposal outlines the creation of a comprehensive payment gateway while integrating crucial compliance mechanisms to ensure legal and regulatory adherence in Lesotho’s evolving financial landscape.

As an affiliate, I emphasize that Deriv does not authorize its affiliates to make contracts, agreements, or warranties on its behalf. Specifically, affiliates, including myself, do not have the authority to collect money from users, offer guarantees against losses, offer investment services, or provide advice in Deriv’s name. Our role is to introduce and connect individuals to Deriv’s platform; financial transactions, investments, and advice are the responsibility of the individual user, directly with Deriv.

The Current Financial Landscape in Lesotho

Lesotho faces challenges such as limited banking infrastructure, high unbanked populations, and slow financial system access. Cryptocurrencies offer a way for individuals to tap into the global financial ecosystem without depending on traditional banks. However, as cryptocurrency adoption grows, so does the need to comply with evolving regulations to prevent fraud, money laundering, and tax evasion.

Objective

The primary objective of this system is to create a compliant, real-time payment gateway that links the Lesotho loti to a range of cryptocurrencies. The system will:

• Facilitate fiat-to-crypto and crypto-to-fiat transactions.
• Integrate robust KYC and AML measures to ensure regulatory compliance.
• Support tax compliance by maintaining accurate transaction records.
• Promote financial inclusion through easy access to digital currency trading while adhering to legal standards.

Important Note on Account Usage

While I do not treat my Deriv account as a conventional bank account, I utilize it to facilitate activities like cryptocurrency trading, over-the-counter (OTC) transactions, and peer-to-peer (P2P) exchanges. These activities are within the scope of Deriv’s platform capabilities and align with its focus on innovative financial transactions. Rather than solely trading through opening and closing positions, I engage in these forms of value exchange to meet market demands, all while ensuring full compliance with the platform’s policies, including adherence to KYC, AML, and tax standards.

By engaging in P2P and OTC trades, I contribute to a broader ecosystem that promotes financial inclusion and accessibility without compromising on compliance. I understand and respect Deriv’s stipulation that accounts should not function as traditional bank accounts, and I am committed to maintaining transparency and regulatory alignment in all transactions.

Key Features and Components of the Gateway

1. APIs and Integration

   • The payment gateway will integrate APIs such as Deriv’s API, enabling seamless trading of cryptocurrencies against the Lesotho loti (LSL). This integration will ensure the system's scalability and adaptability for future needs.

2. Real-Time Automation and Oracles

   • By automating currency conversion in real time and using oracles to provide accurate price feeds, we can ensure users receive the best rates without delays.

3. Stablecoin Integration

   • To offer stability, the gateway will incorporate stablecoins like USDT, USDC, and DAI, ensuring that users can engage in transactions without the volatility seen in other cryptocurrencies.

4. User Experience

   • The platform will be designed to be intuitive for users, especially those new to cryptocurrency. Interactive tutorials and easy-to-follow guides will help users navigate the system with ease.

Compliance Requirements

1. Know Your Customer (KYC)

   • User Verification: Before transactions, users will submit identification documents (e.g., national ID, passport, or utility bill).
   • Identity Validation: Automated tools, such as facial recognition, will verify the authenticity of submitted documents.
   • Risk Assessment: Each user’s profile will undergo a risk assessment based on geographical location, transaction history, and activity patterns. High-risk users may need further verification.

2. Anti-Money Laundering (AML) Compliance

   • Transaction Monitoring: Real-time monitoring systems will flag suspicious activities, such as large transactions, rapid deposits/withdrawals, or known laundering patterns.
   • Transaction Limits: Set limits on transaction sizes for unverified or low-risk users to prevent money laundering.
   • Suspicious Activity Reporting (SAR): Automatic generation of reports for local regulators if suspicious transactions are detected.

3. Tax Compliance

   • Transaction History and Reporting: Each user will have access to a detailed transaction history for tax reporting.
   • Tax Calculation Tools: The system will calculate potential capital gains or losses and offer a tax calculator for users.
   • Tax Deduction at Source (TDS): Automatically deduct a portion of crypto transactions for tax purposes, ensuring compliance with Lesotho’s tax regulations.

Additional Feature: M-Pesa and EcoCash Integration for Fiat-to-Crypto Conversion

To further enhance accessibility, I aim to incorporate mobile money services M-Pesa and EcoCash Lesotho into the system, allowing users to convert fiat currency (LSL) into cryptocurrency and vice versa. This integration will:

• Enable seamless deposits and withdrawals from local wallets.
• Empower the unbanked population of Lesotho to participate in the cryptocurrency ecosystem through M-Pesa and EcoCash.

Benefits of Compliance with Industry Standards

1. Legitimacy and Trust: Adhering to KYC, AML, and tax regulations enhances user trust and builds credibility.
2. Risk Mitigation: Compliance helps reduce the risk of fraud, money laundering, and legal liabilities.
3. Access to Global Markets: Compliant platforms can partner with international institutions, broadening the reach and capabilities of the gateway.
4. Attracting Investors: Strong governance and compliance protocols build investor confidence, supporting growth.
5. Tax Efficiency: Transparent tax reporting and deductions enable users to confidently engage in compliant transactions.

Collaboration and Teamwork

This gateway is a collaborative effort involving software engineers, legal advisors, compliance specialists, and financial partners:

• Software Engineers: Develop and maintain the gateway’s functionality, ensuring smooth integration with M-Pesa, EcoCash, and Deriv APIs.
• Legal Advisors: Ensure compliance with both local and international regulations.
• Compliance Specialists: Oversee KYC, AML, and tax law adherence.
• Financial Partners: Provide liquidity, manage crypto assets, and facilitate secure payment processing.

Working together, each team member contributes to a secure, compliant, and user-friendly system, adapting to evolving regulations and scaling to meet demand.

Conclusion: Shaping the Future of Financial Inclusion in Lesotho

By creating a compliant, efficient, and accessible cryptocurrency payment gateway, I aim to empower the people of Lesotho and connect them to the global financial ecosystem. As cryptocurrency adoption grows, this gateway will continue to evolve with new features, enhanced user experiences, and expanded crypto support, all while ensuring compliance with the highest standards. This collaborative effort will drive financial independence and inclusion for the people of Lesotho.

Disclaimer

You may be introduced to Deriv by one of our affiliates. You acknowledge that Deriv does not authorize its affiliates to make any contract, agreement, or warranty on its behalf. In particular, affiliates do not have the authority to:

• Collect any money from you.
• Offer any guarantees against losses.
• Offer investment services or provide advice in our name.

This system is designed to empower individuals, enhance financial inclusion, and ensure that users engage in secure, compliant, and sustainable cryptocurrency transactions.