The collapse of Sam Bankman-Fried’s FTX is an unfortunate incident that would likely up the skepticism which Africans bear towards the adoption of cryptocurrencies on the continent. Sub-Saharan countries, including Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo, already have cryptocurrencies banned, while Zimbabwe and Liberia have placed a partial restriction on the digital asset according to an IMF survey.
Until its recent crisis, FTX was the world’s third largest crypto exchange which had rescued smaller crypto projects around the globe in troubled times and even launched marketing campaigns that invested in startups like Chipper Cash. But with FTX’s recent trail of losses plummeting the crypto industry, African governments would likely seize the opportunity to impose financial regulations that would place stricter constraints on the digital industry.
South Africa, Kenya and Nigeria, three of Africa’s big techs four have in some way or another placed restriction on crypto.
- Last month, South Africa mandated crypto companies to get an operating license, beginning in July 2023.
- Kenya’s parliament is deliberating over imposing a 20 percent tax on crypto transactions.
- The Central Bank of Nigeria (CBN) forbids commercial banks from processing crypto transactions.
The big picture
African governments looking to protect its citizens from “crypto scam” face the challenge of high volatility and decentralization, which they built the crypto industry on. Policymakers are concerned by the ease with which crypto transactions can cover illegal activities and the risk to monetary policies, as well as the effects on financial and macroeconomic stability.
Therefore, to regulate the industry, there has to be a balance between minimizing risk and maximizing innovation.
Furthermore, as much as proper regulations can limit the reoccurrence of FTX kind of crisis, it can easily prevent the adoption of cryptocurrencies, as experts believe no citizen likes the “prying eyes of the government” on their finances.
What you should know
Chinalysis identified Africa as one of the fastest-growing crypto markets in the world, but also as one region with the smallest crypto transactions peaking at $20 billion per month in July 2021.
Chinalysis also says that Kenya, Nigeria, and South Africa have the highest number of crypto users in the region, despite the government’s partial regulations.
Triple A’s report listed Africa’s largest economy, Nigeria, has one with the highest rates of crypto adoption in the world, as over ⅓ of the continent’s crypto holders are in the west African country. Nigeria leads with 22 million digital assets owners.