BusinessDay Mar 23, 2021
When it comes to cryptocurrency, Africans are one of the biggest traders who embraced the digital currency before the world. However, the government of many African countries has shown many ups and downs regarding cryptocurrency.
Many countries in Africa have made it legal to use and trade cryptocurrency whereas others are still imposing restrictions on the use of cryptocurrency. Thus, on a bigger picture, we can say that the whole of Africa is not going to regulate cryptocurrency but, certain countries have regulated, and others are in the process of regulation.
Why Regulate Cryptocurrency?
You may be wondering why there is a need to regulate cryptocurrency. Well, if a country regulates cryptocurrency, the use of crypto becomes easy and legal. A report by Chain analysis indicates that Africa as a continent rank second in the usage of cryptocurrency. There are three countries that ranked in the top 8 crypto adoption indexes.
Nigeria leads by peer-to-peer volume of $5 million to $10 million. On the second position, there is a tie between Kenya and South Africa with almost $1 million to $2 million per week. Thus, in a country that is such a strong believer and user of cryptocurrency, regulations are needed to bring some early investor incentives.
Crypto payments have become quite common in many countries of Africa that leads to fast and cost-efficient transactions for businesses and individuals. There are several cryptocurrencies used by Africans on various platforms such as e-yuan. The under-banked communities have shown increased productivity since the launch of the digital currency.
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Is Africa Planning on Regulations?
There are some harsh realities of cryptocurrency such as scamming and hacking which puts the government in a difficult position. However, the slow acceptance of cryptocurrency in various countries of Africa indicates the possibility that one day; Africa overall will regulate cryptocurrency.
In a statement of Marius Reitz, Luno’s general manager of Africa, said that they were planning a phase-wise approach. According to him, it can be seen easy to regulate the entire industry in one go but it could stifle innovation.
Thus, he believes that if the government regulates then there are more chances of better traditional infrastructure and it would lead to massive adoption too. It can be derived from his statement that Africa will regulate cryptocurrency, but it will take a long time.
Which Countries are Regulating Countries?
South Africa is the region where cryptocurrency is flourishing the most and regulations are being developed for it. Many regulations are already implemented while others are in process. In April, South Africa took the first step to implement laws by publishing framework proposals.
Nigeria followed its footsteps and regulated cryptocurrencies through the Securities and Exchange Commission. The regulation of cryptocurrency in Nigeria was a turnaround for the country and it took place almost two years ago. However, the Nigerian lawmakers had asked the central bank to investigate bitcoin that resulted in a ban on trading cryptocurrency.
It is believed that Kenya will be next to follow the lead of South Africa and Nigeria because a large population is opting for digital currency.
Exchange Control Regulation in South Africa
The exchange control regulations made by the currency and exchange manuals and the currency and exchange Act 9 of 1933 are applicable in most parts of South Africa. According to these regulations, Africans cannot make cross-border or foreign exchange transfers for purchasing crypto assets. Investors who engaged in foreign crypto trading will have to comply with the exchange control restrictions.
Cryptocurrency regulation can bring out a better future for Africa, especially when their fiat currency is depreciating. It will take many years to see the regulations completely implemented in Africa, but the process has started and is slowly being adopted.