Africa is one of the spaces where cryptocurrency adoption is booming. Yet, in a large majority, African states do not regulate the crypto sector. This regulatory deficit puts the African economy at risk, according to the International Monetary Fund. This financial institution therefore calls on African states to put in place a regulatory framework for the crypto industry.
Africa massively adopts crypto without regulating it
Falling crypto market, FTX collapse, exchange panic, prolonged bear market, …, the crypto ecosystem is going through a difficult time. This situation is prompting more and more calls for regulation of the crypto sector. The latest is from the International Monetary Fund, which is urging African states to regulate the crypto industry to protect its users.
In particular, the IMF notes that cryptocurrency adoption is growing rapidly in Africa. Although volatile, cryptocurrencies are increasingly being used for commercial payments on the continent. According to data from Triple A, of the 320 million crypto holders worldwide, 53 million, or nearly 17 percent, are Africans. Nigeria, Kenya and South Africa have the largest number of crypto users on the continent.
Paradoxically, the crypto sector is overwhelmingly unregulated in Africa. So far, only the Central African Republic has legally regulated cryptocurrency in Sub-Saharan Africa. Some countries impose informal restrictions on the use of crypto. Others have outright instituted an explicit cryptocurrency ban regime. These include Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania and the Republic of Congo.
Not easy to regulate a volatile and decentralized asset
In its advocacy for cryptocurrency regulation in Africa, the IMF reveals its anti-crypto views. In particular, the financial institution believes that it is enormously risky to let citizens use such a volatile and decentralized asset like crypto. For the IMF, this could jeopardize financial stability and harm the overall economy of the state.
Policymakers are concerned that cryptocurrencies could be used to illegally transfer funds out of the region and to circumvent local rules to prevent capital outflows. Widespread use of cryptocurrencies could also undermine the effectiveness of monetary policy, creating risks to financial and macroeconomic stability.IMF
The IMF’s call for regulation of the crypto industry is commendable. As the crypto market grows, the need to protect investors is felt. Nevertheless, regulation should not stifle the use of cryptocurrency. The IMF’s finding in Nigeria tells us that such a move is completely counterproductive and detrimental to the country’s economy. One of the scourges of African economies remains inflation. Bitcoin may be the solution to this problem.
I dream of a world where every citizen has total control over themselves, including their finances. I believe that Bitcoin is one of the tools that will achieve this revolution. Since 2019, I am learning about this cryptocurrency and spreading the word around.