With the increasing surge in adoption amongst retail and institutional investors, the International Monetary Fund (IMF) has said that there is a need to better regulate the cryptocurrency industry in Africa.
The IMF, in a blog post on Tuesday (November 22, 2022) said that the African cryptocurrency scene seems to be lacking most of the cryptocurrency regulations compared to other regions.
“Africa is one of the fastest-growing crypto markets in the world, according to Chainalysis, but remains the smallest, with crypto transactions peaking at $20 billion per month in mid-2021. Kenya, Nigeria, and South Africa have the highest number of users in the region. Many people use crypto assets for commercial payments, but their volatility makes them unsuitable as a store of value.
“The collapse of the world’s third largest crypto exchange FTX, and subsequent plunge in the prices of Bitcoin, Ethereum, and other major crypto assets, is prompting renewed calls for greater consumer protection and regulation of the crypto industry.
Regulating a highly volatile and decentralized system remains a challenge for most governments, requiring a balance between minimizing risk and maximizing innovation. Only one-quarter of countries in sub-Saharan Africa formally regulate crypto. However, as our Chart of the Week shows, two-thirds have implemented some restrictions, and six countries—Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo—have banned crypto. Zimbabwe has ordered all banks to stop processing transactions and Liberia directed a local crypto startup to cease operations (implicit bans).
“The risks are that much greater if crypto is adopted as legal tender—as the Central African Republic recently did. If crypto assets are held or accepted by the government as means of payment, it could put public finances at risk.” the post said.