While there has been a substantial increase in the adoption of cryptocurrencies in Africa compared to three years ago, there has been minimal effort from African countries to try and regulate cryptocurrencies despite their increased use in various African nations according to a new report by Ecobank.
Ecobank tracked “the current state of cryptocurrency regulation in all markets in Sub-Saharan Africa” through the regulatory responses that have been issued by central banks or financial regulators. In the report, the pan-African bank found that most African regulators are taking a “wait and see” approach when it comes to cryptocurrency regulation.
The report stated: “Many African governments and regulators recognise both the risks and the potential positive impacts of cryptocurrencies, and some also appreciate the difference between cryptocurrencies and the underlying blockchain technology. But they have been reticent in authorising cryptocurrency transactions, and mostly remain apprehensive about the potential risks. African countries appear to be looking to their neighbours to regulate and innovate first, and learn from their mistakes, rather than being the first mover.”
The reported noted that the main reason why African governments were being skeptical about licensing the use of cryptocurrencies was their citizens getting overexposed to cryptocurrency investments and there being a future crash that would cause a ripple effect in the broader economy.
African Regulators’ Stance
Out of the 39 jurisdictions surveyed, more than 21 countries in the region are yet to make a public declaration on the use of cryptocurrencies.
So far, there have been three countries that have taken a stance on cryptocurrency. Namibia tops the list having banned the commercial use of digital currencies. However, South Africa and Swaziland are the only two countries in Sub-Saharan Africa that have adopted “a generally favourable and permissive stance, but without full legality”.
The remaining countries fall somewhere in between and “refuse” to directly regulate cryptocurrencies claiming that bitcoin and other digital currencies “operate in the grey area between legality and illegality” and have issued warnings to their citizens and investors against using or investing in them. The bank also noted that conversations regarding the speculative nature and instability of cryptocurrency prices have overshadowed their benefits and the potential they bring.
The bank went ahead to note: “Unfortunately, the spectacular rise and fall in the traded value of cryptocurrencies has drowned out broader discussion on the potential benefits this new technology could bring. The transformational impact that could be delivered by tokenising products and services on the blockchain has been compared to that of the Internet. Crypto tokens and currencies could enable consumers to transact instantly, cross-border and for free, provide them with KYC-compliant digital IDs, and incentivise their behaviour and change the way they engage with governments & service providers.”
Ecobank will continue to track cryptocurrency regulation in Sub-Saharan Africa and provide regular updates that will reflect the regulation progress in the African nations.