Africa Needs Stricter Crypto Regulations, According To A New Report

It Turns Out That The International Monetary Fund (IMF) Is Taking Things Seriously After FTX’s Collapse

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Africa is leading in crypto adoption, but the recent FTX collapse, and the subsequent plunge in the prices of Bitcoin, Ethereum, and other major crypto assets, showed how vulnerable are crypto users to market swings.

This is why the IMF called for greater consumer protection and regulation of the crypto industry. The financial watchdog, however, implied that there has to be a balance between greater consumer protection and regulation of the crypto industry, which still proves to be difficult from a regulatory perspective.

Crypto regulations in Africa are on both ends of the spectrum

IMF data shows that 25% of sub-Saharan African nations have explicit regulations in place for cryptocurrencies, while the other two-thirds have some restrictions in place. However, among the 20 sub-Saharan African nations, Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo have already made crypto assets illegal. The most crypto users happen to be in the region in Kenya, Nigeria, and South Africa.

The data comes as Africa’s crypto market increased in value by more than 1,200% between July 2020 and June 2021, according to data from Chainalysis.

The IMF: “risks from crypto assets are evident”

Interestingly, the IMF did not set a firm stance on cryptos but rather commented that cryptos could be bad for local economies when adopted as legal tender. Indeed, the Central African Republic (CAR), happened to be in contrast with the Bank of Central African States (BEAC)—the regional central bank that serves the Economic and Monetary Community of Central Africa (CEMAC) and its CEMAC Treaty.

Furthermore, according to the IMF, “if crypto assets are held or accepted by the government as means of payment, it could put public finances at risk.”

“Policymakers are also worried that cryptocurrencies can be used to transfer funds illegally out of the region and to circumvent local rules to prevent capital outflows. Widespread use of crypto could also undermine the effectiveness of the monetary policy, creating risks for financial and macroeconomic stability.” the IMF also wrote.

Ghana joins the race

Apart from the leaders in crypto adoption - Kenya, South Africa, Nigeria, and Tanzania, Ghana is also gaining momentum in crypto adoption, as Ghana’s central bank announced the start of CBDC research and a possible CBDC launch.

Kwame Oppong, an executive at Ghana’s central bank commented that a future CBDC could give their citizens the chance to use a "decent form of payment."

“I think in terms of CBDC, our goal is to be able to finish testing it. We've seen the results. We're going to look at the study each and every time in the future. But our real reason for doing it is more financial inclusion.” Oppong added.

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