Putting regulation in the same sentence as cryptocurrencies would be considered an irony five years ago. But not now, when different jurisdictions of the world are finding a way to manage the invention.
Malta and Thailand are currently among the world's first regions to provide full regulatory cover for blockchain and cryptocurrencies while countries such as Switzerland and Bermuda are considered as crypto friendly regions.
In this article, we elaborate a report published by the pan-African bank, Ecobank, to discover how major African nations are managing interest in the new asset class.
How Five Major African Countries are Regulating Cryptocurrencies
Africa’s most populous nation has the highest number of internet users. Therefore it is no surprise that the country also boasts the highest number of searches for ‘bitcoin’ on Google Search Trends. Data from local bitcoins also shows that a significant amount of the Nigerian populace, especially young people are involved with bitcoin amongst other cryptocurrencies.
But what is the government stance towards this development?
A simple answer is that the authorities have been unstable with their decisions and may be as confused as many other countries are about cryptocurrencies.
In January 2017, the Central Bank of Nigeria announced that it had banned cryptocurrencies even though no punishments were specified for individuals who went against the order. This announcement was shortly followed by a declaration from CBN Deputy Director Musa Itopa Jimoh who said at that time,
“Central bank cannot control or regulate bitcoin. Just the same way no one is going to control or regulate the internet. We don’t own it”.
It was also during this period that another official of the Central Banking authority issued circular instructing banks and financial institutions to avoid trading cryptocurrencies or serving an exchange. The circular also instructed that the institutions ensure KYC compliance at crypto exchanges before dealing with them.
In January 2018, the country’s Senate reportedly held a session on the ‘proliferation of bitcoin’ and subsequently warned residents about the dangers of investing in cryptocurrencies. No real action accompanied request by the Senate to educate citizens about cryptocurrencies.
Finally, another statement by the CBN on February 28 which reckoned that “dealers and investors in any cryptocurrency in Nigeria are not protected by law.”
So now clearcut instructions on how to deal with cryptocurrencies have been provided by the Nigerian government or its Central Bank. Meanwhile, some crypto exchanges such as Luno, Paxful, and Nairaex serve the Nigerian crypto community.
Africa’s most developed country has maintained steady progress rate as far as cryptocurrencies are concerned. After releasing a position paper about cryptocurrencies as far back as 2014, the South African government partnered with Bankymoon, a blockchain company to provide a ‘balanced’ approach to Bitcoin regulation.
Most recently in April 2018, the government also made it compulsory for citizens to report as part of their capital gains, income earned from cryptocurrencies. Failure to do so would result in penalties according to the statement.
From these actions, it is clear to see that the South African government is favorably disposed towards cryptocurrencies and will pursue full regulation at some point.
A popular crypto and blockchain project thriving in the country is The Sun Exchange which has partnered with the United Nations Development Programme (UNDP), to make solar power globally available.
Unlike South Africa, Namibia is the only country in the country who have announced an outright ban on cryptocurrencies. A section of the country’s Exchange Act states that Namibia "does not make provision for the establishment of virtual currency exchanges or bureaus.”
Also, In September 2017, a paper released by the Namibian authorities reported that virtual currencies are not a legal tender in the country and for this reason cannot be accepted by merchants or exchanged for the local money.
At this point, a reversal of this regulation seems unlikely even though a possibility cannot be entirely ruled out. The same paper released by the agencies confirmed that cryptocurrencies could aid remittance services in the country.
With a population of 16.5 million and around 15% of that number using the internet, one would expect less crypto activity in the region. Well, this has been far from the case.
The Research Bank of Zimbabwe has appointed a unit to research the potential of cryptocurrencies which indicate that the invention may play a part in the country’s economy in the future.
At the same time, the premier bank banned local banks and financial institutions from getting involved with cryptocurrency related businesses, a situation that also exists in China. A statement issued by the bank says the institutions must “ensure that they do not use, trade, hold and transact in any way in virtual currencies,”
A crypto exchange, Golix, existing in the country at that point was subsequently ordered to shut down, and since then, no decision has been announced on whether this tough stance will change. Golix meanwhile expanded to Uganda and Kenya to set up its business.
Kenya is one of Africa’s most prominent tech nations, and even though a firm decision on how to regulate cryptocurrencies has not been announced, the country is crypto-friendly.
Kenya’s Central Bank has only said that “Bitcoin and similar products are not legal tender nor are they regulated.” Despite this statement, daily trading volumes of cryptocurrencies in the country is only second to Nigeria and South Africa while a crypto exchange BitPesa has continued to thrive in the country.
What may perhaps be the first regulatory framework that governs the continent’s crypto space was launched last week. Raise, a tech startup and Kenyan-based A&K law firm united to unveil the region’s first self-regulatory framework for security tokens. The partners hope it can serve as a precedent for governments in the region to create binding rules for the emerging security token market.
At this point, the only certainty is that African countries have not been asleep with regards to cryptocurrencies are revolutionizing the future of payments.
Governments and Central Bank authorities in the region are playing it safe now but will try to regulate these digital assets at some point in the future.