Cryptocurrency regulation has grown rapidly in Africa, thereby calling for stricter measures. African countries like Nigeria, South Africa and Kenya rank as countries with the highest volumes of cryptocurrency exchanges. Unlike other African countries, Kenya seems to be less bothered about cryptocurrency regulation.
South Africa is said to have drafted a couple of Cryptocurrency laws by publishing a framework proposal while Nigeria has laid out plans to regulate cryptocurrencies through its Security and Exchange Commission. This is a complete turn around from Nigeria’s stance two years ago when it tasked the Central Bank with investigating bitcoin.
Kenya, which is normally at the forefront in the adaptation of financial technology is yet to lay out any plans to regulate cryptocurrency in the country since the Central Bank warned local banks against trading in cryptocurrency.
“We seem to be in limbo,” a Nairobi-based investor and financial analyst, Aly-Khan Satchu said. “The spillover of the central bank governor taking such a strong stance against cryptocurrency remains the overarching situation.”
Interested parties have not been fazed or held back by the prevailing conditions though. Instead of waiting around for the regulations, cryptocurrency trade in the country already took off albeit operating in gray areas.
Cryptocurrency trade solves a couple of financial trade challenges experienced across the continent. Fluctuating exchange rates such as the Naira slump against the dollar and Zimbabwe’s currency crisis make crypto trade a more attractive and valuable option. Remittances to Africa also cost higher than everywhere else in the world and drives more people to “opt for cryptocurrency to try to maximize the value they can get,”
The regulation of cryptocurrency trade will go a long way in facilitating cross-border payments and foster consumer confidence, making it easier for interested parties to start trading in bitcoin. Regulatory requirements will make it easier for interested parties to identify credible, licensed cryptocurrency exchanges.
As it is now, most people have only heard of bitcoin but do not have a clue where or how to get started. The internet offers a myriad of solutions some of which are legitimate, although scams seem to carry the day. This has put the whole trade under tight scrutiny from governments, making interested parties shy off.
“It is important that the space is regulated and properly guided by the financial authorities to ensure confidence and protection of the consumer,” Stephany Zoo, head of marketing at Bitpesa, a Kenya-based exchange said. “When you do that, it feeds back into the ecosystem and encourages innovation around this specific technology which there’s always been so much grey area around.”
The regulation will also lead to the formalization of bank and crypto trade relationships, which will aid in quick exchanges for people already dealing in bitcoin.
Despite the slow and almost stagnant move to regulated cryptocurrency trade, the volume of transactions have grown organically. Buycoins, a three year old cryptocurrency exchange based in Lagos, has already processed $110 million worth of transactions in 2020 compared to $28 million in 2019.
One of the Continent’s oldest exchanges, Luno, reported an increase in the monthly trading volumes in Nigeria and South Africa topping $549 million in August—a 49% increase since the start of the year.
“The demand we see now is a result of the challenges that people experience across Africa,” says Marius Reitz, Luno’s general manager for Africa. “When people find value in using a cryptocurrency and are able to fulfill their needs with that better than they’re able to do with fiat currency, then they will naturally choose cryptocurrency—that’s what we’re seeing.”