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Pan-African Bank Report on State of Cryptocurrencies in Africa

No country in Sub Saharan Africa has embraced cryptocurrencies as legal and regulated within its borders, a new report by pan-African bank, Ecobank Transnational Inc, has shown. Rather, their governments and central banks are employing a ‘wait and see’ approach and appear “to be looking to their neighbours to regulate and innovate first, and learn from their mistakes, rather than being the first mover,” it adds.

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As it is the case in most parts of the world, the mixed nature of the risks and the potential positive impacts associated with cryptocurrencies has been a precluding factor that has compounded regulations around these new asset class and giving them the desired recognition. There is also an issue with understanding the difference between cryptocurrencies and the underlying blockchain technology – and their usefulness.

Of the 39 countries analyzed in the report by Ecobank which has its presence in 36 of them as well as in China, Dubai and the United Kingdom, only two of them – South Africa and Swaziland – have a “generally favorable and permissive stance, but without full legality” on cryptocurrencies. It cites Namibia as the only country that has banned them though a position paper released in September 2017 by the Bank of Namibia acknowledges that cryptocurrencies can facilitate remittances. In nine other countries including Nigeria, Kenya, Uganda and Botswana, they have contentious stance on cryptocurrencies but show signs that the situation is being continually monitored.

The Ugandan government has yet to take an official position on cryptocurrencies though its central bank issued a strongly-worded statement in February 2017 to prevent people from cryptocurrency Ponzi schemes such as OneCoin. However, Uganda has once been tipped to be the first African country to regulate cryptocurrencies after it held a roundtable discussion in 2016 on how to find effective ways to regulate them. While that has yet to be seen, it is evident that Uganda is now home to an operational arm of one of the world’s largest cryptocurrency exchanges, Binance, since June 2018.

The report notes that six other African countries show indications of research into the potential of cryptocurrencies though accompanied with a warning while the remainder 21 countries have no public stance on them.

According to the report, most African governments cannot feign ignorance of an existing evolving digital economy powered by cryptocurrencies and blockchain at this point. They may not have embraced it yet, but several happenings in the crypto and blockchain space in Africa would have drawn authorities’ attention of late. Developments like Binance’s launch in Uganda or South Africa‘s proposal for bitcoin and other virtual currencies trading to be exempted from VAT and reported cases of the first baby birth recorded on blockchain in Tanzania and land register on blockchain in Zambia are hard to ignore.

A regional regulatory trend – whether favorable or not – could develop with time. The likelihood of an exchange traded fund (ETF) being approved by the US SEC will change the global outlook on cryptocurrencies. It is of general knowledge that one or more of these African countries are in sync with the SEC. They will join the wagon if and when SEC grants an approval.

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