Key Insights
- IMF wants tighter regulation in Africa’s crypto ecosystem
- The call for regulation comes shortly after the FTX crisis
- Nigeria, South Africa, and Kenya lead the mainstream adoption of crypto in the region
Cryptocurrency is rapidly growing in Africa, with the ecosystem recording giant strides. On this premise, the International Monetary Fund (IMF) calls for strict regulations as crypto gains mainstream acceptance in the region.
Similarly, the FTX debacle, alongside other exchanges that might file for bankruptcy (very soon), has necessitated tight regulations. IMF noted that the FTX crisis prompted renewed calls for greater consumer protection and regulation of the crypto industry.
IMF Calls for Crypto Regulation
The IMF released a report calling for increased regulation of the African crypto market. The report says Africa is one of the fastest-growing markets in the world.
The IMF report revealed that only 25% of countries in Sub-Saharan Africa have formally implemented crypto regulations. Similarly, two-thirds of the countries have some restrictions in place.
The IMF report highlighted the risk associated with an unregulated crypto market. Experts argued that risks are evident and prevalent in crypto assets, and it is time to regulate the industry. They added that regulating the industry will balance minimizing risk and maximizing innovation.
Similarly, the IMF 2022 Regional Economic Outlook for Sub-Saharan Africa shows that “risks are much greater if (countries in Africa) adopt crypto as legal tender.” They added that it poses a great threat to public finance if Governments accept crypto as payment.
Furthermore, there are concerns about the prevalent criminal activities for which people can use crypto. The IMF report opined, “Policymakers are worried that cryptocurrency can be used to transfer funds illegally out of the region and circumvent local rules to prevent capital outflows.”
Crypto Adoption in Africa
In recent times, crypto adoption has significantly improved. Interestingly, countries such as Nigeria, Kenya, and South Africa have the highest number of cryptocurrency users in the region.
According to Chainalysis, Africa’s crypto market increased by about 1,200% between July 2020 and June 2021. The report showed that countries such as Kenya, South Africa, Nigeria, and Tanzania dominated the market.
Furthermore, some African countries have banned cryptocurrency. These countries include Cameroon, Ethiopia, Sierra Leone, Lesotho, Tanzania, and the Republic of Congo. These countries represent 20% of the entire countries in Sub-Saharan Africa.
