A report published by the pan-African bank, Ecobank Transnational Inc., has found that despite cryptocurrencies exerting a notable presence in each of the 36 African countries in which the company operates, only South Africa and Swaziland have adopted a “generally favorable and permissive [regulatory] stance” pertaining to cryptocurrencies.
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Africa’s Regulators Adopt ‘Wait and See’ Approach Regarding Cryptocurrencies
Ecobank’s report finds that “As in many other parts of the world, African governments and central banks are mostly adopting a ‘wait and see’ approach when it comes to regulating cryptocurrencies.”
The report states that “Many African governments and regulators recognize both the risks and the potential positive impacts of cryptocurrencies,” and that some African governments have shown an “appreciat[ion of] the difference between cryptocurrencies and the underlying blockchain technology.”
Despite such, Ecobank finds that many African states “have been reticent in authorizing cryptocurrency transactions, and mostly remain apprehensive about the potential risks,” adding that “African countries appear to be looking to their neighbors to regulate and innovate first, and learn from their mistakes, rather than being the first mover.”
“No Discernible Regional Regulatory Trend”
The report finds that “To date, there has been no discernible regional regulatory trend, whether favorable or unfavorable.” Ecobank assets that South Africa and Swaziland offer “the most favorable regulatory stances Africa,” whilst only Namibia has sought to prohibit cryptocurrencies.
“With the exceptions of Cameroon, Rwanda, and Senegal, no other Francophone government or central bank has made a policy statement on virtual currencies,” the report states, adding “Those countries that have made a statement have indicated that cryptocurrencies operate in the grey area between legality and illegality. In these countries, the best a cryptocurrency innovator can hope to achieve is a ‘no objection’ to trialing the product rather than formal authorization and (ultimately) legislation to match. The consensus in these countries is that for Africans, although cryptocurrencies are generally not prohibited, consumers use them at their own risk and they have been warned about the potential consequences by regulators.”
African Governments Concerned About Citizens Becoming “Overexposed to Cryptocurrency”
Ecobank emphasizes that many African states have concerns pertaining to the potential systemic risk that could result from many citizens investing heavily and becoming overexposed to the cryptocurrency markets.
The report states that “Cryptocurrencies such as Bitcoin, Ethereum and Ripple made waves in 2017 and early 2018, not just in terms of their innovation, but also of their role as highly speculative assets. […] “Unfortunately, the spectacular rise and fall in the traded value of cryptocurrencies has drowned out broader discussion on the potential benefits this new technology could bring. The transformational impact that could be delivered by tokenizing products and services on the blockchain has been compared to that of the Internet. Crypto tokens and currencies could enable consumers to transact instantly, cross-border and for free, provide them with KYC-compliant digital IDs, and incentivize their behavior and change the way they engage with governments & service providers.”
“African governments worry that if its citizens become overexposed to cryptocurrency investments, the repercussions of a future crash could be felt in the broader economy, hence their skepticism of licensing their use,“ the report concludes.
What is your response to Ecobank’s report on cryptocurrency regulation throughout Africa? Share your thoughts in the comments section below!
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