The International Monetary Fund (IMF) is calling for increased regulation of African crypto markets, one of the fastest growing markets in the world, according to a blog post from the global institution on Nov. 22.
Among the reasons countries in the region should adopt regulation, the Monetary Fund cited the collapse of FTX and its ripple effect on cryptocurrency prices, which “sparks renewed calls for increased consumer protection and regulation of the cryptocurrency industry.”
Moreover, the authors argue that “the risks from crypto assets are clear” and “it’s time to regulate” to strike a balance between minimizing risk and maximizing innovation. Based on the October 2022 Regional Economic Outlook for Sub-Saharan Africa, the article states that “the risks are much higher if crypto is accepted as legal tender”, posing a threat to public finances if governments do. cryptocurrency as a means of payment.
The publication also noted:
“Politicians are also concerned that cryptocurrencies could be used to transfer funds illegally out of the region and to circumvent local regulations to prevent capital flight. The widespread use of cryptocurrencies could also undermine the effectiveness of monetary policy, creating risks to financial and macroeconomic stability.”
According to the IMF, 25% of countries in sub-Saharan Africa formally regulate cryptocurrencies, and two-thirds have introduced some restrictions. On the other hand, Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of the Congo have already banned crypto assets, accounting for 20% of Sub-Saharan Africa. Kenya, Nigeria and South Africa have the largest number of users in the region.
From July 2020 to June 2021, the cryptocurrency market in Africa grew in price by more than 1200%, according to Chainalysis, with active distribution in Kenya, South Africa, Nigeria and Tanzania.
Ghana is testing a central bank digital currency (CBDC), Cointelegraph reports. According to Kwame Oppong, chief executive of the Bank of Ghana, the country’s initiative is aimed at expanding access to financial services. Ghana has the potential to achieve a level of cryptocurrency adoption similar to Kenya and Nigeria, countries that ranked 11th and 19th in Chainalysis’ global cryptocurrency adoption index.