The IMF Wants Stricter Crypto Regulations in Africa
- Nigeria, Kenya, and South Africa have the highest number of crypto users in Africa.
- According to Chainalysis, the African crypto market grew by more than 1,200% between July 2020 and June 2021.
- The IMF believes crypto as a form of payment threatens public finance.
The International Monetary Fund (IMF) recently published a blog post calling for stricter regulations in the African crypto market following the collapse of the crypto exchange, FTX. Africa has one of the fastest-growing crypto markets, with countries like Nigeria ranking highly in the global crypto space.
The IMF noted that FTX’s downfall is “prompting renewed calls for greater consumer protection and regulation of the crypto industry.” So, the regulatory body believes increased scrutiny will help protect African crypto users from ugly experiences.
The publication claimed that crypto posed clear risks, adding that “it’s time to regulate” to help minimize such risks while emphasizing innovation. The IMF noted that crypto poses more risks if adopted as legal tender. The authors believe adopting cryptocurrencies as a means of payment would threaten public finance.
According to the release,
Policymakers are also worried that cryptocurrencies can be used to transfer funds illegally out of the region and to circumvent local rules to prevent capital outflows. Widespread use of crypto could also undermine the effectiveness of monetary policy, creating risks for financial and macroeconomic stability.
IMF data shows that 25% of sub-Saharan African nations have clear regulations in place for cryptocurrencies, while the other two-thirds have some restrictions in place. However, about 20% of sub-Saharan African nations, including Tanzania, Ethiopia, Sierra Leone, Cameroon, and the Republic of Congo, have already outlawed crypto assets. Additionally, the bulk of crypto users in the region are in Kenya, Nigeria, and South Africa.
According to statistics from analytics company Chainalysis, the value of the African cryptocurrency market surged by more than 1,200% between July 2020 and June 2021, with significant adoption in Nigeria, South Africa, Kenya, and Tanzania.
After El Salvador, the Central African Republic is the second nation in the world to recognize Bitcoin as a legal tender and the first in Africa. The move, according to the IMF, breaches the CEMAC Treaty and has caused tension between the CAR and the Bank of Central African States (BEAC), the central bank for the Economic and Monetary Community of Central Africa (CEMAC), of which the Central African Republic is a part.
Africans mostly rely on cryptocurrencies as a hedge against inflation. Most Africans see crypto as a cheaper and more reliable way of sending and receiving funds.