Crypto adoption in Africa is much like the desert rose, an emblem of resilience and the ability to thrive amid great difficulty. Regulatory statements about cryptocurrency adoption in Africa have transitioned at different rates between 2018 and 2023. Each regulatory stance has presented opportunities and challenges in equal measure.
Nigeria
47% of Nigerians in a survey reportedly use cryptocurrencies. Based on another report by Triple A, 10.34% of Nigerians own cryptocurrency, or about 22 million people. This high percentage reflects Nigeria’s ranking at the 11th position globally in 2022, ahead of Kenya (ranked 19th) in the Global Crypto Adoption Index by Chainalysis.
As early as 2017, Nigeria was poised to enable crypto adoption in the country through enabling regulation in a bid to embrace the opportunities afforded by new technologies. Crypto adoption grew significantly among the youth. This growth came with hope among those who gained from being early adopters and losses among those who fell victim to scams. The lack of a clear framework to limit the operation of scams and legitimize the authentic service providers in the crypto ecosystem created a push for the government to step in to afford much-needed investor protection.
Regulatory notices in 2021 from the Central Bank of Nigeria (CBN) expressly banned the use of BitcoinBTC, further prohibiting financial businesses from “dealing with cryptocurrencies”. Banks could not facilitate transactions from individual users and cryptocurrency-related businesses. This consequently drove the growth of peer-to-peer (P2P) transactions to navigate the banking limitation.
In 2022, the growth of cryptocurrency adoption in the country only increased, and in the wake of this growth, the CBN introduced some regulations for digital assets. Some of the rules outline registration fees and requirements for virtual asset service providers. Nigeria also launched the eNaira, a digital currency, to test the operationalization of a Central Bank Digital Currency (CBDC).
Kenya
In 2015, the Central Bank of Kenya (CBK) issued a public notice, highlighting that “Bitcoin and similar products are not legal tender nor are they regulated in Kenya.” The notice went on to discourage the public from transacting in cryptocurrencies. Despite this, Kenya has one of the highest global rates of cryptocurrency ownership among its population, at 8.5%. This places it among the top five crypto-owning countries.
In 2022, after much more interest in the growing crypto space and remarkably higher volumes of remittances, the CBK initiated a Discussion Paper to explore the applicability of a Central Bank Digital Currency (CBDC). The Central Bank then released a detailed report on the potential strengths and risks of implementing a CBDC, and although it is keen on “monitoring developments in the area”, a CBDC is presently not a “compelling priority.”
In 2023, the government revealed a proposal to introduce a 3% tax on digital assets in the financial year 2023–2024. The proposal would also tax the monetization of digital content through a 15% levy. The tax could indicate a form of government recognition of digital assets. While it is too early to tell the success of this initiative, it has already paved the way for more potential collaboration between regulators and virtual asset service providers.
South Africa
Cryptocurrency use is legalized in South Africa. Over the years, it has supported people and businesses keen on growing in the region. The favorable regulation has enabled the growth of a vibrant community of crypto enthusiasts, investors, and entrepreneurs. This has extended into the banking sector, which has also embraced blockchain technology to improve operations and deliver better service to customers.
In 2021 and 2022, a collaboration between the Financial Sector Conduct Authority (FSCA) and the SARB drafted a consultation paper outlining a regulatory framework for the industry. Cryptocurrency service providers would be required to register with the Financial Intelligence Centre (FIC) and comply with anti-money laundering and counter-terrorist financing (AML and CTF) regulations.
Cryptocurrencies are referred to as “a digital representation of value”, as a financial product, but are not recognized as legal tender in the country. People and businesses can use cryptocurrencies at their discretion, and there is a high level of awareness owing to the open nature of their acceptance in the country.
Mauritius
The country is one of the most forward-looking in terms of crypto regulation and adoption in Africa. As of 2022, Mauritius ranked 131st out of 157 countries adopting crypto. There are at least 23,208 crypto owners in the country. Although it seems low relative to the population of 1.3 million, it has a significant impact, as Mauritius is one of the few nations with crypto licenses on the continent.
The Pursa exchange has over 40% of its traders transacting daily, showing consistent growth in usage over time. Cryptocurrencies aren’t legal tender in the country, but they have certain guidelines to protect citizens and stabilize the ecosystem.
In 2021, Mauritius released the first crypto license framework in Africa, the Virtual Asset and Initial Token Offering Services Act (VAITOS Act). The Act offered laws that provided guidelines for international compliance and harmony with the Financial Action Task Force (FATF) in terms of mitigating and averting money-laundering risks connected with cryptocurrencies.
Ghana
One of the most keen regions in terms of cryptocurrency growth and adoption in Africa is Ghana. While cryptocurrencies are not regulated, they’re not prohibited in the country. There is a strong and vibrant community of enthusiasts as well as businesses interacting with cryptocurrencies and working toward fostering an enabling environment for crypto adoption in the country.
In 2022, a 1.5% tax was introduced, legislated as an e-levy on digital financial services. The controversial tax has yet to have a direct impact on the adoption of cryptocurrencies.
Morocco
Cryptocurrency growth in Morocco has increased from 2.4% to 3.1% between 2021 and 2022. This is in spite of nationwide bans on trading and possession of cryptocurrencies in 2017.
After five years of banning it, the Central Bank of Morocco (BAM) announced that it is keen “not to limit innovation and protect citizens from the various risks associated with the field.” This was part of a press conference held in December 2022. Moroccan enthusiasts welcomed the remarks from the BAM governor, as they had for years believed in the potential economic gains from using cryptocurrencies despite the strong bans.
Egypt
At least 1.7 million people in Egypt, or 1.8% of the population, own cryptocurrency. This can be attributed to the tough regulatory stance that has expressly banned cryptocurrency trading in at least four public warning statements.
Egypt remarkably ranked 14th among the global top 30 countries that adopted crypto in the 2022 Chainalysis Cryptocurrency Adoption Index. This is a notable development among other Middle East and North Africa (MENA) region players, as crypto received by consumers totaled $566 billion between July 2021 and June 2022.
Summary
The regulatory stances have a common goal, which is to protect investors and minimize risks associated with financial crimes. Regulators also acknowledge the potential impact of innovation associated with blockchain technology, which is the infrastructure behind cryptocurrencies. Although they differ on what extent they can engage with the crypto ecosystem, there are clear plans to tax cryptocurrencies and their usage.
What is undoubtable is that the adoption of cryptocurrencies on the continent is growing steadily in spite of regulatory uncertainty and the overall low season (better acknowledged as the bear market).
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