The International Monetary Fund (IMF) is calling for more regulation of crypto markets in Africa, one of the fastest growing markets in the world, the global institution’s blog reported Nov. 22.
Among the reasons countries in the region should embrace regulation, the monetary fund cited the collapse of FTX and its ripple effect in cryptocurrencies prices, which “leads to renewed calls for increased consumer protection and regulation of the crypto industry.”
Furthermore, the authors state that “the risks of crypto assets are clear” and “it is 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 piece states that “the risks are much greater if crypto is adopted as legal tender,” posing a threat to public finances if governments adopt crypto as a means of payment.
The publication also noted:
Policy makers are also concerned that cryptocurrencies could be used to transfer money illegally from the region and to circumvent local regulations to prevent capital outflows. Widespread use of crypto could also undermine the effectiveness of monetary policy, creating risks for financial and macroeconomic stability.”
According to IMF data, 25% of countries in Sub-Saharan Africa have formally regulated crypto, while two-thirds have introduced some restrictions. On the other hand, Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania and the Republic of Congo have already banned crypto assets, representing 20% of sub-Saharan African countries. Kenya, Nigeria and South Africa have the highest number of users in the region.
Between July 2020 and June 2021, the African crypto market has increased in value by more than 1,200%, according to data from analytics company Chainalysis, with high adoption in Kenya, South Africa, Nigeria and Tanzania.
As reported by TSTIME, Ghana is testing for a central bank digital currency (CBDC). According to Kwame Oppong, a director of the Bank of Ghana, the country’s initiative is aimed at promoting financial inclusion. Ghana has the potential to reach crypto adoption levels comparable to Kenya and Nigeria, countries ranked 11th and 19th in Chainalysis’s Global Crypto Adoption Index.