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Africa: Crypto Regulation Overview | BanklessAfrica Newsletter
This is BanklessAfrica Newsletter, a newsletter about staying up to date with well-curated news about crypto and Web3 around Africa
Hey Bankless fam!
It's been a very eventful week in the crypto space; while others like Three Arrows Capital are potentially becoming insolvent, others are being bailed out — Blockfi and Voyager by FTX. We hope this will be the end of the insolvency parade, but we shall see.
According to a report by Business Insider Africa, crypto adoption on the continent has increased 880% in the past year alone. Nigeria ranks #1 in the world in terms of search volume for the terms "Bitcoin" and "crypto, which is quite interesting for a country that has outright banned cryptocurrency.
We have included a video of what one can do in a bear market, of course, we also explore African crypto regulation in our main editorial.
This week's podcast features someone who literally had no web3 knowledge or experience but landed a job as a PR & Marketing Manager at one of the biggest crypto exchanges in Africa. Do you want to know how he did it? Listen to the podcast to find out.
Check out our learning centre, "Intro to DeFi", which is a 10 mins slide by the Bankless Academy and read about it in our Pidgin Parlour.
Last but not least, if you love airdrops, we got the perfect one for you.
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📈 Historical Snapshots
As of June 27, 2022
Top Assets by Market Cap
Name: Bitcoin (BTC) Price: $20,804.28 Market Cap: $396,478,278,313
Name: Ethereum (ETH) Price: $1,188.18 Market Cap: $143,993,886,482
Name: Tether (USDT) Price: $0.9991 Market Cap: $66,805,442,925
Africa: Crypto Regulation Overview
We are at a point in history where we are starting to see more signs of potential regulation for cryptocurrencies. Some African countries have outright banned crypto, while other jurisdictions have embraced it in their regulatory policies. But what exactly is going on here, why the discrepancies? In this article, we will look at some of the countries that are banning crypto, explore why they may be doing it and pose some questions that I think will help shape where our future is headed.
In general, African countries are undecided on how to regulate cryptocurrencies; there does not seem to be an exactness to the proposed regulations, however, we cannot ignore that some countries are making small strides in dealing with these digital assets.
The two biggest economies in Africa, specifically South Africa and Nigeria, have taken very different approaches; South Africa has been relatively welcoming of crypto, even considering the implementation of its government-backed cryptocurrency named the "SARB Digital Currency." In contrast, Nigeria's central bank has directed commercial banks not to engage in cryptocurrency transactions and trades, essentially deeming it illegal.
In other countries like Kenya, progress is being made towards pondering whether it should start taxing crypto gains.
The overall outlook of crypto in Africa is divided into four main tiers:
Source: Standard Bank - CV VC Africa Blockchain Report
This list of countries has made it clear that they will not prosecute individuals who use it within their borders. It's important to note that laws can change with time, so you should check the current status of each country before making your decision; it is always important to be sure that your actions are within the law to avoid any kind of prosecution.
Central Africa Republic
Central Africa Republic
On April 27, 2022, the Central African Republic Presidency announced Bitcoin as Legal tender along with the CFA Franc, effectively being the first country in Africa to do so. Lawmakers unanimously voted in favour of the bill. The IMF however, has frowned upon this, sticking to a stance that is similar to their take on El Salvador.
President Faustin-Archange Touadéra, who assumed office on the 30th March 2016 and holds two PhDs, ‘shills’ bitcoin below.
South Africa has the most developed crypto laws and regulations. Cryptocurrency is legal, and banks can therefore allow trades with businesses & individuals to on-ramp/off-ramp crypto funds. This has led to South Africa being home to many successful crypto exchanges in the region, including VALR, which has raised the highest venture capital amount ever led by any crypto startup in Africa, approximately 59.2 million USD. However, the country's central bank, the South African Reserve Bank (SARB), does not recognize cryptocurrency as legal tender quite yet.
An excerpt from the SARB's website about its stance reads:
Crypto assets are not legal tender in South Africa, so any merchant or beneficiary may refuse them as a means of payment. These assets are not guaranteed or backed by SARB as they operate independently from the central bank and users are alerted to the potential risk of fluctuation in the value of crypto assets. There are currently no dedicated laws or regulations that specifically govern the use of crypto assets in South Africa and, therefore, no regulatory compliance requirements exist for local trading of these assets. Legal protection or recourse to users, traders or intermediaries of crypto assets therefore depends on general common law principles. Dealing in crypto assets is performed at the end-user’s sole and independent risk. Initial coin offerings are related to crypto assets and their use are also unregulated and unsupervised by the SARB.
Neither the Currency and Exchanges Manual for Authorised Dealers nor the Currency and Exchanges Manual for Authorised Dealers in foreign exchange with limited authority allow for cross-border or foreign exchange transfers for the explicit purpose of purchasing crypto assets. From an exchange control perspective, the Financial Surveillance Department is unable to approve any transactions of this nature.
Individuals may purchase crypto assets from abroad using their single discretionary allowance of up to R1 million and/or their individual foreign capital allowance of up to R10 million with a tax clearance certificate per calendar year, as outlined in the abovementioned manuals. A local Authorised Dealer will be able to assist individuals with these allowances.
It should be noted that, when purchasing foreign exchange through an Authorised Dealer, a customer is required to sign a declaration, either physically or electronically, which includes the wording “I have been informed of the limit applicable to the above transaction and confirm that this limit will not be exceeded as a result of the conclusion of this transaction”. It follows that an individual is responsible for ensuring that he/she does not exceed the relative allowance applicable to the transaction i.e. R1 million or R10 million.
Cryptocurrency in Kenya is quite explicitly illegal, in fact, the country has one of the most developed financial markets in Africa as it introduced what is called an electronic tax for online transactions, which includes but is not limited to crypto transactions. According to a report by Chainalysis, the country had the highest P2P crypto exchange volume in Africa in 2020 and ranked 5th in crypto adoption on the globe.
Due to the burgeoning Web3 scene, Kenya is set to welcome the first ever Ethereum event on the continent, ETH Safari, which will be taking place on the 18th - 25th of September 2022.
The country has seen interest from big names within the web3 scene, including Celo, Harmony and NEAR to name a few.
Implicit ban refers to countries that have directives from the country's central banks not to engage directly in cryptocurrency transactions with individuals and companies. However, citizens can trade in cryptocurrency among themselves, i.e. P2P.
Nigeria's tech scene is booming; it houses most of the continent's fintech unicorns like Paystack, Flutterwave, OPay and a bevy of promising Web3 startups, including Quidax, they have a dominant roster of international Web3/crytpo companies including Binance, FTX and Payplux. On February 5, 2021, the Central Bank of Nigeria (CBN) issued a stern warning against persons and companies engaging in cryptocurrencies through a press release. The CBN went on to order all commercial banks to close down accounts of companies and individuals linked to crypto transactions. This however, has not deterred Nigerians, the country remains second only to the US in bitcoin P2P transactions worldwide. The CBN inadvertently started embracing crypto upon realising the people’s resilience on the matter, they launched their CBDC which is aptly titled the e-Naira on October 25, 2021. Nigeria transacted 185 million USD worth of bitcoin from January to March in 2022 alone on Paxful and ranks #1 for Google searches for the terms "bitcoin" and "cryptocurrency".
Dr Bawumia, Ghana’s vice president, has made it clear that he intends to move the country toward a digital future. The World Bank approved 200 million USD to accelerate this agenda. The Ghanaian Government has introduced several digitalization initiatives across the country, including a crypto innovation and regulatory sandbox. Like many African countries on the list, it has banned cryptocurrencies and seeks to launch a CBDC- the e- cedi. Piloting of the e-cedi began last month.
The Ugandan central bank has not itself made moves to operate and function within the space quite yet, however, they have not dismissed it. Below is a tweet that shows Uganda’s willingness to learn and educate the masses before it rolls out a full institutional legalisation. This, coupled with the introduction of a Master’s degree in blockchain technology at the university, it seems Uganda’s focus is on learning to understand all elements of crypto before explicitly exposing its people to the potential financial losses that can come with reckless participation.
These are countries where engaging in any crypto related activity, trade and transaction is considered illegal - including P2P.
Egypt has banned the use of cryptocurrency and its related activities at every turn. Egypt's top Imam supported the ban and said it is "forbidden" according to Islam. The absolute ban on crypto has however not stopped the region from attracting venture investment. Egypt attracted 141 million USD and 445 million USD in venture funding in 2020 and 2021 respectively, the jury is still out on what could happen by the end of 2022.
We can conclude then that cryptocurrency regulation is still a developing trend in Africa, however with most countries taking small steps toward regulating the market and its use on the continent, we are yet to see a big continental shift in the outlook of crypto and digital assets. While most African nations have yet to pass comprehensive regulations, several governments have taken significant steps in positioning themselves in the space, including the Central Africa Republic, Kenya, and South Africa. Given time, it remains likely that we will see more comprehensive cryptocurrency regulations establish themselves in Africa, as well as an increase in the understanding and consequential adoption of cryptocurrency.
🏴 Inside BanklessAfrica
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📰 News & Opinion In and Around Africa
The Bank for International Settlements (BIS) is launching a market intelligence platform. The international financial institution owned by central banks aims to safeguard against threats to digital assets as a part of several projects it is pursuing in its innovation hub.
The bank, which is trying to secure the security of the Central Bank Digital Currency, CBDC, is also exploring how blockchain, smart contracts, and other related technologies will be used for the tracking, delivery, and transfer of digitised Mitigation Outcome Interests.
Their goal is to create an open-source market intelligence platform to shed light on market capitalisations, economic activity, and risks to financial stability.
Author: Joseph Hall
When he returned to his country during the COVID-19 outbreak, a young Zimbabwean Bitcoin enthusiast, Ovidy, set up a business using Bitcoin as the backbone, importing automobiles and sending remittance payments.
Ovidy is an entrepreneur who initially encountered Bitcoin while residing in the US and has since developed a company with Bitcoin at its core. He was compelled to return to Zimbabwe from the United States at the start of the COVID-19 pandemic in 2020.
Ovidy makes a small commission on car sales and balances his earnings using a reversible Bitcoin remittance money transfer service. He receives Bitcoin from family members across Zimbabwe or from the families of friends who live in Kenya or elsewhere and pays them the money he earns from selling automobiles in exchange due to dollars being in short supply in Zimbabwe, his dollars for their Bitcoin.
Author: Victor Oluwole
Bitcoin finally went up beyond the $18,000 fall mark to $20,000 on Monday after weeks of unbearable market cap loss of about $850 billion, from the initial $1 trillion.
Bitcoin and other cryptocurrency rates of adoption have enormously grown to over 880% in the last year, not minding the news and trend of the market. With the outstanding idea of the P2P method of transaction, Africans are able to override their local bank payment options, thereby bringing crypto holders across Africa to the forefront.
Despite the Nigerian government's ban on crypto, citizens of Nigeria still have the highest number of crypto holders across the continent. Nigeria has the highest number of natives searching for "Bitcoin" and "Crypto" keywords on Google in the whole world.
Study: 7.6 Million South Africans Are Crypto Investors, Social Media Main Source of Crypto-Related Information
Author: Victor Oluwole
Research studies carried out by KuCoin cryptocurrency exchanges have shown that about 7.6 million people, 22% of them South Africa's adult population, are cryptocurrency investors, and 65% of them consider crypto as the future of finance.
The report revealed that a higher percentage of the respondents prefer digital assets as a means of saving to acquire stable returns. It also added that 72% of respondents source information on the crypto projects they are interested in investing in via social media. Other sources include influencers and media personalities.
According to this report, however, South African cryptocurrency investors remain positive about the matters of cryptocurrencies, seeing as it is having the right impact on the local crypto market in general.
A wide number of Kenyans who have adopted cryptocurrency, mostly young people, potentially experienced more devastating and crippling losses despite heavy warnings from the Central Bank of Kenya (CBK) as Bitcoin dipped below $20,000 again.
Kenya is among the leading dealers on P2P platforms, with over four million crypto investors and more than the 3.07 million native formal employees across the country.
The Central Bank of Kenya (CBK) in February piqued the public’s interest with the potential introduction of a digital currency — one that could offer benefits mainly in the reduction of cross-border payments costs.
🥷🏾 Airdrops Hunter
📝 Pidgin Parlour
Wetin Be DeFi & Why E Make Sense?
DeFi na the financial technology wey dey make products and services dey accessible to anyone wey fit use am, and anyone wey get internet connection.
Wetin DeFi dey do be say, e dey remove the control wey bank and financial institution get for where your money dey. You fit run any transaction wey you want anytime as far as say you get network wey dey work well.
People like DeFi based on say:
E dey remove all fees wey bank and other financial institution dey collect because say you wan use their services.
You fit keep your money or secure your money for your digital wallet based on say na you go dey pilot all your transactions and nobody go charge you anything or even ask you questions.
As far as say you get internet connection, anywhere you dey you fit run any transaction wey you want and e go just go sharp sharp and nobody go even know say you run transaction.
Another thing wey make sense for DeFi be say:
E dey use blockchain technology wey cryptocurrency dey use. E dey use another technology wey dem dey call Dapp(decentralized Finance application) to dey handle transactions and to dey run blockchain.
DeFi dey designed to dey use cryptocurrency dey run transactions and e also get products wey dey help make am make more sense, and the product na wetin we dey call “Peer to Peer”(P2P).
P2P transaction na the one wey be say two parties go gree say dem go exchange cryptocurrency for goods and services, and na only them go run the transaction based on say third party mechanism no comboard for DeFi transactions and third party mechanism no go ever come board.
Peer to peer lending no mean say interests and fees no go dey, just that say plenty option go dey based on say lender fit be anywhere in the world.
📚 Learning Centre
Learn the basics of Decentralized Finance. Get familiar with protocol tokens, stablecoins and decentralized exchanges; how to select the best DEX for your needs and understand how DApps work.
🎬EMERGENCY BEAR MARKET LIVESTREAM What to do if you're scared!
😂 Meme Humour
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