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The State Of Cryptocurrency Regulation In African Countries

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Cryptocurrency Regulations
Brittney Issa (Flickr)

Cryptocurrencies, alongside blockchain, have proven to be one of the most impressive fintech innovations, as they hold huge promises of restructuring the economy of many countries whilst equally granting escape from the limitations of the global economy.

Crypto operates on a decentralized finance system which is largely based on encryption and validation. This means that the government and the central banks have only a little influence over it. 

While interests in crypto as a form of digital currency have been expanding around the globe, reports on the state of cryptocurrency regulation in Africa, show that only a few African countries have an encouraging stance on crypto. A few have even banned its use, but in most places, this innovation is stuck in a regulatory limbo. In this article, we examine the state of cryptocurrency regulation in African countries with a considerable number of interest.

Nigeria

The Nigerian government had earlier expressed concerns surrounding the appeal of crypto and have attempted to place a ban on it. Over the years, financial regulators have constantly warned Nigerians about the inherent risk of using crypto. 

Notwithstanding these warnings, Nigeria remains the largest crypto community in Africa and has become a popular destination for crypto trading. Given the heightened use of crypto by Nigerians, there is, however, the need to establish regulations guiding its use.

The current legal status of crypto in Nigeria remains uncertain. Nigeria is yet to instigate a legal framework for crypto currencies. There is nonetheless a great interest to formulate one quite shortly. The Nigeria’s Securities and Exchange Commission is currently working to ensure that a framework is being put in place for crypto regulation in Nigeria.

As reported by a local newspaper in the country, the legislative arm of the Nigerian government is currently reviewing a bill on cryptocurrency.

South Africa

Recently, Africans experienced a larger volume of crypto regulations, trade, and ownership, as the fintech sector has consistently thrived in the continent. This is particularly true in South Africa which has become popular for its progressive stance in the crypto and blockchain community, and has even proposed a favorable regulatory framework for crypto and blockchain. 

South Africa recently released a policy paper that outlines 30 recommendations for the regulation of cryptocurrency and other relevant service providers. The policy enables crypto to be accepted for domestic payment purposes and also implemented the anti-money laundering and travel rule. 

Kenya

In Kenya, the use of crypto has not been specifically banned. Rather, it has been proclaimed ‘unregulated’.

The Central Bank Of Kenya (CBK) has cautioned Kenyans about transacting or investing in crypto. They advised that it could be a Ponzi scheme of some sort, and may result in a risky venture. In consideration of this, the CBK has expressed its reluctance to rush into the regulation of crypto currencies, defining the situation as “open to innovations”. 

However, the Central Bank Of Kenya has declared a policy on the use of crypto, which serves as an indication to improvements in their plans for crypto regulation. 

Ghana

The Bank of Ghana, just like many other banks in Africa, had previously pronounced crypto as illegal within the country and has warned citizens against crypto trading due to the risks involved. 

Currently, the bodies responsible for financial control in Ghana, have not settled on a regulation for crypto. However, the BOG has made mention of looking into regulations for digital payments in the country.

Their approach towards crypto is also beginning to take a new form with the announcement from the Bank Of Ghana recently that the country may issue it’s own digital currency in the future.

Zimbabwe

The Reserve Bank of Zimbabwe (RBZ) had also quite been reluctant to make crypto legal in their country, due to the high number of fraudulent activities that comes with it. Also, the Zimbabwe government had earlier banned local banks from processing crypto.

However, the RBZ has seen the need to regulate crypto, as it has become a global trend. In an impressive turnaround from its previous anti-crypto stance, the RBZ has proposed a crypto regulatory sandbox. Currently, Zimbabwe has started formulating a policy framework to guide the business activities of crypto firms. 

Most North African countries have been observed to have demonstrated more opposition concerning the adoption of crypto and blockchain. Countries like Morocco, Algeria and Libya have issued bans against all activities involving cryptocurrencies.

On a concluding note, the digital community is seeing a completely new phase of evolution, and there is the need for every country to regulate crypto. With each passing day, people are showing greater rates of involvement in crypto, and many have continued its use, even without authorization from the government or the presence of any regulatory framework set up for it.

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Nigeria’s Central Bank Digital Currency e-Naira Gain Traction

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eNaira

According to Governor Godwin Emefiele, the Central Bank of Nigeria’s (CBN) digital currency, the eNaira, which was officially revealed on Monday, has garnered immense interest and a positive response from both within and beyond Nigeria, with 33 banks fully integrated on the platform. The CBN has successfully minted $500 million, with N200 million going to financial institutions, according to Emefiele, who spoke at President Buhari’s historic launch in Abuja.

In addition, over 2,000 clients have been added to the eNaira platform, and over 120 merchants have successfully enrolled. Since its launch, the eNaira website has had approximately 2.5 million daily views. Customers who download the eNaira Speed Wallet App will be able to complete the onboarding process and build their wallet, locate their eNaira wallet from their bank account, transfer eNaira from one wallet to another, and make payments at registered merchant locations.

In terms of maintaining a robust payment system, the Central Bank of Nigeria (CBN) feels that the eNaira will make a big difference to Nigeria and Nigerians. The eNaira will also lower the cost of processing currency, allowing for more direct and transparent welfare interventions for citizens, as well as increased revenue and tax collection, easier diaspora remittances, lower the cost of financial transactions, and improved payment efficiency.

Governor Godwin Emefiele outlined these advantages during the historic debut in Abuja, saying that Nigeria’s Central Bank Digital Currency (CBDC) is the first in Africa and a digital version of the actual Naira. 

What is eNaira?

The eNaira is the same Naira with considerably more possibilities, Emefiele asserted emphatically, guaranteeing that the new payment system is one of the most robust in the world, sufficiently safeguarded, and thus nothing to worry about.

In 2017, the Central Bank of Nigeria (CBN) began an intensive study, consultations, identification of use cases, and testing of the CBDC idea in a Sandbox environment, in response to increased interest in Central Bank Digital Currency (CBDC) around the world.

The goal of the study was to provide a strong argument for the introduction of a digital currency in Nigeria so that all Nigerians can benefit from a more successful and inclusive economy.

Following the completion of preliminary research, the CBN’s researchers and experts were able to clearly establish that a digital currency will promote a more paperless, inclusive, and digital economy, complementing the successes of prior policy initiatives and our rapidly increasing payment systems.

As a result, the CBN decided to create its own CBDC, dubbed the eNaira. Like the physical Naira – eNaira is a legal tender in Nigeria and a liability of the CBN, which will have the same value and always be exchanged at 1 naira to 1 eNaira

To reduce the risk of the process, the CBN has carefully considered the entire payments and financial architecture, and has structured the eNaira to complement and improve these ecosystems, as well as implementing security protections and policies to ensure the financial system’s integrity.

To maintain the integrity and stability of Nigeria’s payment system, strict adherence to anti-money laundering and counter-terrorist financing regulations would be enforced, according to Emefiele.

The eNaira, like other digital revolutions, is a journey, and Nigerians should expect more features in the coming months. Accessibility and onboarding of consumers without BVN, as well as the usage of the eNaria on the phone without access to the internet, are among them. 

Nigeria will be one of the first countries in the world to implement the CBDC using USSD on phones, bypassing the need for internet access. The CBN also plans to use the eNaira platform to onboard revenue collection agencies in order to increase and simplify collections, as well as to create sector-specific tokens to support the Federal Government’s social programs and distribution of targeted welfare schemes in order to lift millions of people out of poverty by 2025.

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Jack Dorsey‘s Square to develop open source Bitcoin mining

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Jack Dorsey Bitcoin

On Friday, October 15, Twitter CEO Jack Dorsey announced that American fintech company, Square, would be looking to get into Bitcoin mining. Jack Dorsey who is also Square’s CEO announced this on Twitter which subsequently sent waves through the bitcoin market, surging its price to almost a record high, rising over $62,000 over the weekend. According to the Twitter boss, Square is looking to building an open source Bitcoin mining system that would be available to individuals and businesses.

Sharing his thoughts further on the initiative, he stated that “Mining needs to be more distributed” and that “the more decentralized [mining] is, the more resilient the Bitcoin network becomes. He also mentioned the apparent inaccessibility of mining stating that “Bitcoin mining should be as easy as plugging a rig into a power source.

Dorsey also believes that bitcoin mining “needs to be more efficient and that “clean and efficient energy use” would be undoubtedly beneficial to the digital currency in the long run.

Dorsey ended the thread by saying that a “technical investigation would be undertaken by a Square team led by Jesse Dorogusker, Square’s hardware lead. If successful, this initiative would be another of Square’s bitcoin focused projects which includes a Bitcoin hardware wallet.

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Financial Leaders from G7 Release Guidelines for Central Bank Digital Currency

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Source: World Atlas

At a meeting that was held in Washington, yesterday, October 13, G7 leaders discussed central bank digital currency and endorsed 13 public policy principles with regards to their implementation. The financial leaders from G7 agreed that CBDCs would complement cash and should not be detrimental to the monetary system. The G7 leaders have been discussing CBDCs this week concluding that they should do no harm and meet rigorous standards.

It should be noted that G7 includes finance leaders in advanced economic nations comprising of Canada, France, Germany, Italy, Japan, the U.S and the U.K. the G7 leaders make it mandatory that any newly launched CBDC should not harm the central bank’s ability to perform its duty of maintaining financial stability. In a joint statement by the G7 finance ministers and central bankers, they said that, 

“Strong international coordination and cooperation on these issues help to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.” 

The joint statement further states that CBDCs are complements to cash and could serve as a liquid or safe settlement assets with an added advantage of anchoring existing payment systems. CBDCs issuance should be entrenched in a long-standing public commitment to transparency, rule of law, and sound economic governance. The statement added at CBDCs must be so efficient that they are fully interoperable on a cross-border basis. 

The G7 leaders agreed that they had a duty to minimize the incidence of ‘harmful spillovers to the international monetary and financial system” 

The G7 statement reiterated a similar statement earlier made by G20 that no global stablecoin project should begin operation until such a token has addressed legal, regulatory and oversight requirements. 

Countries like China and Nigeria are ahead of the pack with regards to the adoption of digital Yuan and Naira respectively. China’s crackdown on cryptocurrency may be a step forward for the country’s plan to promote its digital Yuan. Nigeria, on the other hand, postponed the launch of its eNaira in deference to the 61st anniversary of Nigerian independence on Oct 1. 

However, countries like the US and the UK are dragging their foot with regards to the introduction of CBDCs to their financial system. There are insinuations that America is in danger of being left behind technologically and financially if it doesn’t get serious with the implementation of CBDC in its financial system.

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