The International Monetary Fund (IMF) calls for greater regulation of Africa’s cryptocurrency markets, one of the fastest growing in the world, the global institution’s blog reported Nov. 22.
Among the reasons why countries in the region should adopt the regulation, the monetary fund cited the collapse of FTX and its ripple effect on cryptocurrency prices, which is “prompting renewed calls for greater consumer protection and regulation.” of the cryptocurrency industry.
In addition, the authors argue that “the risks of crypto assets are self-evident” and “it is time to regulate” to find a balance between minimizing risk and maximizing innovation. Drawing on the October 2022 Regional Economic Outlook for Sub-Saharan Africa, the article states that “the risks are much higher if a cryptocurrency is adopted as legal tender,” which poses a threat to public finances if governments accept cryptocurrencies as a means of payment.
The article says:
“Policy makers are also concerned that cryptocurrencies could be used to illegally transfer funds out of the region and to circumvent local rules preventing capital outflows. Widespread use of cryptocurrencies could also undermine the effectiveness of monetary policy, creating risks to financial and macroeconomic stability”.
According to IMF data, 25% of sub-Saharan African countries have formally regulated cryptocurrencies, while two-thirds have applied some restrictions. On the other hand, Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania and the Republic of the Congo have already banned crypto assets, representing 20% of the countries in sub-Saharan Africa. Kenya, Nigeria and South Africa have the highest number of users in the region.
Between July 2020 and June 2021, the African cryptocurrency market increased in value by more than 1,200%, according to data from analytics firm Chainalysis, with high adoption in Kenya, South Africa, Nigeria and Tanzania.
As we told you before, Ghana is testing a digital currency issued by the central bank (CBDC). According to Kwame Oppong, an executive at the Bank of Ghana, the country’s initiative aims to foster financial inclusion. Ghana has the potential to reach similar levels of cryptocurrency adoption to Kenya and Nigeria, countries that rank 11th and 19th in Chainalysis’ Global Cryptocurrency Adoption Index.
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