How African Regulators Are Responding to Cryptocurrency
This timeline captures the state of cryptocurrencies over four years of official statements by financial regulators on the continent.
The opinion of African Central Bankers on cryptocurrencies is a mixed bag of fortunes ranging from support to strong opposition while others sit on the fence.
This timeline captures four years of official statements by financial regulators on the continent.
South Africa's Reserve Bank Can't Make Up Its Mind
South Africa's Reserve Bank was first to draw blood in the matter of cryptocurrencies. As early as 2014, the regulator had put together a position paper outlining virtual currencies. 2 years later in August 2016, Reserve Bank Governor Lesetja Kganyago hinted at a greater degree of interest saying they were open to cryptocurrencies.
But the latest comments by the Deputy Governor Francois Groepe 2 months ago according to ITWeb, renounced earlier statements, this time deeming cryptocurrencies as ‘too risky.' He said in a keynote address:
"For the central bank to issue virtual currencies or cryptocurrencies in an open system will be too risky for us. This is something we really need to think about."
Kenya's Central Bank Is Reconsidering Its Position
Right off the bat, Kenya's Central Bank issued a warning (pdf) to anyone dealing in virtual currencies like bitcoin. A court case between a local Bitcoin startup BitPesa and the country's largest payment gateway, drew in the regulator to clarify its position on bitcoin. The Bank sent out a circular to all banks instructing them not to provide services for bitcoin-related companies.
Both circulars, sent out in December 2015, seem to have done little to quell the appetite of Kenya's traders. p2p marketplace volumes have taken off since, ranking the country 3rd highest on the continent after South Africa and Nigeria at an average $350,000 per week.
Next year, a joint committee of the country's financial regulators will meet to discuss how to craft a policy framework for digital currencies.
The Bank of Uganda Strongly Opposes Cryptocurrencies
Across the border of Kenya to neighboring Uganda, officials have only issued a warning aimed explicitly at cryptocurrency MLM schemes such as OneCoin. On February 2017, the Bank of Uganda published a notice on its website shedding light on a local affiliate of OneCoin as an unlicensed Financial Institution under its regulatory regime.
Unfortunately, the bank followed up with a blanket warning on all forms of cryptocurrency:
"whoever wishes to invest their hard earned savings in Cryptocurrency forms such as One-coin, Bitcoin, Ripple, Peercoin, Namecoin, Dogecoin, Litecoin, Bytecoin, Primecoin, Blackcoin or any other forms of Digital Currency is taking a risk in the financial space where there is neither investor protection nor regulatory purview."
The Bank of Namibia Is Still On The Fence
The Bank of Namibia at least took the time to put together a position paper in September, detailing the existing gaps in the current currency laws that hinder accommodating virtual currencies. While the paper acknowledged cryptocurrencies could complete fiat currencies in remittances and consumer payments, the bank is unwilling to endorse such services.
"the trading of virtual currencies in Namibia is not currently regulated and individuals that engage in such trading would be doing so at their own risk and should exercise caution."
In future, however, the bank may consider amending or supplementing its position.
The Central Bank of Nigeria Is Remarkably Supportive of Cryptocurrencies
For a regulator that is notorious for currency controls, the Central Bank of Nigeria is remarkably receptive to the idea of a digital currency free from the control of a central government. The Bank has enlisted staff from four departments to harmonize a white paper on the subject; a revelation made at a cryptocurrency conference in September.
One top Central Bank official, Musa Jumoh who heads Payments Policy and Oversight conceded the bank "cannot stop the tide of waves generated by the blockchain technology and its derivatives."
Over $3.2 millions of trades per week are conducted on Nigeria's p2p marketplace localbitcoins.
Swaziland's Central Bank Is Open To Exploring Cryptocurrencies
Swaziland is the latest African state to embrace cryptocurrencies after the Central Bank Governor Majozi Sithole disclosed the regulator was researching the virtual currencies internally. The Chief banker was positive about exploring potential use cases at a Swaziland Economic Conference (SEC 2017), even though virtual currencies are unregulated.
Still, like most central bankers, Sithole urged traders in the country to be cautious, saying:
"We are aware that people are trading on these platforms and we want to caution people to be careful. This has become a topical issue globally, and we are studying it and continually talking to experts on this issue."
From an official point of view, African countries are taking measured steps to finding a place for cryptocurrencies within their economic structures. Considering most regulators around the world are still undecided on the matter, the pace in Africa is great to see.