Connect with us

News

Nigeria And Africa At Large Needs Crypto Regulation For More Adoption

Published

on

Bitcoin in Africa


In recent years, there has been increased mainstream adoption of cryptocurrency and blockchain technology in Africa. According to Chainalysis, Africa is the second-largest continent for peer-to-peer (P2P) trading with two African countries ranking in the top eight of Chainalysis crypto adoption index.

Crypto payments and remittances is increasingly becoming a common feature in many parts of Africa, allowing enthusiasts, business owners and individuals to make fast, cost-efficient transactions, thereby, increasing productivity in some of the most underbanked communities.

In 2020, Nigeria led the continent’s growth having weekly P2P volumes within the range of $5 million to $10 million, followed by its runner ups, Kenya and South Africa with between $1 million and $2 million. Bitcoin and other cryptocurrencies have been a revolution in Africa, and investors across the globe are recognising its scope.

The increasing popularity of cryptocurrencies has finally caught the attention of financial regulators in Africa. Cryptocurrencies, as a market full of decentralize innovations has become a viable alternative for many Africans, solving microcredit problems such as high-interest rates, high overhead costs, slow registration times and corruption.

Despite the tremendous merits of cryptocurrencies on the economy, fraudsters and bad players have taken advantage of its decentralized system. Since cryptocurrencies cannot be controlled by a central authority or entity, African governments are taking hostile approache to regulate these digital currencies.

The recent ban of commercial banks and financial institutions from providing crypto related services to Nigerians by the Central Bank of Nigeria (CBN), and the regulation of certain crypto players in South Africa by Financial Sector Conduct Authority (FSCA) is a testament to this.

Considering the massive attention the crypto industry has garnered over the years, the regulation of space is increasingly inevitable. But like every nascent market, bad regulations from the government can stiffen innovation. This is why players in the crypto space believe that regulators should rather create an enabling environment that will further boost the adoption of this new tech, while creating stringent rules to take out bad actors.

Why should there be crypto regulations?

1. Government control and supervision – accountability;
2. Cyber-Crime control;
3. Protection of investors;
4. Accurate valuation on cyptocurrency’s worth;
5. Standards for ethical practices.


Government Control and Supervision – Accountability

Every sector of the economy needs the government’s regulation for increased output and accountability. The cryptocurrency market belongs to the financial sector of the economy, which is already an area that calls for special scrutiny, audit and needs to be regulated, since it measures a country’s economic growth and strength, amongst other things.

Most citizens are now seeing cryptocurrencies as a way of evading tax and enriching their own pockets, with KYC (know your customer) and tight regulations put in place. This will improve the country’s GDP (gross domestic product), thereby, leading to reduced cost of living and enhanced country’s economic health.

Cyber-Crime and Fraud Control



Cryptocurrencies are decentralized and allow anonymity. Bad players and scammers are using them for extortion, laundering, kidnapping, ransomware in darknet marketplaces and fueling terrorism. Transactions in cryptocurrencies do not require real names, so it is easy for criminals to remain unidentified or anonymous as they move and use cryptocurrencies.

Money launderers make use of cryptocurrencies since they have inherently low levels of regulations, and are not governed by a central authority. This essentially means that their transactions cannot be closely monitored. These have made the masses see cryptocurrencies as scams, ponzi or get-rich schemes. With the government providing the structural measures and necessary regulations to curb this negative menace, this will in return, increase crypto adoption in Africa.

Protection of Investors



According to the Securities and Exchange Commission (SEC) in a report of September 2020, they proposed a new set of rules that will regulate cryptocurrency (either coins or tokens) investments when the character of the investments qualifies as securities transactions. The SEC is majorly looking at regulating Initial Coin Offerings (ICOs) as securities and is cracking down on fraudulent means of acquiring wealth through it.

The SEC, as a government organization which is empowered to regulate investments and securities business, should implement laws and regulations that will protect investors from illegal or fraudulent ICOs. Also, if anything goes wrong, the owners of the projects can be held accountable. This will create a system of confidence in the mind of institutional or retail investors, which in turn, acts as a catalyst for crypto adoption.

Accurate Valuation of Cyptocurrency’s Worth



The parabolic climb of Bitcoin in late 2017, led to a cataclysmic price retrace in which many investors faced overwhelming liquidation due to market manipulation, over-valuation, and outright scams. Many Virtual Asset Service Providers (VASPs) helped to facilitate these Wild West conditions. When there are regulations, real identities can be connected to illicit behavior by the regulators or government. Fake buy and sell orders implemented just to generate “pump and dump” action, will be harder to get away with.

Compliant Virtual Asset Service Providers (VASPs) will have the ability to collectively verify and cross-check the real identities behind the public addresses, and pass this information over to the respective authorities when required. This will ensure that cryptocurrencies are judged solely on their merits,thereby, creating a level playing field for all cryptocurrency investors and enthusiasts, leading to growth and crypto adoption in Africa.

Standards for Ethical Practices



There should be rules and regulations for every practice. No action should be discretionary. This will ensure that the masses to have faith in the system, and in turn, boost crypto adoption.

Comments
Continue Reading
Click to comment

Leave a comment:

Crypto Assets

Crypto prices drop as global market fear increases

Published

on

Top cryptocurrency prices have fallen amidst a drop in stocks and fears over China’s Evergrande debt crisis. In the last 24hour, Bitcoin dropped from $47,772 to $42,630 shedding about 8.58%. this is the lowest in price since another bull run began on Sept 5 after the April crash.

El- Salvador’s President, Nayib Bukele sees the fall as an opportunity to invest more. Recall that the country adopted Bitcoin as a legal tender on September 7. Despite the adoption, the price of Bitcoin has fallen by almost 14% since then.

Other coins have experienced dramatic crashes within the last 24hours. Solana, a coin that has experienced 355% growth within the last 3 months fell from $162 to $130 shedding about 11.39% within the last 24hours. Solana’s fall may be categorized by the 17-hour outage which the founder, Anatoly Yakovenko said was caused by bots “flooding the networks”

Ethereum fell by 9.37% while Dogecoin and Axie Infinity fell by 11.22% and 14.14% respectively within the last 24hrs hours. While crypto experiences dark Monday, El-Salvador keeps investing more money in Bitcoin.

A look at the global market

The global market is experiencing fear due to the Evergrande debt crisis. A report published by the University of Michigan shows that consumer’s sentiment is beginning to decline. This trend alone may impact the crypto market as well.

On the other hand, the global market downturn must have been spurred by the Evergrande debt crisis. The company grew to be one of China’s biggest companies by borrowing more than $300bn. Last year, Beijing made rules to control the debt owed by big real estate developers. This led Evergrande to offer its properties at major discounts to raise more money to keep the business afloat. Right now, the company is struggling to meet the interest on payment of debts.

Why would it matter if Evergrande fails?

The collapse of the multi-million dollars company would affect the global market; including the crypto market. Many people bought properties from Evergrande and they expect to make gains. If Evergrande falls, crypto investors will be forced to withdraw more money to keep their business running without the means to invest more. When one business fails, the other gets affected indirectly. This also applies to other firms that do businesses with Evergrande.

The potential impact on China’s financial system is another effect of Evergrande’s fall. In his statement to BBC, Mattie Berkink, the Economist Intelligence Unit (EIU), said that “the financial fallout would be far-reaching. Evergrande reportedly owes money to around 171 domestic banks 121 other financial firms” if the company fails, other lenders or businesses may be forced to lend less. Thereby leading to a credit crunch- a situation where companies struggle to borrow money.

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading

Bitcoin in Africa

The rise of CBDC in African economies

Published

on

Many nations have taken cues from the world of crypto and its resounding successes over the last decade. In order to avoid getting left behind, governments worldwide are increasingly turning their attention towards implementing some form of digital currency, a CBDC which in full is Central Bank Digital Currency. Although inspired by cryptocurrencies, CBDC’s are quite different from traditional crypto platforms. The main differences are that CBDC’s are unlikely to be decentralized, the supply of this currency regulated by the host’s country’s central bank as the CBDC is designed to operate as a sovereign legal tender, the digitized form of the host country’s fiat currency. Thus, a central bank may issue digitized tokens of its currency of which their value is pegged to the fiat currency of the nation in question, making CBDC’s stablecoins.

Africa has seen a rise in the use of cryptocurrencies and it’s still pushing frontiers in this sector. Although the use of crypto in many African nations is becoming more and more pervasive by the day, the tone of governments in many of these countries toward the sector is cautious at best and threatening at worst. However, a few nations have voiced interests in creating digitized versions of their legal tender to function as a CBDC. Amongst these are Ghana, Nigeria, Morocco, Kenya and Tunisia.

Many of these projects are still in the research phase or developmental phase however. A good example is Ghana’s proposed CBDC, the E-cedi being developed in partnership with German company, Giesecke + Devrient. Nigeria’s CBDC project, the eNaira has been announced and according to Nigeria’s central bank, this CBDC will be launched sometime in 2021. To that end, the CBN has partnered with fintech company, Bitt Inc. to serve as the technical partner in the eNaira’s development. Reportedly, the CBN had made the decision to digitize the Nigerian Naira in 2017.

While the pursuance of digital currencies in African nations is a welcome development, implementation of these schemes isn’t without challenges. Chief among the issues countries in Africa face would be the already existing financial service inequality and poor penetration of internet access in the continent. These challenges must be tackled in order to allow for mainstream adoption of CBDCs and the subsequent provision of financial inclusion. The benefits largely depend on the peculiarities of the nation deploying them. For instance, a digital currency is thought to help Nigeria increase foreign remittances, it’s second largest source of forex after oil. Whatever the outcome of these projects, it is becoming apparent that CBDC’s have come to stay.

Comments
Continue Reading

Decentralize Brief

Bitcoin trades above $51k ahead of El Salvador’s adoption

Published

on

Bitcoin growth

Bitcoin price has rallied above $51,000 ahead of El Salvador’s adoption. The immediate surge in price may be due to the social media campaign that everyone should buy sats of Bitcoin to support El Salvador’s plan to make the coin a legal tender or it may be due to the news of El Salvador’s adoption of the coin as a legal tender on September 7. Users of social media platforms like Twitter and Reddit are discussing how they will buy Bitcoin of $30 each to mark the new El Salvador Bitcoin law.

The surge in Bitcoin’s price began in the last 24hrs with the price rallying around $51,955 with a 3.37% increase. This is an all-time high after the April crash that brought the price of Bitcoin from $64k down to $28k. The move by El Salvador to be the first country that accepts Bitcoin as a legal tender and the social media campaign that leads to a surge in price ahead September 7 are a repetition of events that occurred late last year and early this year with regards to institutional investors and how the price of Bitcoin skyrocketed.

El Salvador, a country in Central America, has been preparing heavily to adopt Bitcoin by installing ATMs to allow citizens to convert the token into US dollars. Last week, the country’s Legislative Assembly passed a law to allow for the creation of a $150m Trust to support the conversion of Bitcoins to US dollars.

To promote the use of Bitcoin, the government states that it will give the adult population of El Salvador $30 in Bitcoin once they download “Chivo” the wallet issued by the government. This was confirmed by the Finance Minister, Alejandro Zelaya.

What this means for Bitcoin investors

Apart from the adoption by Salvadorians, on-chain analytics show that Bitcoin is in high demand. The fourth halving that occurred will make Bitcoin become a scarce token in the nearest future. Thereby increasing the price sporadically.

With El Salvador’s interest in Bitcoin, other countries are likely to follow suit- Panama is considering following El Salvador’s lead. History will repeat itself as this development will serve as another crypto rout that occurred early this year when Tesla and MicroStrategy announced their support for Bitcoin.

El Salvador’s new law allows the use of Bitcoin as a legal tender it can be used to buy goods, pay for taxes and bank loans. This means more demand for Bitcoin, with the fourth halving that occurred, it means less supply. A common rule of economics for demand and supply will apply. Prices are projected to keep rising. At the time of writing this report, Bitcoin is trading at $51,839 with a projection of $52k before the end of today and higher tomorrow when Salvadorians begin to use the token.

Comments
Continue Reading

TRENDING

%d bloggers like this: