The crypto market in Nigeria, Kenya, Tanzania, and South Africa together saw a growth of 1,200 percent, reaching a market valuation of $105.6 billion (roughly Rs. 775 crores) in between 2020-2021. The growth trajectory of the crypto sector in Africa has attracted the attention of the International Monetary Fund (IMF). In a recent blog post, the IMF has asked the African nations to implement tighter regulations around the crypto sector as soon as possible. The IMF intends to safeguard investors against financial risks.
In its post, the IMF noted that regulating a highly volatile and decentralised system remains a challenge.
“Many people use crypto assets for commercial payments, but their volatility makes them unsuitable as a store of value. Only one-quarter of countries in sub-Saharan Africa formally regulate crypto,” the IMF said.
Africa is one of the fastest-growing crypto markets in the world, according to Chainalysis. The region, however, remains the smallest in-terms of transactions that peaked at $20 billion (roughly Rs. 1,63,006 crore) per month in mid-2021.
As per the IMF, Kenya, Nigeria, and South Africa have the highest number of crypto users in the region.
The Central African Republic, for example, followed El Salvador and legalised Bitcoin earlier this year.
Crypto activities in other African regions have also gathered pace. For instance, Coinbase-backed cryptocurrency wallet called Mara is ready for launch in Kenya and Nigeria.
Binance crypto exchange is also coordinating with Nigeria to establish a special economic zone, powered by the crypto sector.
Adopting cryptocurrencies as part of their financial systems is not a move, supported or encouraged by the IMF.
Earlier this year, the global financial body had said that due to Bitcoin's high price volatility, its use entails significant risks to consumer protection, financial integrity, and financial stability.
“If crypto assets are held or accepted by the government as means of payment, it could put public finances at risk. Policymakers are also worried that cryptocurrencies can be used to transfer funds illegally out of the region and to circumvent local rules to prevent capital outflows,” the IMF post added.
It is noteworthy, that recent research reports have highlighted that as more nations begin to regulate the crypto sector, the use of cryptocurrencies by criminals to launder funds could dwindle.
Crypto-based ransomware payments reportedly rose above $600 million (roughly Rs. 13,330 crore) in 2021. However, a report by Kaspersky suggests that Bitcoin is set to lose its value as a digital asset for ransomware negotiations and payments.
Currently, cryptocurrencies are banned in six African countries—Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo. Meanwhile, Zimbabwe has ordered all banks to stop processing transactions and Liberia directed a local crypto startup to cease operations (implicit bans).
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