Here are five regulatory objections to cryptocurrency use in Africa


Less than five out of 54 countries in Africa actively support the use of cryptocurrencies. Why are the rest still protesting? Here are five current objections to cryptocurrency use in Africa.

Different jurisdictions

Cryptocurrency companies base their headquarters in different jurisdictions. To name a few, Malta, Mauritius, Dubai and the Bahamas host Virtual Asset Service Providers (VASPs). Each of these has different regulatory systems that enable VASPs to operate globally. Creating a lack of synchronization in regulation makes it fundamentally difficult for nation states to regulate crypto.

To put it differently, a single country cannot regulate over 21,000 cryptocurrencies.

The skill pool and the budget to do so are by default prioritized elsewhere. The main priority of any government is economic growth and protection of its citizens. For many who perceive cryptocurrencies as transitory or speculative, regulating them is far from a key priority.

This leads to the more common option of banning them or leaving them in a gray area.

Incidence of fraud

Governments jump on the crypto bandwagon when things go wrong. It has been when a big scam goes bankrupt or a crime occurs. In recent documentation of crimes involving the use of cryptocurrencies, law enforcement often has to follow money trails. These trails can take up to five years or more to trace the cash flows. While crypto itself is not the problem, few governments have the instruments to track all the criminal activity associated with it.

As an example, Velox 10 Global operated in Kenya between 2018 and 2019. It promised investors would earn $4,000 if they invested $100 and topped up with $200. Needless to say, it was a Ponzi scheme that never paid back its promise. Investors were left in the dark because the “founders” came up with $3.6 billion. Similarly, Dunamiscoin and Africrypt escaped with $2.7 billion and $3.6 billion of investors’ funds in Uganda and South Africa. Regulators were later called in to sort out the mess.

These are just a few among others that landed cryptocurrencies on the wrong side of regulators.

Away from fraud, Ghana, Nigeria, South Africa, Kenya and more recently the Central African Republic have announced efforts to investigate cases of digital currency use. Notably, the Central African Republic has legalized Bitcoin
as legal tender. Along with CFA
Franc, it is acceptable for trade.


This is an ongoing concern for sustainable use case considerations. It is good for individuals to speculate in cryptocurrencies, but governments cannot. They are mandated to keep economies stable; Therefore, the volatility does not agree with it. For example, the central bank of Kenya took note of the governor and said he should be arrested if he allows the country’s reserves to go into Bitcoin.

The dynamics of allocating national reserves to crypto are complex. However, the Central African Republic and El Salvador could share their lessons and challenges as they have adopted Bitcoin as legal tender alongside their currencies. The volatility is here to stay. Investigations into cryptocurrency risk can provide insight into better risk management in the future.

Low to no control

Cryptocurrencies are mostly decentralized. Few have centralized authorities overseeing them. Some exist as tokens, and others as various utilities. The design is the peer-to-peer payment systems. In reality, they also act as a store of value. While governments can oversee monetary or fiscal policy regarding the money supply, this does not apply to cryptocurrencies.

Cryptocurrencies have different characteristics compared to fiat currencies. One such difference is the supply. Governments control the money supply, but cryptocurrencies have algorithms that control supply. Fiat money exists as cash and debt, but crypto exists as a digital ledger. Often this ledger lacks debt financing. Additionally, fiat is inflationary while crypto is deflationary.

Governments therefore do not control the supply, distribution and collateralization of crypto. In Africa, no government is associated with cryptocurrency mining. They cannot claim a loan or credit on it. Furthermore, they cannot issue restrictions on those creating new tokens or using existing supplies. So how can they regulate it effectively?

The issue of legal tender

Apart from El Salvador, the Central African Republic has adopted Bitcoin as legal tender. These two countries are currently case studies for other countries on the use of Bitcoin in this way. While it is positive that they have taken that path, there is no guarantee of success. There are already challenges with interoperability and user support in El Salvador. At the national level, it will undoubtedly take a few years to get things running smoothly. Other countries are taking a wait-and-see approach as they look to central bank digital currencies (CBDCs) as an alternative.

For now, the low level of trust in crypto means it won’t see rapid government adoption.

However, it is seeing retail adoption as people adopt the payment aspect of cryptocurrencies. Governments can learn from VASPs as they serve citizens with best practices, challenges and better ways to support the emerging industry. Perhaps it needs more down-to-earth support than full regulation. After all, by interacting with current users and service providers, there will be a better understanding of the risks and opportunities in the industry. Awarding more partnerships with crypto industry players will also provide a platform for early warnings of fraud.


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