In late April, the Central
African Republic (CAR), one of the world’s poorest countries racked with
decades-long conflicts, announced a shocking decision: it was adopting Bitcoin (BTC) as a legal tender.
It became the second
country in the world to do so after the Central American country, El Salvador,
which took the first move in September 2021.
Although the
International Monetary Fund (IMF) kicked off against El Salvador’s move at the time,
saying Bitcoin as a legal tender increased the country’s risk to financial
instability, CAR in its announcement said the move places it “on the map of the
world’s boldest and most visionary countries.”
Despite the worries and
fear that trailed this action, one question remains: Will there be a ripple
effect across Africa?
This question is now even
more pertinent as monetary authorities and central banks from Africa dominated
the list of 44 countries recently invited by El Salvador’s President, Nayib
Bukele, to the country’s Bitcoin Conference.
Bukele had said the
meeting was “to discuss financial inclusion, digital economy, banking the
unbanked, the Bitcoin rollout and its benefits in our country.”
Will other African
countries be inspired by CAR and El Salvador’s step to adopt Bitcoin or other cryptocurrencies
as a legal tender? Or will they double down on their clampdowns on
cryptocurrencies as already being seen?
Is Africa ripe for Bitcoin
as legal tender?
Africa’s Crypto
Regulation Landscape
Although Africa is still
catching up with the rest of the world in terms of total turnover from cryptocurrency
trading, the region has one of the highest crypto adoption rates in the world.
This milestone is mostly
being supercharged by peer-to-peer retail-sized crypto transactions.
According to the
Brookings Institution, Africa is the fastest-growing cryptocurrency market among developing economies and the
third-largest growing market in the world.
Chainalysis 2021 Global
Crypto Adoption Index also
ranks Kenya, South Africa and Nigeria among the top 10 countries in the
world in terms of cryptocurrency use. However, not all countries in the
continent are open to cryptocurrencies.
According to a
report by the United States’ Library of Congress (LoC), of the 51 countries
that have implemented a ban on cryptocurrencies, 23 are African countries.
While 4 African
countries, Algeria, Egypt, Morocco and Tunisia, have placed an absolute ban on
cryptocurrency, 19 countries, including Nigeria, Africa’s largest economy, have
placed implicit restrictions on the digital assets.
In fact, the African
Blockchain Report 2021 published
on Monday by Crypto Valley Venture Capital, a Swiss blockchain investor, put
these figures on 6 countries for legal sanctions on cryptocurrencies, 27 with
implicit bans, 4 with absolute bans, and 17 with uncertain regulations.
In February 2021, the
Central Bank of Nigeria, the apex monetary authority of Africa’s largest
economy, placed an implicit ban on cryptocurrencies in the country when it ordered commercial
banks in the country to shut down all cryptocurrency-related accounts.
Nonetheless, Nigeria some
weeks ago issued new rules on the issuance, offering and custody of digital assets,
classifying cryptocurrency as digital assets. However, this move has been
criticized as stifling the local cryptocurrency industry.
With struggling
currencies, double-digit inflations and a divided cryptocurrency
industry, is crypto as legal tender an option for Africa?
Experts who spoke to Finance Magnates agree that Africa is still
far from seeing widespread adoption of Bitcoin as legal tender, although they
noted that the continent holds potential.
Oluebube Nwosu, the Lagos-based
Community Manager of KoinAndKash, believes that African countries with weak countries
are more likely to consider the adoption of Bitcoin as a legal tender.
Nwosu noted that: “there
are systems that have to be put in place” before any country in the continent
can make Bitcoin legal tender.
According to him,
these include the provision of internet, electricity and thorough education to ensure the understanding of cryptocurrencies.
“That’s
why I’d rather say that countries should start with moving a tiny percentage of
their reserves into Bitcoin first before going into legal tender. So many things
have to come in before the legal tender,” he added.
Stefan Ateljevic, the Founder
of BitCoinPlay.Net, pointed out that distrust in government and corruption are
major embargoes.
Ateljevic believes it is more likely that other African nations will cautiously observe the crypto
experiment and what happens in CAR before committing to adoption.
“I doubt it, just like
El Salvador didn’t exactly spark a crypto revolution in Latin America. Africans,
like in Latin America and other developing nations, are very suspicious of
anything financial, particularly if the government is involved,” he said.
On his part, Trevor
Goott, Director, Africa & India at Unlimint, a global payments provider, sees
the risk of fraud and the volatility of Bitcoin as major discouragements.
Rather than going the
legal tender route, governments in the continent, Goott explained, are more likely to
opt for Central Bank Digital Currencies (CBDCs) like
Nigeria did in late 2021.
“In 2020, the world’s
biggest crypto scam was perpetrated in South Africa. The job of a country’s
central bank is to both promote financial well-being of its users and at the
same time protect these same users,” Goott told Finance Magnates.
“This challenge of
managing the risk of fraud is one of the major challenges when it comes to
considering how best to legalize cryptos or Bitcoin,” he added.
Scott Melker, the host of The
Wolf Of All Streets Podcast, explained that although Africa is the perfect
breeding ground for Bitcoin adoption, pressure from the United States and the IMF
are battles any country looking to adopt Bitcoin must fight.
“The IMF has a monopoly
on predatory loans to struggling nations, and Bitcoin threatens this. This is
readily apparent if you look at their response to El Salvador’s adoption,
withholding a loan that was well underway,” Melker said.
“Further, Argentina was
likely to adopt crypto friendly legislation until the IMF expressly forbade it.”
With these major constraints on the way to adoption and legalization, it remains to be seen how the tide will turn.
In late April, the Central
African Republic (CAR), one of the world’s poorest countries racked with
decades-long conflicts, announced a shocking decision: it was adopting Bitcoin (BTC) as a legal tender.
It became the second
country in the world to do so after the Central American country, El Salvador,
which took the first move in September 2021.
Although the
International Monetary Fund (IMF) kicked off against El Salvador’s move at the time,
saying Bitcoin as a legal tender increased the country’s risk to financial
instability, CAR in its announcement said the move places it “on the map of the
world’s boldest and most visionary countries.”
Despite the worries and
fear that trailed this action, one question remains: Will there be a ripple
effect across Africa?
This question is now even
more pertinent as monetary authorities and central banks from Africa dominated
the list of 44 countries recently invited by El Salvador’s President, Nayib
Bukele, to the country’s Bitcoin Conference.
Bukele had said the
meeting was “to discuss financial inclusion, digital economy, banking the
unbanked, the Bitcoin rollout and its benefits in our country.”
Will other African
countries be inspired by CAR and El Salvador’s step to adopt Bitcoin or other cryptocurrencies
as a legal tender? Or will they double down on their clampdowns on
cryptocurrencies as already being seen?
Is Africa ripe for Bitcoin
as legal tender?
Africa’s Crypto
Regulation Landscape
Although Africa is still
catching up with the rest of the world in terms of total turnover from cryptocurrency
trading, the region has one of the highest crypto adoption rates in the world.
This milestone is mostly
being supercharged by peer-to-peer retail-sized crypto transactions.
According to the
Brookings Institution, Africa is the fastest-growing cryptocurrency market among developing economies and the
third-largest growing market in the world.
Chainalysis 2021 Global
Crypto Adoption Index also
ranks Kenya, South Africa and Nigeria among the top 10 countries in the
world in terms of cryptocurrency use. However, not all countries in the
continent are open to cryptocurrencies.
According to a
report by the United States’ Library of Congress (LoC), of the 51 countries
that have implemented a ban on cryptocurrencies, 23 are African countries.
While 4 African
countries, Algeria, Egypt, Morocco and Tunisia, have placed an absolute ban on
cryptocurrency, 19 countries, including Nigeria, Africa’s largest economy, have
placed implicit restrictions on the digital assets.
In fact, the African
Blockchain Report 2021 published
on Monday by Crypto Valley Venture Capital, a Swiss blockchain investor, put
these figures on 6 countries for legal sanctions on cryptocurrencies, 27 with
implicit bans, 4 with absolute bans, and 17 with uncertain regulations.
In February 2021, the
Central Bank of Nigeria, the apex monetary authority of Africa’s largest
economy, placed an implicit ban on cryptocurrencies in the country when it ordered commercial
banks in the country to shut down all cryptocurrency-related accounts.
Nonetheless, Nigeria some
weeks ago issued new rules on the issuance, offering and custody of digital assets,
classifying cryptocurrency as digital assets. However, this move has been
criticized as stifling the local cryptocurrency industry.
With struggling
currencies, double-digit inflations and a divided cryptocurrency
industry, is crypto as legal tender an option for Africa?
Experts who spoke to Finance Magnates agree that Africa is still
far from seeing widespread adoption of Bitcoin as legal tender, although they
noted that the continent holds potential.
Oluebube Nwosu, the Lagos-based
Community Manager of KoinAndKash, believes that African countries with weak countries
are more likely to consider the adoption of Bitcoin as a legal tender.
Nwosu noted that: “there
are systems that have to be put in place” before any country in the continent
can make Bitcoin legal tender.
According to him,
these include the provision of internet, electricity and thorough education to ensure the understanding of cryptocurrencies.
“That’s
why I’d rather say that countries should start with moving a tiny percentage of
their reserves into Bitcoin first before going into legal tender. So many things
have to come in before the legal tender,” he added.
Stefan Ateljevic, the Founder
of BitCoinPlay.Net, pointed out that distrust in government and corruption are
major embargoes.
Ateljevic believes it is more likely that other African nations will cautiously observe the crypto
experiment and what happens in CAR before committing to adoption.
“I doubt it, just like
El Salvador didn’t exactly spark a crypto revolution in Latin America. Africans,
like in Latin America and other developing nations, are very suspicious of
anything financial, particularly if the government is involved,” he said.
On his part, Trevor
Goott, Director, Africa & India at Unlimint, a global payments provider, sees
the risk of fraud and the volatility of Bitcoin as major discouragements.
Rather than going the
legal tender route, governments in the continent, Goott explained, are more likely to
opt for Central Bank Digital Currencies (CBDCs) like
Nigeria did in late 2021.
“In 2020, the world’s
biggest crypto scam was perpetrated in South Africa. The job of a country’s
central bank is to both promote financial well-being of its users and at the
same time protect these same users,” Goott told Finance Magnates.
“This challenge of
managing the risk of fraud is one of the major challenges when it comes to
considering how best to legalize cryptos or Bitcoin,” he added.
Scott Melker, the host of The
Wolf Of All Streets Podcast, explained that although Africa is the perfect
breeding ground for Bitcoin adoption, pressure from the United States and the IMF
are battles any country looking to adopt Bitcoin must fight.
“The IMF has a monopoly
on predatory loans to struggling nations, and Bitcoin threatens this. This is
readily apparent if you look at their response to El Salvador’s adoption,
withholding a loan that was well underway,” Melker said.
“Further, Argentina was
likely to adopt crypto friendly legislation until the IMF expressly forbade it.”
With these major constraints on the way to adoption and legalization, it remains to be seen how the tide will turn.
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