It’s no surprise that calls for crypto regulation have increased in recent months. The FTX saga that played out in the global media highlighted the strong reach of digital assets, but also the structural weaknesses of a young industry that has grown at an incredible pace. Regulation is coming, and as is the case in so many aspects of the cryptocurrency sector, Africa leads the way.
The past month alone has seen three high-profile moves towards greater crypto regulation on the continent, as governments come to terms with shifting macro-economic trends.
Last month, legislators passed the country’s first law aimed at reining in bad crypto practices, introducing taxation alongside greater consumer protections. The country represents one of the most prominent crypto markets in the world, and in introducing the legislation made updates to its existing Capital Markets Law to define crypto as a security.
Last week, at the annual Chartered Institute of Bankers Dinner Day event, the Governor of the country’s Central Bank, Dr Ernest Addison, announced that the institution is to begin developing a comprehensive framework for the regulation of the digital asset industry. Interestingly, he told delegates that the greatest takeaway for the Bank of Ghana is that “crypto currencies are digital assets and not currency”, and that “an outright ban of cryptocurrency has proven ineffective, mainly due to its decentralised and borderless nature”.
Just this week, it’s being reported that policymakers are preparing to pass a new law that would legalise Bitcoin and other cryptocurrencies. Such activities were initially banned by the country in 2021, and this represents a swift realisation that we no longer live in a world where crypto can simply be ignored. Nigeria is also currently moving as close as possible towards a cashless society, and strengthening the country’s digital ecosystem can only help to facilitate that.
Of course, while the continent leads the way in this area, the move towards regulation is not solely an African trend. Speaking at an event in Athens in November, Changpeng Zhao, CEO of Binance, emphasised the importance of cultivating, rather than condemning, these technologies.
“I think most governments now understand that adoption will happen regardless,” said Zhao. It’s better to regulate the industry instead of trying to fight against it. (This year) was a very nasty year, the last two months too much has happened. I think now we see the industry is healthier… just because FTX happened it does not mean that every other business is bad.”
As the world’s largest cryptocurrency exchange, Binance is uniquely positioned to provide key insights in this area, and keen to work with local governments to help tighten legislation.
Earlier this week, the company formerly pledged its support to the Central Bank of Azerbaijan (CBA), in helping the country to develop a robust regulatory framework. Olga Goncharova, Director of Governmental Relations in the Commonwealth of Independent States (CIS), told local media: “In practice, both around the world and in a number of CIS countries, central banks choose the way to regulate cryptocurrency rather than ban it.”
Her words echo those of Ghana’s Dr Addison and Changpeng Zhao, and may be more colloquially translated into layman’s terms as ‘if you can’t beat them, join them’.
Particularly in Africa, a continent that encompasses 54 individual countries, crypto can facilitate secure, frictionless trading and help stimulate further economic growth. It’s also highly synonymous with the new and emerging digital economies of tomorrow, which are areas in which African economies can play a larger role on the global stage.
African governments know this, and it’s understandable that they are leading the world’s reformatory efforts.
Tola Odeyemi, Head of Government Relations, West Africa for Binance. Says that greater trust in crypto can bring about stronger economic growth. “Binance strongly believes that a stable regulatory environment can support innovation and is essential to establishing trust in the industry,” she says. “This can help to create long-term growth, and we are committed to working with regulators and policymakers to shape policies that protect consumers, encourage innovation, and move our industry forward.”
Ultimately, in moving towards crypto regulation, the real legislative alchemy undoubtedly lies in making national changes that can effectively get to grips with an international, digital-first phenomenon. The shift towards universal digital currencies is accelerating, and making sure that this transition takes place in a free and fair way that does not leave any of the world’s populations behind is imperative.
Kenya’s Capital Markets Law will no doubt be looked to as the proverbial canary in the cage, and as the last week alone has shown, Ghana and Nigeria won’t be far behind.