The collapse of the world’s third largest crypto exchange FTX, and subsequent plunge in the prices of Bitcoin, Ethereum, and other major crypto assets, is prompting renewed calls for greater consumer protection and regulation of the crypto industry, the International Monetary Fund (IMF), has said.
According to the IMF, in a report, regulating a highly volatile and decentralized system remains a challenge for most governments, requiring a balance between minimising risk and maximising innovation.
The Central Bank of Nigeria (CBN), has taken several measures to control the crypto transactions in the country including the introduction of the Central Bank Digital Currency otherwise referred to as the eNaira.
While data has revealed that only a quarter of countries in sub-Saharan Africa have been able to formally regulate crypto, two-third are implementing some form of restrictions and “six countries—Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo—have banned crypto.
Zimbabwe has ordered all banks to stop processing transactions and Liberia directed a local crypto startup to cease operations (implicit bans).
“Africa is one of the fastest-growing crypto markets in the world, according to Chainalysis, but remains the smallest, with crypto transactions peaking at $20 billion per month in mid-2021.
“Kenya, Nigeria, and South Africa have the highest number of users in the region. Many people use crypto assets for commercial payments, but their volatility makes them unsuitable as a store of value.
The Fund noted that policymakers in the continent 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.
“Widespread use of crypto could also undermine the effectiveness of monetary policy, creating risks for financial and macroeconomic stability.
“The risks are that much greater if crypto is adopted as legal tender—as the Central African Republic recently did. If crypto assets are held or accepted by the government as means of payment, it could put public finances at risk,” the Fund said.
