African governments pretty much don’t know what to do with cryptocurrencies.
Take Nigeria, the continent’s largest economy, as an example. The Central Bank has flip-flopped going from warning local banks against doing business in virtual currencies to reportedly researching potential policy proposals. In Kenya, authorities have gone from comparing cryptocurrencies to pyramid schemes to setting up a task-force to study potential benefits of the underlying blockchain technology.
That mix of reticence and strong-handedness is prevalent across the continent, a new report by Ecobank on the state of cryptocurrency regulation in sub-Saharan Africa shows. Of the 39 countries analyzed, only two—South Africa and Swaziland—have a favorable or permissive stance on cryptocurrencies while only Namibia has banned cryptocurrencies outright. Everywhere else, cryptocurrencies are stuck in regulation limbo.
“African governments and central banks are mostly adopting a ‘wait and see’ approach when it comes to regulating cryptocurrencies,” the report states. “Rather than being the first mover,” it adds, “African countries appear to be looking to their neighbours to regulate and innovate first, and learn from their mistakes.”
But while governments try to make their minds, citizens across several countries are warming up to virtual currencies. Cryptocurrency trade has notably boomed in Zimbabwe, mainly thanks to its economic crisis as locals turned to bitcoin as a storage of value. Indeed, for a brief period, Zimbabwe had the highest bitcoin prices in the world. In Nigeria, cryptocurrencies have also become popular: last year, peer-to-peer bitcoin trading in Nigeria increased by nearly 1,500%—surpassed only by China.
Without coherent regulation in place, local cryptocurrency entrepreneurs are drawing inspiration elsewhere. Timi Ajiboye, co-founder of Bitkoin Africa, a bitcoin exchange, says the company models its security features on those of exchanges in more regulated countries. Eventually though, governments on the continent will decide on regulating virtual currencies. When that time comes, Ajiboye says the focus should be “making cryptocurrencies more synonymous with safety than they currently are”—even if that means putting pressure on local exchanges and entrepreneurs to step up their game.