The rise of cryptocurrencies has changed the landscape of business in many developing countries. It has made it easier for people to start small businesses and work for global brands without having to leave their country. In recent years, hyperinflation and unreliable local currencies have played a role in this phenomenon. Hyperinflation in Zimbabwe was so severe that some people were trading in Bitcoin instead of dollars. Some economists have predicted that cryptocurrencies will boost some African economies in the long run. challenges to regulating cryptocurrencies
African governments are grappling with a myriad of issues regarding cryptocurrency. Many have concerns about fraudulent practices. Others worry that cryptocurrency markets are not as secure as they appear. There are many challenges to regulating crypto currencies, but there are some positive examples of what can be done to keep customers safe. Fortunately, South Africa’s recent experience has shown that balance can be achieved. Here are some tips for governments to consider. Regulating crypto currency for Africa will help ensure that the cryptocurrency market will not become too popular, but also remain a viable option for consumers.
Among the challenges is taxation. In South Africa, the tax authorities have issued an advisory note recommending that cryptocurrency service providers be brought under the FIC Act. The FIC Act is intended to protect consumers, and the new regulations will ensure that companies abide by the law. Luno’s position paper outlines five recommendations for regulating crypto currency in Africa. While these recommendations are largely optimistic, they do not preclude a lack of progress.
Although the benefits of crypto are numerous, the lack of appropriate infrastructure makes the implementation of blockchain in Africa problematic. Africa was largely a colonised space until the 1950s, and most African countries were rebuilt on the foundation of colonization, with banking infrastructure modeled after European structures. The African continent, as well as the developing world, is still struggling with a lack of financial services. In addition, the continent is experiencing significant economic inequity as a result of the ongoing wars and famine.
In Africa, the youth-oriented native population is receptive to new financial systems, including blockchain. Investment in crypto-specific infrastructure, internet, and electricity networks, is crucial for the continent. The emergence of cryptocurrency in Africa could be a significant step toward better life for its citizens, a continent full of unbanked people. It has many advantages for young and tech-savvy citizens. In addition, it has the potential to revolutionize the continent’s economic structure.
The increase in Nigerian cryptocurrency trade despite the ban by the government has raised questions about whether or not the decline in remittances is due to a reduction in the value of the local currency or a rise in the amount of remittances evaded through increased use of cryptocurrency in the diaspora. In Nigeria, where the oil industry accounts for more than half of the government’s revenue, remittances from the diaspora are crucial. Indeed, in the last five years, the CBN’s Naira for Dollar scheme has signaled a decline in diaspora remittances. Likewise, the government has banned cryptocurrency, signaling that it saw the currency as a diversion from its priority.
Despite these risks, Africans have begun embracing cryptocurrency as a means of remittances. According to a report by Chainalysis 2020, Africa is the region with the smallest cryptocurrency economy. In the last year, $8.1 billion worth of cryptocurrency was sent or received in Africa. With relatively low fees and a low cost of sending money, the currency has emerged as a viable alternative to traditional means of saving and remittances.
African countries are often touted as the next frontier of cryptocurrency adoption, but the continent’s lack of access and infrastructure could be stifling growth. In fact, a report by the ITU indicates that the cost of connecting 1.5 billion people to the internet is more than $500 per month – out of reach for many citizens. Additionally, low internet penetration and the high cost of Internet-capable devices hamper cryptocurrency adoption. Regardless of the challenges facing Africa, crypto adoption is a key factor in driving economic growth and financial inclusion on the continent.
In 2016, Rwanda achieved a ninety percent broadband penetration rate. In 2008, the government started a nationwide fibre optics roll-out, connecting disparate areas across the country and facilitating onward connectivity to submarine cables. The government of Rwanda views internet connectivity and ICTs as drivers of economic growth and productivity across all sectors. Therefore, they are actively working to expand broadband connectivity in their country. And they are not alone. Is Crypto Currency Good For Africa?