The mixed state of cryptocurrency in the East African region

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  • Somalia has approximately 155 million transactions, accounting for $2.7 billion monthly. 
  • The Bank of Uganda showed interest in crypto businesses participation in its Regulatory Sandbox.
  • The Kenyan government announced the introduction of a 3% tax on all digital currencies and NFTs.

The East African region is home to numerous innovations willing to ensure development among their respective nations. As the dawn of digital currency steadily settles in the world, Africa has received some form of resistance from within. Several governments have questioned the viability of adopting digital currency within their system. Others have decided to look into digital currency and see its practicability within the region.

However, establishing blockchain-based finance systems has split the area into two. Countries such as Uganda and Ethiopia have rejected the notion of web3 in Africa. At the same time, countries such as Kenya and Tanzania have a change of heart.

With the votes missed between these two countries, what lies next for East Africa? Will the region lose its current race with the West and South African Region? Or will a ray of hope finally propel the area to new heights?

The East African Region still has mixed opinions.

Adopting digital currency is still relatively new in most of Africa. Most, in not all, regions initially rejected the policy of blockchain-based financial systems, significantly reducing their adoption rate. Due to it, most of Africa’s crypto adoption rate was set back decades as governments initially saw crypto coins threatening their fiat currency.

Within the East African regions, one such country has declared that crypto is not a luxury its state can accommodate. The Central Bank of Ethiopia stated that it would not recognize digital currency as a transactional payment method. Like many others, the NBE feared that the high value of digital currency would threaten its fiat currency, the Ethiopian Birr.

Furthermore, the government ensured that any exchanges established within the country underwent a gruelling reconstruction with their cyber security agency. Setting any blockchain-based financial services was nearly impossible, with digital currency declared illegal and crypto firms placed on a tight leash. This gradually affected the East African region setting back its crypto adoption rate.

Also Read : Venom Foundation partners with Kenya to establish Africa’s blockchain hub.

Rwanda is no different, as its Central Bank has stated that the country’s financial service providers are forbidden from engaging in any crypto-related transaction.

Somalia at a confusing state with crypto

Somalia is another entity whose crypto stance still needs to be clarified. Fortunately, this unclear verdict of crypto within the Eat African country generally only partially sets back its operations, but it significantly hinders its ace. Knowledge and need are a necessity to expand web3 in Africa.

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Digital currency is still a controversial topic in Africa having a mixed take between different parties.[Photo/BBC]
When you take away the knowledge of cryptocurrency, users are stuck in a state of confusion. Amid such a state, misconceptions erupt and lead to negative myths within Web3 in Africa. With negative means being its driving force, it removes its need from people. This fact has significantly aided in the low crypto adoption rate of Somalia. Its government’s unbothered state has set back digital currency adoption, leaving most of its transaction volume to individual crypto traders.

This creates a state of confusion since Somalia has one of the highest mobile money markets in the world, outpacing some of Africa’s countries. It has approximately 155 million transactions, accounting for $2.7 billion monthly

This begs the question of whether or not Somalia will acknowledge digital currencies, given its high mobile money adoption.

Ray of Hope from the East African region.

Aside from Somalia and Ethiopia, a ray of hope shines on East Africa’s crypto adoption rate. After countries such as Nigeria, CAR, and South Africa set the pace for digital currency adoption, it was only a matter of time before other regions followed. East African regions such as Tanzania, Kenya, Uganda and Eritrea have steadily embraced the digital currency. The ever-unstable love-hate relationship between these countries and digital currency is improving as they become more open to web3 in Africa.

Like the rest, Uganda initially banned cryptocurrency use within their economy. Fortunately, as Web3 in Africa steadily grew, blockchain-based financial services became more plausible. Soon petitions were forwarded to the High Court of Uganda to revert the initial decision of its Central Bank.

Also, Read Nigeria 2023 elections: Is the Naira Scarcity a ploy to force eNaira adoption?

The Blockchain Association of Uganda has sought to change the trajectory of the East African Region by reinstating crypto within the country. Fortunately, after several rulings and decisions, the bank opted for a more diplomatic approach. They invited the organization to “talk” about the future of cryptocurrency. The bank had invited the BAU for a technical discussion on matters concerning digital currency.

The Bank of Uganda showed interest in crypto businesses participating in its Regulatory Sandbox. In June 2021, the bank launched this new framework allowing fintech firms to test innovative financial solutions in a controlled environment. If the firms could successfully prove their blockchain-based financial services were practical, it would open the doors for more electronic payment systems within the country.

Eritrea also had a similar mixed set of ideals. While the country’s government still has an undefined stance on digital currency, it has not stopped its citizens from playing with it. Due to their approach and more businesses opening up to digital currency, its government has taken a more positive take on crypto. Unfortunately, the country still uses third-party services to trade digital currency.

Tanzania and Kenya propelling East Africa’s trajectory.

Tanzania’s and Kenya’s governments have shown a new ray of hope for web3 in Africa. Tanzania has recently announced its willingness to launch its very own CBDC. President Samia has urged its citizens that the digital transformation of Africa is coming. On January 14th, the Bank of Tanzania issued a public statement that, as an East African region, it has tasked a technical team to research everything surrounding CBDC.

It would highlight how its risks and profit for its country. This set the pace for Kenya’s new President, William Ruto, who claimed that the country is underutilizing the lucrative venture known as crypto trading. The Kenyan government announced the introduction of a 3% tax on all digital currencies and NFTs.

In taxing these blockchain-based financial services, Kenya has finally acknowledged the existence of crypto coins, which might open doors to new regime changes. Avhit Bij, a blockchain and crypto expert, said, “Taxation is a clear recognition of this asset class. Taxation is welcome; crypto investment is not a means to run away from tax but an advanced exchange form. Essential governance will, therefore, create greater accessibility, transparency, and growth.”

Also, Read ChatGPT AI eases blockchain and web3 adoption by offering limitless information.

With crypto regulation significantly hiding web3 in Africa, this might be the sign it requires. The steady growth of Kenya’s crypto adoption rate has inspired the likes of Tanzania and Uganda to ak a step further into digital currency. Despite Rwanda’s stance on crypto, its primary concern is not fear of competition but rather illegality.

The need for defined crypto regulatory rules has hindered its governments from finding a proper solution. Fortunately, countries like Kenya, Uganda and Tanzania have set the pace for change within the East African region.

Conclusions.

The East African Region has set the pace for web3 in Africa. Despite hostility from countries such as Ethiopia, Rwanda and Somalia, a fair majority have taken a more positive turn. It might not be an option, but openness will set Africa’s trajectory to recover its crypt adoption rate.

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Ken Mutuku
Ken Mutuku
I am an enthusiastic writer who believes that facts, knowledge and opinions can be expressed vividly with just a few words. I think that all forms of writing achieve this; hence I have a wide area of expertise and interest, such as cryptocurrency, psychology and the human mind.