- According to the IMF, about 20% of Africa has explicitly banned the use of cryptocurrency.
- On 16 May, finance ministers of the EU Council approved and signed off new crypto regulations.
- The EU Council had agreed that the new crypto regulation requires all crypto providers to disclose details of their customers’ holdings to tax authorities.
A lack of crypto regulation has plagued the industry since its debut. Developing a legal framework has proved that the founders of digital currency are meant for true decentralization. Unfortunately, for governments to implement the positive effects of crypto, they had to find a way to protect their citizens from fraud. Several African countries, such as Nigeria and South Africa, have implemented successful regulations but require additional scrutiny. Fortunately, the EU Council has initiated and signed the Markets in Crypto Asset(MiCA) regulation. This marks a considerable milestone for the crypto industry since it is the world’s first comprehensive legal framework.
The need for crypto regulations
The collapse of the FTX exchange, the world’s third-largest crypto exchange, caused immense damage to the entire ecosystem. Many African crypto traders and exchanges suffer heavy losses, significantly dropping their renowned adoption rate. The FTX crash did not just prove the fears of most African governments, but it was a reminder that the crypt industry requires a standard crypto regulation system.
According to the IMF, about 20% of Africa has explicitly banned the use of cryptocurrency. In their defence, most have stated that the effects of digital currency are too unpredictable and cannot integrate within their running economic structure. Fortunately, other African countries have strived to inspire their peers.
Also, Read Zambia’s test cryptocurrency regulation using blockchain technology.
Countries like Nigeria, the Central African Republic, and South Africa have led Africa’s crypto industry. They constantly show that there are positive effects of digital currency. This caused ripple effects, and now countries such as Kenya, Tanzania and Uganda t are taking a softer viewpoint of the crypto industry and deploying research. In doing so, these countries have openly acknowledged the crypto industry and are trying to find a way to create crypto regulations that will benefit their people in their economies.
Unfortunately, the recent crypto winter has significantly undone this progress. Organizations like the SEC have led a severe chase for any crypto exchange with any hint of irregularity. Organizations such as Binance, Bittrex, Kraken and many ores have suffered under the allegations of the SEC.
Intending to prevent any similar FTX scenario, the SEC has made the globe aware of its dissatisfaction. Despite their harsh approach, the existence of fri crypto regulations is necessary. Without it, scammers, hackers and fraudulent activities can quickly happen, further laundering developing countries into chaos. Several governments have sought the establishment of universal crypto regulations covering multiple areas.
Fortunately, the EU Council has taken up the mantle and finally approved comprehensive MiCA regulations.
New Comprehensive crypto regulations.
On 16 May, finance ministers of the EU Council approved and signed off new crypto regulations. The council had 27 representing members stated and unanimously approved the Markets in Crypto Assets regulation. This has instantly made this new crypto regulation the first primary jurisdiction in the world with a crypto licensing regime.
Also, Read Blockchain technology curbing the faulty tax system of Africa.
According to Elisabeth Svantesson, minister for finance of Sweden, the recent events have urged the need for a comprehensive crypto regulation framework. By imposing these n the crypto industry, the ecosystem might finally set numerous crypto traders at ease. According to the MiCA regulation, crypto firms such as wallet providers and exchanges seek a license to operate across their region. Furthermore, any stablecoin issuers were to hold any suitable reserves.The EU Council had agreed that the new crypto regulation requires all crypto providers to disclose details of their customers’ holdings to tax authorities. This will prevent the exchange from stashing secret funds overseas and account for customer funding, avoiding misuse.
According to Valdis Dombrovskis, “Crypto-assets and e-money have great potential to drive economic activity and innovation – but they also carry risks of reducing transparency and enabling tax evasion or fraud. Updating our tax rules to address these issues will help national administrations collect tax more efficiently and keep up with evolving technology as Europe progresses with its digital transition.”
This bold move from the EU Council has set things in motion. With the establishment of the MiCA regulations, other African governments can benchmark with its ruling and witness how its intricate details affect their country. Fortunately, a majority of African countries are still in a state of confusion when it comes to the crypto industry.
The effects of digital currency are positive and negative, and with the growing digital transformation, it’s only a matter of time before full adoption. The MiCA regulation provides ample reference for the creation of their crypto regulations.
Also, Read Africa’s crypto ecosystem affected by FTX collapse.
The EU Council has shown the world that we only need proper guidelines. If crypto exchanges can share with the crypto regulation full of loopholes, we only require to implement a comprehensive one. Establishing a crypto industry will ultimately chain digital currency.
To some extent, this fear does give a valid and plausible fact. Unfortunately, with the FTX crash, more crypto trades are worried about losing funding. We can wait and see if the MiCA regulation can shed a positive light on the effects of digital currency.