The collapse of FTX, the world’s third-largest cryptocurrency exchange, and the subsequent price decline of Bitcoin, Ethereum, and other major crypto assets, is sparking new calls for greater consumer protection and regulation of the cryptocurrency 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 minimizing risk and maximizing innovation.
The Central Bank of Nigeria (CBN) has taken several steps to control crypto transactions in the country, including the introduction of the Central Bank digital currency, also known as eNaira.
While the data has revealed that only a quarter of sub-Saharan African countries have been able to formally regulate cryptocurrencies, two-thirds are implementing some form of restrictions, and “six countries: Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of the Congo: they have banned cryptocurrencies.
Zimbabwe has ordered all banks to stop processing transactions and Liberia has ordered a local cryptocurrency startup to cease operations (implicit bans).
“Africa is one of the fastest growing crypto markets in the world, according to Chainalysis, but it remains the smallest, with crypto transactions peaking at $20 billion per month by mid-2021.
“Kenya, Nigeria and South Africa have the most users in the region. Many people use crypto assets for business payments, but their volatility makes them unsuitable as a store of value.
The Fund noted that policymakers on the mainland are also concerned that cryptocurrencies could be used to illegally transfer funds out of the region and circumvent local rules to prevent capital outflows.
“The widespread use of cryptocurrencies could also undermine the effectiveness of monetary policy, creating risks to financial and macroeconomic stability.
“The risks are much higher if crypto is adopted as legal tender, as the Central African Republic did recently. If the government retains or accepts crypto assets as a means of payment, it could put public finances at risk,” the Fund said.