November 27, 2022

IMF Calls for More Regulation for Crypto Industry in Africa

Africa

Africa

The International Monetary Fund (IMF) called for more regulation of the crypto industry and greater consumer production in African countries, according to a blog published by the global financial institution.

The call came amid the collapse of the world’s third-largest crypto exchange FTX followed by the drop in the prices of Bitcoin and Ethereum.

IMF referred to policymakers’ concerns that cryptocurrencies could be used to illegally transfer funds out of Africa and get around local rules to prevent capital outflows. The blog said: “Widespread use of crypto could also undermine the effectiveness of the monetary policy, creating risks for financial and macroeconomic stability.”

It noted that the risks would be bigger if the crypto is adopted as legal tender, saying if the government accepted the crypto assets as means of payment, it could put public finances at risk.

Despite being one of the fastest-growing crypto markets in the world, Africa’s crypto market is still the smallest in terms of crypto transactions reaching $20 billion per month in mid-2021, according to Chainalysis. Africa’s crypto market increased in value by more than 1,200% between July 2020 and June 2021.

The blog mentioned that South Africa, Nigeria, and Kenya top the African continent in terms of the number of crypto users. It is worth mentioning that the Central African Republic is the first country in Africa to designate Bitcoin as a legal tender.

According to IMF’s data, a quarter of countries in sub-Saharan Africa have formally regulated crypto, while two-thirds have implemented some restrictions. On the other hand, Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo have already banned crypto assets, which represent 20% of the sub-Saharan African countries. Zimbabwe ordered all banks to stop processing transactions and Liberia directed a local crypto startup to stop operations.

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