While stringent regulation offers consumer protection, it hampers innovation
Africa has emerged as the second-largest region for peer-to-peer (P2P) trading with its crypto-adoption accelerating in 2020. In fact, two African nations are part of the top eight of the Chainalysis crypto adoption index. However, this booming growth has sparked concerns among Africa’s financial regulators that has created a rush to introduce heavy-handed measures that could hurt the local crypto industry.
In a conversation with CoinTelegraph, a representative of the top P2P exchange Paxful explained that Africa has been the strongest growing region for crypto in 2020. He further noted that such dramatic growth was also seen in smaller economies Ghana and Cameroon.
Nigeria had led Africa’s growth in 2020 with P2P volumes between $5 million to $10 million. Kenya and South Africa are next on the list with P2P volumes between $1 million and $2 million a week each.
Luno, a centralized exchange has also reported a $549 million worth of combined volume from Nigerian and South African customers last month, a 49% increase compared to the start of 2020. Further, the exchange has also reported that new customer sign-ups have increased by 122% from the fourth quarter of 2019 until Q2 of 2020.
Marius Reitz, Luno’s general manager for Africa spoke to business publication Quartz about the increasing demand for cryptocurrency in the continent and the benefits offered by virtual currency over the local banking sector.
He added that the increasing popularity of crypto in Africa could be attributed to the large number of workers who live away from their home countries and the steep fees of foreign exchange across the continent. “The demand we see now is a result of the challenges that people experience across Africa,” Reitz noted.
Lagos-based BuyCoins exchange has also reported growth in “people trying to move money in and out of the country”. The exchange also witnessed a growth in crypto volume this year to $110 million from $28 million. However, this increasing demand has left African lawmakers divided on how to best respond to the crypto phenomenon.
South African regulators proposed strict licensing and monitoring requirements for crypto in Africa without recognizing it as legal tender. Nigeria SEC guidelines recently announced that they would treat all crypto assets like securities by default.
Stephany Zoo of the Kenya-based exchange Bitpesa welcomed the consumer protections offered by increased regulation. “It is important that space is regulated and properly guided by the financial authorities to ensure the confidence and protection of the consumer,” he said.
Reitz, on the other hand, argued that heavy-handed regulation could hamper innovation in the crypto sector. “What we’d like to see is a phased approach. It can be very easy for regulators to want to regulate the entire industry from the onset but it could stifle innovation. Once governments regulate better, there’s more chance of opening up integration with traditional financial infrastructure and there would be more mass adoption as well,” he stated.