Crypto-friendly African countries attract IMF attention amid sector expansion
The crypto market in Nigeria, Kenya, Tanzania and South Africa together witnessed a growth of 1,200%, reaching a market valuation of $105.6 billion (approximately Rs 775 cores) during 2020- 2021. The growth trajectory of the crypto sector in Africa has attracted the attention of the International Monetary Fund (IMF). In a recent blog post, the IMF asked African countries to implement stricter regulations around the cryptocurrency sector as soon as possible. The IMF intends to protect investors against financial risks.
In his post, IMF note that regulating a decentralized and volatile system remains a challenge.
“Many users crypto assets for commercial payments, but their instability makes them unsuitable as a store of value. Only a quarter of countries in sub-Saharan Africa officially regulate cryptocurrencies.” IMF said.
Africa is one of the fastest growing crypto markets in the world, according to chain analysis. However, the region remains the region with the smallest transactions peaking at $20 billion (roughly Rs 1,63,006 crore) per month in mid-2021.
According to the IMF, KenyaNigeria and South Africa have the highest number of crypto users in the region.
The Central African Republicfor example, followed in the footsteps of El Salvador and legalized Bitcoin earlier this year.
Crypto activities in other African regions have also accelerated. For example, a Coinbase-supported crypto wallet called Lucifer is ready to launch in Kenya and Nigeria.
Cryptocurrency exchange Binance is also in collaboration with Nigeria to establish a special economic zone, powered by the cryptocurrency sector.
Accepting cryptocurrencies as part of their financial system is not a move, supported or encouraged by the IMF.
Earlier this year, the global financial authority said that due to Bitcoin Due to high price volatility, its use entails significant risks to consumer protection, financial integrity and financial stability.
“If crypto assets are held or accepted by the government as a means of payment, that could put public finances at risk. Policymakers are also worried that cryptocurrencies could be used to illegally move money out of the region and circumvent local rules to prevent capital outflows,” the IMF post reads. know more.
It is noteworthy that recent research reports have highlighted that as more countries begin to regulate the cryptocurrency sector, the use of cryptocurrencies by criminals to launder money may decrease.
Cryptocurrency-based ransomware payments are reported to have grown above $600 million (approximately Rs 13,330) in 2021. However, one report by Kaspersky suggests that Bitcoin is set to lose value as a digital asset for ransomware negotiations and payments.
Currently, cryptocurrencies are banned in six African countries—Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo. Meanwhile, Zimbabwe has ordered all banks to stop processing transactions, and Liberia has directed a local crypto startup to cease operations (implicit ban).