Banks and Cryptocurrencies Global Evaluation: Africa

Bitcoin and blockchain tech are ripe for mainstream adoption in Africa, where the population is well positioned to embrace the innovative technologies as alternatives to the expensive and/or outdated banking systems scattered across the continent.

Lack of economic infrastructure paired with inadequate financial education has left a large portion of Africans without bank accounts or basic monetary means. However, in many countries the proliferation of smartphones has allowed access to alternative financial services which have become a dominant means of payment, especially among the high proportion of millennials.

Bitcoin’s appeal is in large part due to its accessibility and inclusivity, but the trust-free component of using cryptocurrencies also resolves the long standing issue of Africans’ distrust of banks on online payment platforms.

The pan-African crypto community officially launched the continent’s first multinational cryptocurrency, Nuru Coin, in February. Many hope it will help facilitate trade among African countries and provide financial services to people who otherwise would never have access to a traditional bank account. But mainstream adoption of its use requires more awareness of the potential benefits of the technology.  

Anticipation of a tech-revolution in Africa has been escalating since late 2017. Governments have shown little uniformity in their approach and attitude toward the booming crypto markets on the continent, but the underlying sentiment toward cryptocurrencies and decentralization is that it can provide humanitarian relief and transform the lives of underserved populations.

The following assessment of cryptocurrency regulation in Africa is a part of a larger series of pieces evaluating regulation of the flourishing global fintech industry. Part one of the series looks at activity in Asian hotspots like Japan, Hong Kong, Singapore, and Taiwan, and how governments are facilitating or hindering growth. Part two examines crypto regulation and the critical attitudes held by many European leaders. Part three analyzes the varying attitudes of western leaders on the disruptive new technology, and how regulatory agencies in the Americas are preparing for mainstream adoption of cryptocurrency.

The list below is based on thorough news research, but should in no way be considered complete. If you have more detailed information on banks and the crypto relationship in your country, we encourage you to share it in the comment section.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, and you should conduct your own research when making a decision.

South Africa 

South Africa launched its first governmental cryptocurrency startup, Project UBU, in late 2017. Similar to other projects that aim to alleviate impoverished families, the objective of Project UBU is to distribute universal basic income to underprivileged South Africans.

Blockchain and cryptocurrencies are popular in South Africa, where financial institutions are taking notably progressive steps toward involvement in the industry. The Blockchain Africa Conference has convened every year since 2015 in Johannesburg, and partners with IBM and Microsoft, which have been the biggest contributors to Africa’s technological development over the past century.

The South African Reserve Bank established a Financial Technology Program, which aims to analyze fintech developments and advise the government on appropriate regulations. Additionally, it launched a blockchain project based on Ethereum’s distributed ledger technology and will experiment with interbank payments.

Although the government has not set clear regulations and rules for using virtual currency, it does not recognize Bitcoin as legal tender, and the South African Revenue Service considers cryptocurrencies intangible assets that are subject to normal income tax rules.

Nigeria

The Central Bank of Nigeria first announced a commissioned study on virtual currencies in August 2017, with an objective to gather stakeholders to brainstorm and exchange ideas--proving the country to be a leader in blockchain and Bitcoin regulation in Africa.

Shortly thereafter, the Blockchain Education Network of Nigeria and Blockchain Nigeria User Group hosted the country’s first blockchain conference, where ten startups and countless industry leaders were present and discussed incentives to bring blockchain startups to Nigeria.

Another conference hosted by Techpoint scheduled for later this month will supposedly have over 5,000 people in attendance. But the active tech community has yet to see any regulatory response or direction from the government.

Things could be changing soon, however. Earlier in April the lower chamber of the Nigerian National Assembly adopted a bill titled “Need to Regulate Blockchain Applications and Internet Technology,” and called on the central bank to assist in creating regulatory framework for blockchain developments and other fintech.

Uganda

The Bank of Uganda issued a warning to investors about the associated risks with cryptocurrency in March of last year. However, this has not stopped global investors from opening exchanges in the country and pursuing opportunities to strengthen the Ugandan economy.

Recent reports show the Ugandan government is interested in using blockchain tech to provide basic public services and to better position Uganda in the global marketplace, which is largely driven by technological innovations. A conference hosted by AfricanBlockchain.org is scheduled to take place next month where leaders will discuss viable plans to integrate blockchain into the economy.

The Ugandan blockchain organization, Crypto Savannah, partnered with the global crypto exchange Binance in April in an effort to support economic development in the country, which is considered the poorest country in the world with a GDP of $2,000 per capita and a population where 77 percent are bankless.

Kenya

The Central Bank of Kenya issued a warning to banks in April, urging them to reject crypto related transactions and entities, and likened Bitcoin to a pyramid scheme. But Kenyan crypto investors have yet to see any clear regulatory guidelines.

The central bank’s governor expressed support of blockchain technology, though banks have maintained a cautious and skeptical attitude toward digital currency since 2015.

Finterra, a globally present blockchain company, officially established a Kenyan firm in response to the heightened interest in blockchain after President Uhuru Kenyatta said the country should explore the technology's potential utility.

A blockchain task force was created under the president’s directive in March. Many enthusiasts hope to see distributed ledger technology be utilized for land ownership registry, and for strengthening existing mobile money services.

Kenya’s largest mobile network operator is responsible for launching M-Pesa, the mobile phone money transfer and payment service, which boasts 30 million users and increasingly challenges the dominance of traditional banking. However, regulatory uncertainty in Kenya led M-Pesa to deny services to Bitcoin trading platforms.

Egypt

In early 2017, a local Bitcoin enthusiast likened the use of cryptocurrency in Egypt to that of narcotic drug use, claiming a friend was jailed without trial for using the site localbitcoins.com.

By mid 2017, when reports surfaced with claims that the first Bitcoin exchange had launched in the country, the Central Bank of Egypt reiterated the legal status of cryptocurrency and denied that any exchanges had been authorized.

The legality of cryptocurrency is covered by Egyptian law that stipulates transactions with foreign entities be limited to official banks only, and also bans electronic banking.

Despite the recent announcement by an Islamic cleric claiming virtual currencies are halal, there is confusion in Egypt over the acceptance of digital currency under Sharia law. Historically speaking, Islam only recognizes “commodities of intrinsic value” as acceptable currency.

The government consistently rules against cryptocurrency, but it recently allowed the Central Bank of Egypt to join the American-based R3 blockchain consortium to experiment with evolving technologies.

Rwanda

The Transform Africa Summit in Kigali, Rwanda, attended by over 4,000 delegates including heads of state, fintech companies, blockchain experts, government regulators, AI firms, investment banks, and venture capitalists, took place recently on May 7-10.

The diverse turnout with representatives of both public and private sectors, and the conference’s theme, “Accelerating Africa’s Single Digital Market,” is exemplary of the collective effort by leaders to ensure that Africa is not left behind in the oncoming digital revolution.

The National Bank of Rwanda published a document earlier this year detailing the bank’s position on cryptocurrency and the potential risks associated with the new cryptocurrency market in regard to established financial institutions. The bank concluded that its preparations for mainstream adoption of cryptocurrency include creating and regulating a bank-owned currency.

The Kenyan-based blockchain payments platform, Bitpesa, has expanded over East Africa since it was established in late 2013, yet the cryptocurrency trend hasn’t been confronted with a regulatory response from the governments in the region. The forewarning from the National Bank of Rwanda, however, proves that monetary authorities in these places are preparing for the next technological wave.

Zimbabwe

At the end of last year, Zimbabwe’s central bank, the Reserve Bank of Zimbabwe, announced that Bitcoin is not considered a legal currency. During a period marked by political turbulence, the bank claims to be engaging in research and development of possible regulations for crypto markets, but the future of Bitcoin is still up in the air as there have been no proposed regulations. 

The central bank’s announcement came days after a military coup successfully overthrew the Zimbabwean government, causing Bitcoin’s price to surge by 10 percent on Golix, the country’s largest cryptocurrency exchange.

Golix reportedly opened Bitcoin ATMs in the capital city and loaded them with U.S. dollars last month. Zimbabwe has some of the worst recorded inflation levels in modern history, and recently ditched its national currency for a multi-currency system that heavily relies on the U.S. dollar.

Tanzania

Onlookers took note of Bitcoin’s growth in Tanzania when trading volume on the exchange, LocalBitcoins, spiked last summer. The increase of Bitcoin use in Tanzania is a significant indicator that cryptocurrency is expanding from African crypto hotspots like Nigeria to rural nations.

The Central Bank of Tanzania commented on the recent Bitcoin price surge in March by linking it to market speculation, and cautioned investors who are buying and selling in the high-risk market. Bitcoin first caught the bank’s attention last December, and it has since been studying Bitcoin carefully in order to create viable regulations in the future.

The Tanzanian government has not officially banned cryptocurrencies, and the crypto community in the country is awaiting regulatory direction from the bank and other regional regulators.

Botswana

Although there is no Bitcoin exchange present in Botswana, the country maintains a small but active cryptocurrency and blockchain community. Many traders travel to neighboring countries like South Africa to use exchanges, or utilize online trading groups.

However, Botswanans have taken an interest in blockchain and have held the country’s first ever Bitcoin and Blockchain Summit in 2016. The country currently has three blockchain startups, all of which aim to serve the needs of the largely unbanked population.

The Bank of Botswana has not issued any regulations for the market, and at the end of 2017 claimed it had no interest in studying cryptocurrencies in general.

Ghana

In 2015, the Bill and Melinda Gates Foundation donated a research grant to a Ghana-based blockchain startup, Bitsoko, with the objective of promoting acceptance of mobile money for everyday use, and providing a cheap and efficient cross-border payment system.

However, Ghanaian banks are restricting the use of cryptocurrency out of concern for its use in illegal activity, like money laundering and terrorist funding. The central bank of Ghana announced Bitcoin is not legally recognized earlier this year, but hinted at an interest in blockchain tech to enhance payment and settlement systems.

Morocco

The Moroccan Foreign Exchange Authority and central bank officially outlawed cryptocurrency transactions in late 2017, and sending and receiving payments is punishable by fine. The Foreign Exchange Authority insisted all foreign payments must pass through authorized intermediaries and the central bank.

Algeria

The National People’s Congress of Algeria proposed a finance bill at the end of 2017 which will declare Bitcoin usage and ownership illegal if signed into law.

Other provisions of the bill address the potential of cryptocurrencies being used for illegal activity, such as for drug trafficking and tax evasion, which is likely the cause of concern and strict response from the government.

Ethiopia

The Ethiopian Ministry of Science and Technology signed an agreement with the cryptocurrency startup Cardano earlier this month. The memorandum of understanding signed by the two parties intends to guide blockchain development and training for the country’s agritech industry.

More specifically, the ministry is said to be collaborating with Cardano to create a blockchain application for coffee shipments, the country’s largest export.

Sierra Leone

Media hype centered around the possibility that Sierra Leone used blockchain tech to tally votes in the most recent presidential election ended with disappointment and allegations.

The National Electoral Commission responded to the media speculation and denied that it used the voting tech company Agora for the national election. Agora also responded, saying it did play a legitimate role as an international observer, but did not serve in any official capacity in terms of election results.

The first, second and third volumes of our Banks and Crypto Evaluation were about Asia, Europe and Americas respectively.