Cryptocurrency adoption in Africa has always been a source of encouragement for the industry. Many have pointed to the continent as the next crypto frontier, with industry heavyweight predicting a coming boom. However, while adoption has continued to surge across the continent, regulatory oversight appears to be lagging significantly.
Kenya Isn’t Enough
This week, the Young Entrepreneurs Network, a Kenya-based business forum that organizes golfing tournaments across the country, received approval to test its YENTS stablecoin in the country’s regulatory sandbox.
Speaking with The Africa Report, Kamau Nyabwengi, YEN’s chief executive, explained that the group planned to use its stablecoin to make payments for sporting events and training programs for members. They plan to launch the token in November, pending any additional regulatory challenges.
Nyabwengi added that while they had begun testing the YENTS in Kenya’s sandbox, the entire continent will need to develop a robust crypto framework if it is to capitalize on it and other blockchain-based projects, in the future. The CEO pointed out blockchain’s benefits for improving product movement and reducing the cumbersome middlemen from supply chains. He also added that the technology could help aggregate small-scale pooled funds tor investment.
While YEN plans to improve circulation in Kenya, he’s also touting the prospect of expanding YENTS and their access across the entire continent.
African Regulators Have Work to Do
The need for regulatory adaptation to crypto is one that several regions across the world share. However, there’s hardly anywhere that requires this like Africa. This year alone, crypto adoption on the continent has grown significantly. On Chainalysis’ Crypto Adoption Index for 2020, Kenya, South Africa, and Nigeria rank among the world’s top eight countries. No other continent has as many countries so high up in the rankings.
Data from Useful Tulips also shows that peer-to-peer exchange volumes across the three countries have surged in 2020. With such a budding industry, it would be reasonable for countries on the continent and their regulators to examine the right approaches to crypto regulation.
Kenya appears to be on the right track, mainly thanks to its regulatory sandbox. An article on Smart Africa praised the initiative as an example of a “government-driven institutionalization of blockchain,” which allows the private and public sectors to minimize risks while exploring the technology.
The report additionally suggested that regulators develop a pan-African classification of blockchain-based financial instruments. In Nigeria, as well, regulators appear to be waking up to the reality of crypto assets’ penetration. Earlier this month, the Nigerian Securities and Exchange Commission published a statement defining crypto tokens as assets that provide “alternative investment opportunities.”
“Virtual crypto assets are securities, unless proven otherwise. The burden of proving that the crypto assets proposed to be offered are not securities and therefore not under the jurisdiction of the SEC, is placed on the issuer or sponsor of the said assets.”
The Commission added that it would register and approve all digital assets as commodities. Thus, it would not be responsible for overseeing spot trading and transactions for utility tokens. However, security tokens would be viewed as securities, while derivatives and investment funds would be classified as “specified investments.