IMF calls for tighter regulation of crypto in Africa as industry grows

FTX's collapse is one reason countries in the region should adopt regulation, the money fund noted.

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The International Monetary Fund (IMF) is calling for increased regulation of crypto markets in Africa, one of the fastest growing markets in the world, the global institution's blog reported on November 22.

Among the reasons why countries in the region should adopt the regulations, the monetary fund cited the collapse of FTX and its ripple effect on cryptocurrency prices, which “prompts renewed calls to greater consumer protection and regulation of the crypto industry".< /p>

Furthermore, the authors argue that “the risks in crypto assets are obvious” and “it is time to regulate” to strike a balance between minimizing risk and maximizing innovation. Based on the October 2022 Regional Economic Outlook for Sub-Saharan Africa, the article states that "the risks are much greater if crypto is adopted as legal tender", posing a threat to public finances if governments accept crypto as payment.

The post also noted:

“Policymakers are also concerned that cryptocurrencies could be used to illegally transfer funds out of the region and circumvent local rules to prevent capital outflows. The widespread use of crypto could also undermine the effectiveness of monetary policy, creating risks to finance and macroeconomic stability."

According to IMF data, 25% of countries in Sub-Saharan Africa have officially regulated crypto, while two-thirds have some restrictions in place. In contrast, Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo have already banned crypto assets, accounting for 20% of countries in Sub-Saharan Africa. Kenya, Nigeria and South Africa have the highest number of users in the region.

Between July 2020 and June 2021, the value of the African crypto market grew by more than 1,200%, according to data from analytics firm Chainalysis, with strong adoption in Kenya, South Africa, in Nigeria and Tanzania.