Hashbon Space: Crypto Grand Tour. Part I — Africa
Dear HASHtronauts and Crypto community!
Today, in our brand new, but already permanent Sunday column “Hashbon Space Edition”, you will dive into one more milestone of information about blockchain and cryptocurrency.
In our last article, we touched on the topic of KYC regulations all over the world. Now we would like to shift the focus a little and tell in general about different countries’ attitude to cryptocurrencies: where crypto is adopted as a government payment method and where it has already been implemented or rejected.
To make it easier to navigate across our Crypto Grand Tour, we devote each Hashbon Space Edition to a group of countries which are united by some geographical features or have a single legal regulation.
Africa — crypto regulation in general
According to Hootsuite’s 2022 Global Digital Yearbook, 37.8% of Internet users around the world own cryptocurrency. However, this indicator varies quite a lot from country to country. Nigeria and South Africa take the second place in the world, where 19.4% of Internet users own crypto, they follow top-1 Thailand with 20.1%. The performance of other African countries is also above average: let’s have a closer look:
One of the most attractive factors for cryptocurrencies development in Africa is the current lack of government regulation in this area. Indeed, most African states have not developed any rules for regulating crypto business yet, because it is simply not clear to local regulators how this can be done. Nevertheless, countries such as Algeria, Morocco, Libya, Namibia, Zambia banned any operations with cryptocurrencies on their territory.
In fact, the gap of government regulation has both its pros and cons. On the one hand, the income of crypto companies is not taxed, and the transfers of such funds are not tracked. On the other hand, under such conditions it is just impossible to make bitcoin or other crypto a full-fledged means of payment. Fraud is also an obvious problem, since there is no established KYC system.
In 2016–17, when Bitcoin was showing a rapid growth, many Africans were trying to play on its rise in the rate. There even were attempts to “mine Bitcoin”, although Africa is not the most suitable place for this because of the very high electricity prices. In countries with high inflation (and there are quite a few of them in Africa — Egypt, Ghana, Malawi, South Sudan, Nigeria, Mozambique, Zambia, Zimbabwe), Bitcoin is still one of the tools that help keep personal funds from depreciating. It is especially popular in Zimbabwe, because this country has not only a very high inflation rate, but also a cash crisis — that is, there is simply not enough cash in circulation.
As part of a series of amendments to South Africa’s financial laws, crypto-asset service providers will become accountable institutions. A report from the South African Treasury announced further crypto regulations “to be finalized during 2022.”
In brief, the proposed changes will ensure that “any person providing advice or intermediary services related to crypto assets must be recognized as a financial services provider under the act and must comply with the act’s requirements.”
Countries with crypto exchanges but no regulatory framework: Cameroon, Côte d’Ivoire, Ghana, Nigeria, Senegal, and South Africa.
Countries that allow trading but do not provide an exchange: Botswana, Kenya, Zimbabwe.
Let’s study some African countries in details!
Cameroon, Congo and Democratic Republic of the Congo (DRC)
The question “Why TON?” can be perfectly answered by an expert from the Republic of Congo’s governmental release (translated from French using Google): “…we have reached an agreement with the representatives of TON, a blockchain originally designed by the founders of Telegram Messenger and now independent. Based on careful evaluation, TON’s technologies, products and stage of development provide us with the greatest potential to achieve our ambitions.”
The DRC (Democratic Republic of the Congo) has already confirmed that they are considering their own national stablecoin that will be built on the TON blockchain. The TON project interacts with the DRC, Cameroon and Congo to provide them with cryptocurrency solutions.
Each of the above countries will undertake a phased transition to adopt cryptocurrency as one of the foundations of their own economy. This will expand the opportunities for participation in the economy for banking and unbanked persons, which will stimulate the economic development of the country, according to TON.
Crypto enthusiasts say that Bitcoin and other cryptocurrencies can solve the problems of the so-called unbanked population — that is, those who do not have access to banking services. There are really quite a few of them in Africa: on average, from 60 to 80% of the population (depending on the country).
*TON (Telegram Open Network) is a blockchain and coin by Telegram that was founded in 2017. Pavel Durov raised more than $1.7 billion for the development of this project, but the US Securities and Exchange Commission launched an investigation into TON. In 2020, Telegram stopped the development of TON due to the objections of the regulator. In the same year, an independent development team took up the project, whose work was later recognized by the Telegram Group and agreed to transfer the original ton.org domain to the team, as well as the original repository, where all work on the blockchain began. The project was renamed The Open Network; the abbreviation TON has been preserved behind it. Durov supported the project, emphasizing that he is currently independent of Telegram, and wished the project team success.
The Central Bank of the country has repeatedly indicated that any transactions with virtual assets are in the nature of a pyramid, so it is very wary of them. At the same time, there are no regulations in the state prohibiting the use of cryptocurrency. Let’s talk about some crypto projects in Kenya.
Pezesha is a Kenyan fintech company specializing in MSME (Micro, Small and Medium Enterprises) credit ratings and lending, has opened up new capital by turning the cryptocurrency community into MSME lenders in East Africa by providing a global pool of lenders for direct investment in Kenyan businesses. Within four months, the turnover of one of the portfolios of short-term loans tripled.
There is one interesting project connected with cryptocurrency. Huduma Number Identification System is built on the blockchain — a single identity number and card system that can help to improve service access and delivery to citizens. However, Kenya’s Huduma Card does only marginally better at 12.5 percent population coverage (and more than 40 percent of issued cards have still not been collected).
Republic of South Africa (RSA)
SARB (South African Reserve Bank) is in charge of regulating the financial virtual market. The South African Revenue Service (SARS) has confirmed that normal income tax rules apply to crypto and taxpayers need to submit their crypto gains or losses as part of their taxable income. A crypto asset can also be subject to capital gains if it is held and disposed of with capital intent.
Senegal launched in December 2016 a blockchain-based national digital currency. Known as eCFA, the digital currency is legal tender with the same value as the current currency the CFA Franc. After that, the ecosystem of the Senegalese franc was transferred to the blockchain. The maintenance of this cryptocurrency is carried out with the help of the Central Bank of the country and the eCurrency Mint company.
The Central Bank of Mozambique in January 2018 stated that it neither regulates nor monitors transactions using Bitcoin because cryptocurrency is not issued by its central authority and has no legal standing in the country. There are no exchanges based in Mozambique.
However, Empowa, a Mozambican fintech startup, exudes the spirit of this new movement — the democratization of finance — by crowdsourcing funding for residential real estate development through cryptocurrency. In this way, it demonstrates a proof of concept for decentralized finance in Africa by bypassing the traditional bottlenecks in home finance and using a blockchain platform to channel finance to developers and innovators.
As you can notice, cryptocurrency governmental regulation varies markedly, it depends on many factors such as: governmental institutions, history and political background, economy situation, global influence and country citizens of course. There was quite a lot of information today, to study this topic further you can find information yourself or wait till next Sunday.