Two countries that have had a huge effect on the Bitcoin ecosystem are South Korea and Japan. The Japanese are buying – as well as actually spending – bitcoin and the South Koreans are trading it. Around 70% of the world’s bitcoin trading takes place in yen or won. The neighboring nations are leading the pack, but other countries are starting to stir. Africa nations have also become obsessed with bitcoin.
For the term “buy bitcoin”, South Africa proves to be a country with a population that is intrigued by all things bitcoin. It ranks fourth globally over the last 90 days for the term “buy bitcoin”.
Two of the countries that rank above SA on that list also hail from Africa – Nigeria and Ghana. Many of the world’s unbanked reside in these countries, and many more Africans in lands such as Zimbabwe are reliant on money remittance from family overseas. Bitcoin is ideal.
For bitcoin to flourish in any country it needs two things: public interest and a favourable regulatory environment. South Africa passes both tests with flying colours. Its government has spoken of taking a “balanced approach” to cryptocurrency regulation, and its second largest supermarket chain is currently trialing bitcoin payments.
The regulatory environment in other African countries is not as favourable, with the Central Bank of Kenya (CBK) issued a public notice warning against the use of bitcoin citing the lack of regulations to govern its use. The CBK proceeded to send out a circular to local banks instructing them not to provide services to bitcoin startups in 2015. However, the CBK’s stance seemed to have little impact on Kenyans appetite for bitcoin with the country being ranked third in Africa when it came to trading volumes at local exchanges such as Localbitcoins. Also, things seem to be looking up with a number of public and private entities now experimenting with blockchain technology.
The Central Bank of Nigeria (CBN) is notorious for currency controls and so it came as no surprise when it informed the public to be wary of speculating in bitcoin and other cryptocurrencies. The January 2017 directive caused uncertainty in the local bitcoin community, which is among the largest in Africa, with trading volumes on the P2P marketplace Localbitcoins showing an average of $3.2 million worth of trades being conducted every week.
The Bank of Uganda sent out a strong statement cautioning investors against MLM schemes such as OneCoin, which was promising people high returns if they invested in the scheme. The bank also warned against the use of digital currencies indicating there was lack of consumer protections or a regulatory framework to govern their use. As of the time of writing this article, the central bank’s position remains unchanged despite a growing bitcoin presence in the country.
In August 2015, the Central Bank of Namibia issued a statement saying that it did not support the use of digital currencies and users did so at their own risk. Similar to Kenya and other jurisdictions, the bank cited the lack of regulatory oversight as being its biggest concern with a promise to clarify its position in the future.
In September 2017, the bank proceeded to officially ban the use of bitcoin or other cryptocurrencies in the country. The directive was contained in a nine-page position paper which cited risks such as money laundering, legal, credit and operational risks as threats to Namibian users. However, recognising the potential of blockchain technology and its possible application in various sectors, the Namibian Central bank acknowledged the need for further research stating, “the current position of the Bank may be amended and/or supplemented, should a need arise.”
Presently, bitcoin traders and startups operating in Cameroon do not fall under regulatory oversight as the Central African Central Bank is yet to release specific guidance on the use of digital currencies. This means Cameroonians can purchase, hold or use bitcoin until specific guidance by the market regulator is issued.
The government has previously tested a cryptocurrency called Trest in 2015, which shows the country could be open to cryptocurrency solutions given its largely underbanked population.
Bitcoin and other cryptocurrencies are not officially recognised by the Egyptian Central Bank and trading them for fiat currencies is thus not authorised. In July 2017, the deputy governor of the Egyptian Central Bank, Mr Gamel Negm, responding to rumours that the bank was looking to officially adopt cryptocurrencies, insisted the bank only recognises official currencies and would not accept any digital currencies.
The island nation is aiming to become a leading hub for blockchain companies and serve as a gateway to African and Asian markets. Setting up this ‘Silicon Corridor’, which will be known as the Ethereum Island, is a collaborative effort between local authorities and blockchain-based companies.
Already, the country’s second-largest bank, State Bank of Mauritius (SBM) has partnered with Secured Automated Lending Technology (SALT) to allow its clients to use bitcoin or ether as a guarantee for loans. However, this was not always the case with recognition of cryptocurrencies in the country. Previously, in December 2013 the Bank of Mauritius warned the public about risks associated with the use of bitcoin. It appears the Bank reversed its position in light of the island nations ambitions to cement its position as a breeding ground for blockchain solutions.
Swaziland is among the few African countries that is actively researching cryptocurrencies and their potential applications. Swaziland Central Bank Governor, Majozi Sithole, disclosed the bank was looking at potential case studies, at the Swaziland Economic Conference (SEC 2017). Speaking to the Swazi Observer, the Chief Banker said,
“It may not be wise to dismiss virtual currencies, and as the CBS we are learning, and we want to accept and support innovation. If this is innovation, we do not want to stifle it. We want to learn more about it.”
Currently, cryptocurrencies like bitcoin remain unregulated in the country and Sithole cautioned traders on local exchanges to be careful as the Central Bank seeks opinions of experts on the issue.
Bitcoin use, for the most part, has been undefined under the law in Algeria. However, a new 2018 Finance Bill being considered at the National’s People Congress (NPC) will make it unlawful to possess bitcoins or use it for transactions. The government aims to establish stricter control over cryptocurrencies, and its perceived dangers such as money laundering or tax evasion due to the pseudo-anonymity it guarantees its users.
Article 113 of the Finance Bill states,
“The purchase, sale, use and holding of the so-called virtual currency is prohibited. The virtual currency is the one used by Internet users through the web. It is characterized by the absence of physical support such as coins, banknotes, payments by check or bank cards. […] Any violation of this provision is punished in accordance with the laws and regulations in force.”
The document also recognises that cryptocurrencies such as bitcoin have no central authority, and presently escape any regulations or control by the state. This means bitcoin users in Algeria can still go about their activities until tighter restrictions are put in place.
Bitcoin adoption in Zimbabwe is among the highest in Africa, buoyed by hyperinflation, weak local currency and limited access to financial services. This has resulted in Zimbabweans moving to local exchanges to trade for bitcoins, which are immune from inflation, and thus allow them to protect their savings.
The Reserve Bank of Zimbabwe (RBZ) has not officially permitted the use of bitcoin. In July 2016, the RBZ’s Director of National Payments, Josephat Mutepfa, warned Zimbabweans about the risks associated with bitcoin while speaking at a conference. He asserted that while they were a number of bitcoin initiatives in the country offering specific services, the central bank was yet to devise regulations for use of cryptocurrencies.
Recently, Reserve Bank of Zimbabwe director and registrar of banking institutions, Norman Mataruka, stated that the use of bitcoin is illegal in Zimbabwe. However, no actual regulations have been issued by the RBZ and no laws have been passed covering digital currencies in Zimbabwe.
The central bank of Morocco, Bank Al-Maghrib and the country’s Foreign exchange office, issued a joint statement on November 20, 2017, informing the public that transacting in cryptocurrencies such as bitcoin is now considered illegal. According to the statement, transactions in digital currencies such as bitcoin, ether and others will constitute a violation of the country’s exchange regulations.
The two regulators point to the risks involved in using digital currencies for transactions as their reason for the directive. They further state,
“As a hidden payment system that is not backed by a financial institution, the use of virtual currencies entails significant risks for their users.”
This comes at a time when the demand for bitcoin in Morocco has been growing steadily for the past one and half years evident from trading volumes on the bitcoin exchange, Localbitcoins. But while the ban is a blow to bitcoin adoption in the country, it will be hard to control the cryptocurrency given its pseudo-anonymous and censorship-resistant nature.
THE REST OF AFRICA
Bitcoin regulation in the rest of Africa is essentially uncharted territory as regulators are still coming to terms with how best they can deal with decentralised digital currencies in their highly regulated financial systems.