Do African central banks feel threatened by Crypto surge?

Cryptocurrency adoption in Africa grew 1,200% between July 2020 and June 2021, making it the fastest adoption rate in the world. This incredible sudden surge, however, has been met with stern resistance by individual nations’ central banks.

Studies from online casino au showed that Africa amassed $105.6bn worth of cryptocurrencies in forecasts for the year ending June 2021, driven by peer-to-peer (P2P) transactions in key growth markets.

Markets like Kenya, Nigeria, South Africa, and Tanzania had some of the highest grass-roots adoptions in the world and ranked in the top 20 Global Crypto Adoption Index. Yet Africa is the smallest crypto economy of all the regions.

Hostility to cryptocurrency exchanges means the continent is left in a situation where P2P platforms are the only viable solution – unless  VPNs are used to access servers in other countries.

In the best-case scenario, a central bank may leave the cryptocurrency sector unregulated. For instance, the Central Bank of Kenya issued a notice in December 2015 to not engage in Bitcoin trading, warning that:

“There is no underlying or backing of assets and the value of virtual currencies is speculative. This may result in high volatility in the value of virtual currencies thus exposing users to potential losses.”

Interestingly, since that proclamation, Bitcoin has gained over 11,000% in value while Kenyan Shilling (KES) has lost 7% of its value. In 2018, Kenya’s central bank also warned banks in the East African country against dealing with cryptocurrencies or facilitating transactions for crypto-related entities. On June 4, local bitcoin publication BitcionKE reported that some Kenyan Banks had started sending cautionary emails to customers who had previously transacted in crypto using their debit or credit card.

The Central Bank of Nigeria (CBN) made similar edicts, banning all banks in 2017 from using, holding, trading and transacting in cryptocurrencies. Predictably, its currency Naira (NGN) dropped by nearly 52% in the meantime.

In January, the apex bank sent a circular to banks in the country, stating that regulated financial institutions are “prohibited” from “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges.”

The CBN’s anti-bitcoin move came roughly three months after the viral “End SARS” protest, which saw Nigerian youths demand that their government rein in police brutality in the country. Bitcoin, among other cryptocurrencies – which is accepted in https://www.casinoclic.com/fr/, was a significant part of how the protest received funding after Nigerian banks limited the accounts associated with the protest.

As the most populous African nation with over 201 million citizens, Nigeria was hit hard by Covid-19 lockdowns. Compared to a year ago, food prices have increased by 20%, while the inflation rate seems to be winding down, currently settling at 17%.

Kenya, with its 53 million people, has experienced a similar spike in inflation; though less dramatic at only 6.57% compared to 4.2% a year prior.

More recently, the Bank of Botswana (BoB) warned the citizens and residents of the southern African country to be cautious and diligent when dealing with Bitcoin traders.

There is no specific legal or regulatory framework about or proscribing investment in crypto assets, such as Bitcoin in Botswana, according to a statement released by Botswana’s central bank.

“Therefore, trading in Bitcoin or similar decentralized technologies, also known as cryptocurrency, is akin to investment in any other intangible assets with attendant risks, inherent in such investments, such as complete loss of value or possible abuse of the technologies to the detriment of investors,” the BoB said.

The BoB said these activities put the investor’s funds at risk, premised on the trust and full knowledge of the nature and scale of the risks associated with these forms or types of businesses.

The southern African country’s central bank stated that it is advisable and considered prudent for those intending to participate in the activity to undertake due diligence on the registration and legality of the business, as well as the nature of the business activity.

Birth of CBDCSs

African central banks are fast exploring ways to create virtual money as legal tender following the growth in cryptocurrency and privately issued stable coins.

Both so-called central bank-backed CBDCs and cryptocurrency are virtual money: CBDCs are issued and regulated by the central bank while the other is out of government control.

China became the first major economy to pilot a digital currency last year. Since then, six countries have launched digitised currencies, according to a CBDC tracker by American think-tank Atlantic Council.

Although some African countries such as Kenya, South Africa, Ghana and Rwanda are exploring CBDCs, Nigeria has launched its own digital money; eNaira.