Globally, the demand for and usage of cryptocurrencies and similar digital assets has steadily increased. A once-ignored digital asset is now being used to send money across borders, stored for speculative purposes, as a key to access the different features that blockchain platforms offer, and much more.
The continent of Africa is no exception, as residents in several African countries now use cryptocurrencies to achieve various objectives.
According to statistics, “cryptocurrency adoption in Africa grew 1200% between July 2020 and June 2021, making it the fastest adoption rate in the world.”
Data shows that “transaction volume made up of retail-sized transfers in Africa was 7%, against the global average of 5.5%.”
In comparison to other continents, Africans actively prefer the decentralized aspect of cryptocurrency usage, particularly peer-to-peer trading.
This article examines the crypto legislation in several African nations, including Nigeria, South Africa, Rwanda, Egypt, and Kenya.
Crypto Regulation in Nigeria
In Nigeria, cryptocurrencies are not explicitly prohibited. However, the country’s apex financial institution, the Central Bank of Nigeria, has banned the use of banking facilities in the country for cryptocurrencies.
Residents can’t utilize their credit and debit cards to purchase cryptocurrencies on any exchange or crypto-related platforms. This means that banks are not allowed to get involved in cryptocurrencies. These banks are also not expected to permit their customers to use the banking channels to conduct cryptocurrency transactions.
In the past, crypto enthusiasts could purchase cryptocurrencies with their debit cards and link them to any exchange they wanted. After token sales, customers could withdraw fiat currency from the crypto exchange directly to their bank accounts. This is no longer possible, and customers who ignore this regulation risk having their bank accounts closed.
In February 2021, the Central Bank of Nigeria prohibited the use of banking infrastructure or channels for cryptocurrency-related activities.
Banks were directed to restrict any cryptocurrency-related transactions and block the accounts of individuals or organizations involved in such activities.
Failure to prevent customers from using banking channels to engage in crypto-related activities incurs significant sanctions, and some Nigerian banks have already been penalized and fined.
The banks listed below allegedly disregarded the regulations and were subsequently penalized by the CBN.
In April 2022, Stanbic Bank was fined N200 million, while Access Bank was fined N500 million. Fidelity Bank was billed to pay N14.3 million, and UBA has been fined N100 million.
Though the Central Bank of Nigeria may have banned the use of banking facilities for crypto transactions, it has taken an interest in Central Bank Digital Currencies (CBDCs) as it was one of the first countries to launch a CBDC called the e-Naira. The CBDC development aims to foster “increased cross-border trade, accelerated financial inclusion, as well as cheaper and faster remittances.”
Recently, the Nigerian Securities and Exchange Commission (SEC) published new guidelines governing virtual asset issuance, exchange, and storage.
Any individual or organization intending to issue virtual assets comparable to securities must first register with the Nigerian SEC. The regulation covers digital asset firms such as “digital asset offering platforms (DAOPs), digital asset custodians (DACs), virtual asset service providers (VASPs), and digital asset exchanges (DAX).”
When a firm applies to the SEC to issue digital assets that resemble securities, the SEC typically responds within thirty days.
According to the SEC,
“The commission may reject any application for registration of digital assets if, in its opinion, the proposed activity infringes public policy, is injurious to investors, or violates any of the laws, rules, and regulations implemented by the commission.”
There is a cap on the amount a company can raise, and it must not exceed N10 billion.
Crypto Regulation in South Africa
Currently, South Africa does not have regulations that ban or legalize cryptocurrencies and their usage in the country.
However, cryptocurrency taxation is a significant aspect of the crypto climate in South Africa. The South African Revenue Service (SARS) has stated that those who use cryptocurrencies and earn gains or profits from them are expected to pay taxes. The crypto tax is subject to the same laws that apply to personal income in the country.
Crypto enthusiasts are also requested 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.”
Regarding VAT, cryptocurrencies are not subject to VAT except in cases where services are provided.
Amendments to the financial laws are in the works. A proposed amendment regarding cryptocurrency usage and crypto firms is expected before 2022 runs out. It is expected that “any person providing advisory 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.”
The proposed amendments have elicited divergent opinions in the country, with some believing they will enable residents to identify the best crypto institutions to use.
Another school of thought argues that the regulations will compel cryptocurrency firms to implement Know Your Customer/ Anti-Money Laundering (KYC/AML) processes into their platform structures, preventing many residents from accessing their platforms.
Crypto Regulation in Rwanda
The authorities in Rwanda consider this digital asset to be illegal. According to the National Bank of Rwanda (NBR), “anyone who gets involved in the business of buying and selling digital money does so at their own risk.”
Because of the risks associated with cryptocurrencies, the authorities have advised people to stay clear of them. There are currently no specific regulations governing the use of cryptocurrencies and digital assets in the country.
The National Bank of Rwanda has plans to create its Central Bank Digital Currency (CBDC) in the future, although it is currently researching the subject.
Based on the study of CBDC and cryptocurrencies by the financial authority, the director of payment systems at the NBR, John Karamuka, stated,
“Nevertheless, we are benchmarking on countries that are at more advanced stages, learning both positive and negative experiences. We are basing on work done by international institutions such as the International Monetary Fund, World Bank, World Economic Forum among others.”
Crypto Regulation in Egypt
The Central Bank of Egypt issued a warning in 2018 stating the risks associated with using cryptocurrencies and advised residents to avoid using them. Although crypto usage is not formally prohibited in Egypt, this virtual asset is not considered legal tender. Residents are not permitted to use cryptocurrencies as a medium of exchange for everyday transactions.
Two years later, in 2020, the Central Bank of Egypt prohibited the creation, trading, and promotion of cryptocurrencies unless the individual or organization involved had obtained the appropriate license.
According to a religious decree issued by the Egyptian Islamic legislator, Dar al-Ifta, cryptocurrencies are considered haram and should therefore not be utilized by Muslims. They believe that this type of digital currency comes with significant risks. Since the decree is a fatwa and not a law enacted by the Egyptian government, it is not binding on the average resident.
Crypto Regulation in Kenya
Cryptocurrencies and similar digital assets are regulated by three major laws, which are: The National Payments Systems Act (NPSA), The Capital Markets Act (CMA), and The Kenya Information and Communication Act (KICA).
The Central Bank of Kenya ensures that crypto platforms and users adhere to the National Payments Systems Act (NPSA). The Capital Markets Authority (CMA) is in charge of implementing the Capital Markets Act (CMA), while the Kenya Information and Communication Act (KICA) is under the purview of the Communications Authority.
In the past, the Central Bank of Kenya has issued warnings about the risks associated with this digital asset, advising the general public to avoid it.
No law prohibits the usage of cryptocurrencies by residents in the country. However, before any crypto exchange or company can operate in Kenya, it must obtain the appropriate license from the CBK.
Cryptocurrencies classified as securities by the law are under the jurisdiction of the Capital Markets Authority (CMA). Before issuing or selling tokens that resemble securities, the issuing entity must obtain approval from the CMA.
- In Nigeria, residents are not permitted to purchase or sell cryptocurrencies using banking channels.
- The Central Bank of Nigeria recently launched a CBDC called e-Naira.
- Crypto exchanges and companies are expected to obtain the necessary license before operating in any of the countries mentioned above.
- The Islamic community in Egypt considers cryptocurrencies haram.
Note: This is not financial or legal advice. Before investing in cryptocurrencies in any country, it is best to verify with the local authorities.
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