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Nigeria mulls over crypto regulation

More Africans are now using cryptocurrency to facilitate private and business transactions with other regions, specifically China, a new Chainalysis 2020 Geography of Cryptocurrency Report has found.

Released barely a few days after Nigeria's Security Exchange Commission (SEC) announced its intention to start regulating crypto-related investments in the country, the report highlights African countries’ currency devaluation and instability - and the sometimes rigorous process Africans have to go through to access foreign exchange as major factors responsible for growing interest in cryptocurrencies like Bitcoin.

It also identifies the increasing number of Chinese nationals residing and trading on the continent as contributing towards heightened cryptocurrency use in Africa.

The data analysis firm, which offers cryptocurrency investigation and compliance solutions to global law enforcement agencies, regulators, and businesses, stated that some Chinese traders use cryptocurrencies to send profits from their mining rigs that run on cheap hydro-power in parts of Africa, and from illegal ventures such as those in the illicit diamond trade.

Chinese-led cryptocurrency exchange Binance, the world’s largest by volume, is also identified to be the main beneficiary of the increasing on-chain cryptocurrency activities in Africa, which has reportedly grown to be one of the ten largest services in the region by volume.

While Binance prides itself in its ability to build relationships with local banks, the share crypto activity in Africa is said to have risen from 67% in October 2019 to 78% currently.

According to the report, developing countries in Africa, Latin America and some parts of East Asia have high grassroots cryptocurrency activity, while Africa received about US$8-billion in crypto value over the last year representing the smallest cryptocurrency economy of any region analysed in the report.

“However, that relatively small amount of activity is creating life-changing value for users in the region facing economic instability, offering low-fee remittances and an alternative way to save,” it says, pointing to how top African currencies, including the South African Rand and Nigerian Naira, have devalued against the US dollar in the last decade.

It is unclear whether the value inflow forms a part of the key factors considered by the SEC before making its first move “to create standards that encourage ethical practices that ultimately make for a fair and efficient market”.

It is equally uncertain as to what the likely impact of the proposed regulation would be on related crypto and blockchain activities in the case of Nigeria.

“I think it’s the first step,” said Munachi Ogueke, the CBO at Yellow Card Financial. ”We can’t say if it’s the right direction yet but the first step. It also shows they are thinking about the industry and its potential.”

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