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Crypto-currency thrives in Africa amid regulatory quagmire

By , ITWeb's news editor.
Africa , 31 Jan 2022

Africans are delving into the burgeoning world of crypto-currency trading to satisfy their personal finance needs and entrepreneurial ventures.

This is despite the risks associated with these emerging digital currencies, such as Bitcoin and Ethereum.

According to Statista, the Bitcoin price again reached an all-time high in 2021, as values exceeded over $65 000 in February, April and November 2021.

It adds the Ethereum price in US dollars soared to new heights in November 2021, reaching over $4 800.

With the rise in the value of crypto-currencies, Africans are not being left behind in this global trend and the populace on the continent is finding unique use cases for the use of crypto.

ITWeb spoke to some traders who are raking in crypto trade profits, to find out how they do it and the challenges that come with these new assets.

Kamau Nyabwengi is a crypto-currency trader based in Nairobi, Kenya, who started off as a forex trader before dipping his toes in the world of crypto.

He is the founder of Young Entrepreneurs Network (YEN) Africa, a networking platform that connects young entrepreneurs through events and training programmes focusing on crypto-currency.

“I started out as a forex trader in 2011. I traded currency pairs for a while before taking a long break [until] 2016 when I discovered Bitcoin,” he says.

From his experience in forex trading, Nyabwengi saw big potential in trading crypto-currencies because of the many options available and the volatility of the market.

“I immersed myself in learning about trading them and in the process, got interested in the technology behind crypto-currencies – blockchain. I have since been trading Bitcoin and developed the idea for YEN.”

Kamau Nyabwengi, a crypto-currency trader based in Nairobi, Kenya.
Kamau Nyabwengi, a crypto-currency trader based in Nairobi, Kenya.

Cautionary statements

Just as in many African jurisdictions, Nyabwengi points out crypto-currencies are not illegal in Kenya.

In South Africa, leading crypto-currency exchanges recently told ITWeb they are expecting more regulation of the sector this year.

The Kenyan government has, however, on several occasions issued cautionary but not prohibitory statements against the use of crypto.

He says this was due to the many scams that have seen a lot of people losing money. “The scams promise huge returns from either buying the crypto at low prices with expectations of them skyrocketing or returns from mining pools.

“Several business entities in Kenya, including ourselves, accept Bitcoin and other crypto-currencies as a means of payment.”

On the regulation front, in 2019, the Kenyan government formed a Distributed Ledger and Artificial Intelligence Taskforce to look into blockchain and related emerging technologies.

The taskforce came up with recommendations, including the set-up of a regulatory sandbox under the Capital Markets Authority.

Nyabwengi says two crypto start-ups have since been incubated in the sandbox. He adds that currently, there is a Bill in Kenya’s parliament seeking to create regulations for Alternative Investment Funds.

These regulations will include such assets as crypto-currencies, with the aim of legally recognising fund managers of such assets and protecting the investors.

“The Central Bank of Kenya cautioned the public against involvement in Bitcoin and other crypto-currencies, citing that there would be no protection in case of loss. In such jurisdictions as ours, the biggest risk is regulation, in that the government does not offer protection against fraudulent practice in the space.”

He points out the other huge risk in crypto-currency use is the “hygiene” around it in terms of custody and transfer of the assets.

“Should one lose private keys or send crypto to the wrong address, there is little that can be done to recover or reverse the transactions. The volatility in crypto-currency markets is also a double-edged sword – it offers high returns but if caught up in the wrong direction of the move, an account can be wiped out.”

Nyabwengi urges that anyone looking to start crypto trading should first seek out as much knowledge as possible.

“Crypto trading is not a get rich quick scheme but a skill that requires a lot of patience and experience. There are numerous resources online that can guide someone who wants to start. Before investing real money, there are platforms that beginners can use to try out their trading strategies with virtual cash in real market situations.”

The biggest use case for crypto-currency in Kenya and Africa is speculation, he says. “A lot of people are buying different crypto assets in the hope that they will rise in value and that they will make a return.

“The top two most bought crypto assets for this purpose are Bitcoin and Ethereum. The use case for payments and remittances in Kenya is peer-to-peer for small transactions, as banks risk losing their licence if they deal in crypto-currencies. There are also a few cases of organisations such as the Kenya Red Cross using a blockchain-powered token called Sarafu Coin for basic income distribution.”

Ray Youssef, co-founder and CEO of Paxful.
Ray Youssef, co-founder and CEO of Paxful.

African financial lessons

Another company tapping the African crypto-currency market is Paxful, a peer-to-peer crypto marketplace that operates in 50 African countries, and has over 2.5 million users across the continent.

The company’s co-founders, Ray Youssef and Artur Schaback, say they started in 2015 to help everyone have financial freedom through equal access to finance.

CEO Youssef started out as an entrepreneur in 2001; he founded a successful ringtone business and then had a series of start-ups before setting up Paxful.

Schaback, who is Paxful’s chief operations officer, started out as an Android developer and previously had his own web performance and blockchain-based software company.

Says Youssef: “Africa is teaching us about the true use cases of Bitcoin and the opportunity it presents for greater financial inclusion. We have found that Africans are using crypto to satisfy both personal finance needs and entrepreneurial ventures – through remittance, e-commerce, payments, wealth preservation and social good.

“What’s most exciting is seeing users set up side-hustles and their own businesses, which include remittance, as well as import and export enterprises.

“Take Joseph Ebuka, for example, a Paxful peer in Nigeria who buys art pieces with Bitcoin. Most of his earnings are in crypto and it’s more convenient for him to pay for goods and services with Bitcoin.”

According to Youssef, stories like Ebuka’s have global implications for showing how Bitcoin and other crypto-currencies are becoming a strong financial contender for everyday transactions in Africa.

Like Nyabwengi, Youssef notes that calls for the regulation of crypto-currencies are growing across the globe, with more governments expected to formulate enabling regulations, “and rightfully so as we see rapid growth in the Bitcoin global economy.

“If we want to achieve global adoption and secure the evolution of blockchain technology and crypto, regulation will be required.”

However, he says any form of regulation should not take away from the value peer-to-peer finance offers.

“The African continent can only benefit from having access to a global currency such as Bitcoin that can help boost economies and create jobs. We would like to work with governments directly on issuing some regulation that brings clarity to our users – we are very open to dialogue in this regard.”

* Article first published on

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