Cryptocurrency booms calls for African countries’ regulation; African countries adopting the wide use of virtual currency during pandemic

With people often winding up entangled with botched investments and unsecured savings, the need for alternative ways for saving and trading have been sought for.

Financial technological inventions have been on the rise with their main aim being to make transactions, investments and savings plans easier and safer. At times banks get robbed or go under, you wind up being financially stuck despite having a hefty amount of cash in your savings account. Other times, hackers infiltrate your accounts and lick up your savings or a tech guru seated in a basement somewhere finds a way of intercepting your payments. Cybercrime in relation with financial criminal activities is becoming rampant within the globe, the African continent and even in our own country.

Haven’t we all had daunting experiences with the group of witty criminals known as ‘confirm’? They somehow manage to coax you into giving up your private information. A few hours later you find yourself in a kiosk somewhere with an avocado in your hand trying to make a payment via Mpesa or KCB only to find out that all your accounts are reading negative. Suddenly eating ugali and kales without an avocado stops being your biggest concern.

There is also a matter of fluctuations in exchange rates when it comes to international trading.

Cryptocurrency is not a new term in the African continent. This form of financial technology allows the application of decentralized technology on users’ transactions and savings, it has been proven to be quite safe. This is mainly because with cryptocurrency one does not need to disclose their name or even visit the bank. Cryptocurrencies run on a distributed public ledger known as the blockchain. This unit records all updated financial transactions by all users. The blockchain is held by currency holders. With this virtual currency you can buy goods and services through electronic transfers without any need for an intermediary. You can acquire cryptocurrency by purchasing the virtual currency with a credit card or the process known as ‘mining’. Thereafter the owner of the cryptocurrencies can store them in a digital wallet online either on a computer or any other hardware really.

Clearly this form of financial technology is appealing in terms of safety and simplicity. Why are some people still holding back from using digital money?

The fact that cryptocurrencies are almost always experiencing price fluctuations makes people shy away from using them. Merchants tend to treat cryptocurrency like leprosy; they are genuinely scared of contracting its crippling abilities given the constant price spikes. Now, if the merchants are not accepting the virtual currency, how are people meant to use it in the first place? The thing is, people are using cryptocurrencies, widely.

Let us look at the trends in the application of cryptocurrency and whether Kenya is using this digital money.

Cryptocurrency trends across Africa
In August 2018, African countries were to share their views on cryptocurrency regulation. 21 African countries did not respond on what their stance was in the matter, they claimed to still be on the fence about it. Only two countries warmed up to the idea of regulating the digital money.
Nigeria and South Africa are currently veering towards this regulation suggestion. Nigeria and South Africa are among the African countries with the largest economies in the continent.

Nigeria has whipped up plans to regulate cryptocurrencies through its Securities and Exchange Commission. South Africa started a bit earlier in the year. In April, the country began creating cryptocurrency laws through publishing a framework proposal.

With there being few countries which are beginning to see the importance of cryptocurrency regulation, you might think that the digital money is not being used by most individuals across the continent. This could not be more wrong.

Local users and cryptocurrency startups in Africa have been trading the virtual currency for a long time. This has been partly propelled by homegrown exchanges which do not seem to mind lack of defined lines when it comes to cryptocurrency regulation. A research conducted by Chainalysis shows that the total value of retail digital money transfers, which is less than $10,000 per transaction, reached the whopping heights of $316 million in June this year.

This tells us that cryptocurrencies are picking up despite the pronounced gray area of its regulation. Experts say that this virtual currency trade is not about to cripple anytime soon. Monthly trading in Nigeria and South Africa reached $549 million in August alone. This was a 49% increase since January this year. BuyCoins, a budding exchange center based in Lagos, reported that they have processed $110 million in transactions so far this year. Last year they processed $28 million.

This increasing adoption is attributed to the global pandemic, COVID-19. Luno, one of the continent’s oldest exchanges, says that there has been a 122% increase in new customers across the continent between the fourth quarter of 2019 and the second quarter of 2020.

African countries have been doing international trade for a while but there has always been an issue of fluctuating exchange rates and general hardship when it comes to international payments. The corona virus pandemic added salt to the pulsating wound and many international traders based in Africa developed migraines trying to figure out a way of solving their financial payment issues.

Cryptocurrency trade proved to be a panacea as more people leapt towards its use. They have not been disappointed.

Use of cryptocurrency in Kenya

Kenya is always seeking new, better forms of financial technology. Like most African countries, Kenya has not made defined plans surrounding cryptocurrency regulation. This is majorly due to the fact that the central bank strongly advised against the use of this virtual currency.

Aly-Khan, a Nairobi-based investor and financial analyst shared his view on the matter. He described the country’s cryptocurrency situation as dwelling in limbo. He said that this is because the central bank has a strong stance against the use of digital money.

Well, here is a huge shock. Kenya is ranked as the highest African country on the 2020 Global Crypto Adoption Index. Even without clear visible lines surrounding this virtual currency (legality and regulation), Kenyans are highly using it.

Kenyan authorities making a stance in the matter will go along way in helping Kenyans accrue cryptocurrency advantages and ultimately boosting the economy.

Do you have a digital wallet?

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