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Banks and Cryptocurrencies Global Evaluation: Africa

Bitcoin and blockchain tech are ripe for mainstream adoption in Africa, where the population is well positioned to embrace the innovative technologies as alternatives to the expensive and/or outdated banking systems scattered across the continent.

Lack of economic infrastructure paired with inadequate financial education has left a large portion of Africans without bank accounts or basic monetary means. However, in many countries the proliferation of smartphones has allowed access to alternative financial services which have become a dominant means of payment, especially among the high proportion of millennials.

Bitcoin’s appeal is in large part due to its accessibility and inclusivity, but the trust-free component of using cryptocurrencies also resolves the long standing issue of Africans’ distrust of banks on online payment platforms.

The pan-African crypto community officially launched the continent’s first multinational cryptocurrency, Nuru Coin, in February. Many hope it will help facilitate trade among African countries and provide financial services to people who otherwise would never have access to a traditional bank account. But mainstream adoption of its use requires more awareness of the potential benefits of the technology.  

Anticipation of a tech-revolution in Africa has been escalating since late 2017. Governments have shown little uniformity in their approach and attitude toward the booming crypto markets on the continent, but the underlying sentiment toward cryptocurrencies and decentralization is that it can provide humanitarian relief and transform the lives of underserved populations.

The following assessment of cryptocurrency regulation in Africa is a part of a larger series of pieces evaluating regulation of the flourishing global fintech industry. Part one of the series looks at activity in Asian hotspots like Japan, Hong Kong, Singapore, and Taiwan, and how governments are facilitating or hindering growth. Part two examines crypto regulation and the critical attitudes held by many European leaders. Part three analyzes the varying attitudes of western leaders on the disruptive new technology, and how regulatory agencies in the Americas are preparing for mainstream adoption of cryptocurrency.

The list below is based on thorough news research, but should in no way be considered complete. If you have more detailed information on banks and the crypto relationship in your country, we encourage you to share it in the comment section.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, and you should conduct your own research when making a decision.

LEGEND

South Africa

South Africa 

South Africa launched its first governmental cryptocurrency startup, Project UBU, in late 2017. Similar to other projects that aim to alleviate impoverished families, the objective of Project UBU is to distribute universal basic income to underprivileged South Africans.

Blockchain and cryptocurrencies are popular in South Africa, where financial institutions are taking notably progressive steps toward involvement in the industry. The Blockchain Africa Conference has convened every year since 2015 in Johannesburg, and partners with IBM and Microsoft, which have been the biggest contributors to Africa’s technological development over the past century.

The South African Reserve Bank established a Financial Technology Program, which aims to analyze fintech developments and advise the government on appropriate regulations. Additionally, it launched a blockchain project based on Ethereum’s distributed ledger technology and will experiment with interbank payments.

Although the government has not set clear regulations and rules for using virtual currency, it does not recognize Bitcoin as legal tender, and the South African Revenue Service considers cryptocurrencies intangible assets that are subject to normal income tax rules.

Nigeria

Nigeria

The Central Bank of Nigeria first announced a commissioned study on virtual currencies in August 2017, with an objective to gather stakeholders to brainstorm and exchange ideas–proving the country to be a leader in blockchain and Bitcoin regulation in Africa.

Shortly thereafter, the Blockchain Education Network of Nigeria and Blockchain Nigeria User Group hosted the country’s first blockchain conference, where ten startups and countless industry leaders were present and discussed incentives to bring blockchain startups to Nigeria.

Another conference hosted by Techpoint scheduled for later this month will supposedly have over 5,000 people in attendance. But the active tech community has yet to see any regulatory response or direction from the government.

Things could be changing soon, however. Earlier in April the lower chamber of the Nigerian National Assembly adopted a bill titled “Need to Regulate Blockchain Applications and Internet Technology,” and called on the central bank to assist in creating regulatory framework for blockchain developments and other fintech.

Uganda

Uganda

The Bank of Uganda issued a warning to investors about the associated risks with cryptocurrency in March of last year. However, this has not stopped global investors from opening exchanges in the country and pursuing opportunities to strengthen the Ugandan economy.

Recent reports show the Ugandan government is interested in using blockchain tech to provide basic public services and to better position Uganda in the global marketplace, which is largely driven by technological innovations. A conference hosted by AfricanBlockchain.org is scheduled to take place next month where leaders will discuss viable plans to integrate blockchain into the economy.

The Ugandan blockchain organization, Crypto Savannah, partnered with the global crypto exchange Binance in April in an effort to support economic development in the country, which is considered the poorest country in the world with a GDP of $2,000 per capita and a population where 77 percent are bankless.

Kenya

Kenya

The Central Bank of Kenya issued a warning to banks in April, urging them to reject crypto related transactions and entities, and likened Bitcoin to a pyramid scheme. But Kenyan crypto investors have yet to see any clear regulatory guidelines.

The central bank’s governor expressed support of blockchain technology, though banks have maintained a cautious and skeptical attitude toward digital currency since 2015.

Finterra, a globally present blockchain company, officially established a Kenyan firm in response to the heightened interest in blockchain after President Uhuru Kenyatta said the country should explore the technology’s potential utility.

A blockchain task force was created under the president’s directive in March. Many enthusiasts hope to see distributed ledger technology be utilized for land ownership registry, and for strengthening existing mobile money services.

Kenya’s largest mobile network operator is responsible for launching M-Pesa, the mobile phone money transfer and payment service, which boasts 30 million users and increasingly challenges the dominance of traditional banking. However, regulatory uncertainty in Kenya led M-Pesa to deny services to Bitcoin trading platforms.

Egypt

Egypt

In early 2017, a local Bitcoin enthusiast likened the use of cryptocurrency in Egypt to that of narcotic drug use, claiming a friend was jailed without trial for using the site localbitcoins.com.

By mid 2017, when reports surfaced with claims that the first Bitcoin exchange had launched in the country, the Central Bank of Egypt reiterated the legal status of cryptocurrency and denied that any exchanges had been authorized.

The legality of cryptocurrency is covered by Egyptian law that stipulates transactions with foreign entities be limited to official banks only, and also bans electronic banking.

Despite the recent announcement by an Islamic cleric claiming virtual currencies are halal, there is confusion in Egypt over the acceptance of digital currency under Sharia law. Historically speaking, Islam only recognizes “commodities of intrinsic value” as acceptable currency.

The government consistently rules against cryptocurrency, but it recently allowed the Central Bank of Egypt to join the American-based R3 blockchain consortium to experiment with evolving technologies.

Rwanda

Rwanda

The Transform Africa Summit in Kigali, Rwanda, attended by over 4,000 delegates including heads of state, fintech companies, blockchain experts, government regulators, AI firms, investment banks, and venture capitalists, took place recently on May 7-10.

The diverse turnout with representatives of both public and private sectors, and the conference’s theme, “Accelerating Africa’s Single Digital Market,” is exemplary of the collective effort by leaders to ensure that Africa is not left behind in the oncoming digital revolution.

The National Bank of Rwanda published a document earlier this year detailing the bank’s position on cryptocurrency and the potential risks associated with the new cryptocurrency market in regard to established financial institutions. The bank concluded that its preparations for mainstream adoption of cryptocurrency include creating and regulating a bank-owned currency.

The Kenyan-based blockchain payments platform, Bitpesa, has expanded over East Africa since it was established in late 2013, yet the cryptocurrency trend hasn’t been confronted with a regulatory response from the governments in the region. The forewarning from the National Bank of Rwanda, however, proves that monetary authorities in these places are preparing for the next technological wave.

Zimbabwe

Zimbabwe

At the end of last year, Zimbabwe’s central bank, the Reserve Bank of Zimbabwe, announced that Bitcoin is not considered a legal currency. During a period marked by political turbulence, the bank claims to be engaging in research and development of possible regulations for crypto markets, but the future of Bitcoin is still up in the air as there have been no proposed regulations. 

The central bank’s announcement came days after a military coup successfully overthrew the Zimbabwean government, causing Bitcoin’s price to surge by 10 percent on Golix, the country’s largest cryptocurrency exchange.

Golix reportedly opened Bitcoin ATMs in the capital city and loaded them with U.S. dollars last month. Zimbabwe has some of the worst recorded inflation levels in modern history, and recently ditched its national currency for a multi-currency system that heavily relies on the U.S. dollar.

Tanzania

Tanzania

Onlookers took note of Bitcoin’s growth in Tanzania when trading volume on the exchange, LocalBitcoins, spiked last summer. The increase of Bitcoin use in Tanzania is a significant indicator that cryptocurrency is expanding from African crypto hotspots like Nigeria to rural nations.

The Central Bank of Tanzania commented on the recent Bitcoin price surge in March by linking it to market speculation, and cautioned investors who are buying and selling in the high-risk market. Bitcoin first caught the bank’s attention last December, and it has since been studying Bitcoin carefully in order to create viable regulations in the future.

The Tanzanian government has not officially banned cryptocurrencies, and the crypto community in the country is awaiting regulatory direction from the bank and other regional regulators.

Botswana

Botswana

Although there is no Bitcoin exchange present in Botswana, the country maintains a small but active cryptocurrency and blockchain community. Many traders travel to neighboring countries like South Africa to use exchanges, or utilize online trading groups.

However, Botswanans have taken an interest in blockchain and have held the country’s first ever Bitcoin and Blockchain Summit in 2016. The country currently has three blockchain startups, all of which aim to serve the needs of the largely unbanked population.

The Bank of Botswana has not issued any regulations for the market, and at the end of 2017 claimed it had no interest in studying cryptocurrencies in general.

Ghana

Ghana

In 2015, the Bill and Melinda Gates Foundation donated a research grant to a Ghana-based blockchain startup, Bitsoko, with the objective of promoting acceptance of mobile money for everyday use, and providing a cheap and efficient cross-border payment system.

However, Ghanaian banks are restricting the use of cryptocurrency out of concern for its use in illegal activity, like money laundering and terrorist funding. The central bank of Ghana announced Bitcoin is not legally recognized earlier this year, but hinted at an interest in blockchain tech to enhance payment and settlement systems.

Morocco

Morocco

The Moroccan Foreign Exchange Authority and central bank officially outlawed cryptocurrency transactions in late 2017, and sending and receiving payments is punishable by fine. The Foreign Exchange Authority insisted all foreign payments must pass through authorized intermediaries and the central bank.

Algeria

Algeria

The National People’s Congress of Algeria proposed a finance bill at the end of 2017 which will declare Bitcoin usage and ownership illegal if signed into law.

Other provisions of the bill address the potential of cryptocurrencies being used for illegal activity, such as for drug trafficking and tax evasion, which is likely the cause of concern and strict response from the government.

Ethiopia

Ethiopia

The Ethiopian Ministry of Science and Technology signed an agreement with the cryptocurrency startup Cardano earlier this month. The memorandum of understanding signed by the two parties intends to guide blockchain development and training for the country’s agritech industry.

More specifically, the ministry is said to be collaborating with Cardano to create a blockchain application for coffee shipments, the country’s largest export.

Sierra Leone

Sierra Leone

Media hype centered around the possibility that Sierra Leone used blockchain tech to tally votes in the most recent presidential election ended with disappointment and allegations.

The National Electoral Commission responded to the media speculation and denied that it used the voting tech company Agora for the national election. Agora also responded, saying it did play a legitimate role as an international observer, but did not serve in any official capacity in terms of election results.

The first, second and third volumes of our Banks and Crypto Evaluation were about Asia, Europe and Americas respectively.

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Central Bank Of Kenya Warns Banks Against Dealing In Crypto

The Central Bank of Kenya (CBK) has issued a circular to all banks in the country, warning them against dealing with cryptocurrencies or engaging in transactions with crypto-related entities, local news outlet Standard Digital reports today, April 13.

CBK Governor Patrick Njoroge mentioned the circular when speaking in front of the National Assembly Committee on Finance, stating that CBK’s warning fell in line with other regulators globally, according to The Star:

“The actions of CBK are consistent with those taken by other regulators globally, most of whom have taken a cautious approach towards crypto-currencies.”

Njoroge cited crypto’s prevalence to be used for illegal activities, its anonymous nature, and its lack of centralized control as impetus for the ban:

“There are risks associated with cryptocurrency particularly on consumer protection, fraud, hacking and loss of data and they are prone to be used as pyramid scheme.”

According to The Star, Njoroge expressed support for innovation in technology, but noted that some of the new technologies could be dangerous for the financial sector.

The CBK had warned the public against Bitcoin (BTC) and other cryptocurrencies back in December 2015, citing its lack of regulation and recognition as legal tender.

India’s central bank announced that they would be ending all dealings with crypto-related entities last week, and China’s central bank warned against the dangers of Initial Coin Offerings (ICO) in September of last year.

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Kenya's Central Bank Chief Warns Again On Crypto Risks

The Central Bank of Kenya (CBK) is once again seeking to dissuade domestic businesses from dealing in cryptocurrencies.

Following what the institution called massive price volatility in the sector, the national bank has issued a circular to financial institutions on the subject, a development revealed in an appearance by the governor of the CBK before the nation’s parliament, domestic news outlets report.

In statements, Patrick Njoroge, the governor of the national bank, sought to expand on past public statements, including a notable one in November in which he warned investors similarly.

He said this week:

“There are risks associated with cryptocurrency particularly on consumer protection, fraud, hacking and loss of data and they are prone to be used as pyramid schemes.”

Njoroge went on to allege that the features of cryptocurrencies make them vulnerable to money laundering and terrorist financing, while mentioning that emerging technologies are broadly prone to risks.

As such, Njoroge’s comments build on the public statements from senior African officials. Countries such as Zimbabwe and Namibia , for example, have sought to brand the technology as illegal, while Zimbabwe’s central bank said in November that cryptocurrency “is not actually legal.”

Kenya flag image,  via Shutterstock

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Financial Inclusion and Efficient Remittance System Can Save Africa From Mediocrity

Blockchain technology is giving Africa the opportunity and platform to stand for herself, especially in the financial technology ecosystem.

In a recent speech, while welcoming the President of France, Emmanuel Macron, the Ghanaian President, Nana Akufo-Addo emphasized that it is the responsibility of Africans to develop their nations by themselves. Akufo-Addo notes that it is not right for African nations to continue depending on the generosity of European taxpayers for aid and support, but that the continent should be able to handle their own basic needs by themselves.

Akufo-Addo said:

“Our main responsibility as leaders and citizens is what we need to do to grow our own countries.”

The role of fintech in development

Already acknowledged as underdeveloped when compared to other continents like Asia, Europe and America, most of the problems faced by the 1.2 bln people of Africa are directly or indirectly connected with financial inclusion and remittances.

Easy access to funds and efficiency of transactions have proven to be major determinants of wealth creation and growth in today’s world. As a matter of fact, in some cases it stands out as the difference between development and primitive existence. This is evident in the dynamism and rate of change in communities where improved fintech products have been launched.

Typical examples include Kenya, whose rate of adoption of mobile money services has shown impressive results and consequences. Malawi is another great example; the country is taking significant steps to improve financial access such as setting measurable financial inclusion goals and joining both the Maya Declaration and the Better Than Cash. This progress on the regulatory and public policy side is reflected in its relatively high scores on country commitment and regulatory framework.

Dickson Nsofor, Founder of Kora Network, said:

“Financial services have been proven to help grow wealth. Unfortunately, for much of the world access is uneven and expensive. In many places formal banking is seen as something exclusively for the wealthy. Banks require high minimums and fees for opening and maintaining accounts. Due to the cost to serve and inability to prove identity, many financial institutions don’t open branches in remote or low-income areas, requiring people to travel for hours to transfer money.”

The emergence of Blockchain technology reveals huge potential in solving these problems and enabling the development of the continent.

Financial inclusion and remittances

According to Nsofor, technology is a big value add-on to humanity, although it has some disadvantages that cannot be overlooked. He notes that startups are the engine room of any nation that wants to remain competitive on a global scale. As an example, we can see how companies like Uber, Lyft, Facebook, PayPal, Instagram and others have shaped the world and added numerous economic benefits while bringing a total overhaul of the traditional systems.

The search for a better quality of life has led to the massive exodus of Africans, especially youths, to the West. As a result of this high rate of migration from Africa to the more developed parts of the world, sending money the other way round has grown to become a huge industry on its own. Emigres, therefore, need to send money back home for several reasons, most of which revolve around taking care of families and relatives.

Remittance money mostly for basic needs

The most common investment that families make with remittance money is education. One study by the World Bank showed that households in Ghana receiving remittance payments  reduced their spending on food by at least 14 percent (meaning they had more disposable income in hand), and increased the margin on education by as much as 33 percent. In Nigeria and Kenya, more than half of total remittance spending is invested in homebuilding, land purchases and farm improvements.

Laolu Samuel-Biyi, director of remittances at SureRemit tells Cointelegraph:

“Diaspora remittances are an important income source for individuals and families across Africa and other major remittance corridors. Nearly half of these funds are sent home to support with basic needs like food, clothing, education, medicine and utility bills. The earning power of a significant portion of the population in the developing world is relatively low, so, many people rely on international remittances for their basic needs. The volume of funds will continue to rise as migrants prosper abroad.”

Samuel-Biyi notes that cross-border remittances are still tedious and costly to execute, largely because of the procedures required by financial institutions and governments to facilitate money transfers. However, the emergence of Blockchain technology provides the opportunity to remove many complicating layers inherent in the traditional remittance process, thereby making cross-border value transfers cheaper, faster and more secure.

With the liberality presented by Blockchain technology and the opportunity that it offers innovators to create and develop independent ideas, Africans are seizing the opportunity to free themselves from the shackles of underdevelopment and total dependence on their Western counterparts.

Obviously, total emancipation will not happen overnight, but a journey of a thousand miles must begin with one step. The attachment of financial solutions to the various aspects of development makes it expedient for Africa to take advantage of the opportunities presented by Blockchain and decentralized ledger technology. This will enable the continent to solve its peculiar problems and place itself on the same platform as its counterparts in the comity of nations.

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Kenyan Police Arrest Bitcoin Traders Due to Alleged Banking Fraud

The Kenyan police have arrested three peer-to-peer Bitcoin brokers Emma Kariuki, Stanley Mumo, and Timothy Gachehe for allegedly trading stolen money through the local trading platform LocalBitcoins. The funds were reportedly stolen by a person using the pseudonym “BADASS20” from the I&M Bank and a Safaricom Pay Bill account.

According to a report by regional media Kenyan Wall Street, the anonymous thief has stolen KEH 10.2 mln (around $100,000) from the financial establishments and used the money to purchase Bitcoins via the exchange LocalBitcoins.

The local police were able to trace the stolen money to various bank accounts, including those owned by the arrested Bitcoin traders.

During the police investigation, the traders claimed that they were not aware that the money used by the anonymous thief to buy Bitcoin was stolen and they were just doing what they claimed as a “normal” trading activity. Based on their chat history on the trading platform, they seem to be telling the truth.

In spite of their seemingly valid defense, the Kenyan Banking Fraud Investigation Unit (BFIU) still arrested the traders and froze their bank accounts. The brokers, however, were able to post bails and were eventually released. They are scheduled to attend a preliminary hearing in December 2017 in advance of a full hearing in January 2018.

State of cryptocurrency trading in Kenya

The digital currency peer-to-peer (P2P) market in Kenya is flourishing despite the warning issued by the country’s central bank in 2015, advising citizens to refrain from transacting Bitcoin and other virtual currencies.

This latest case of banking fraud involving the cryptocurrencies is expected to have a chilling effect on the local virtual currency market. It remains to be seen, however, if this incident will compel the government to introduce drastic measures to regulate the market or the industry players will just consider it as an isolated case and ignore it.

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Why is Africa Slow on the Bitcoin Uptake?

There are masses of potential for Bitcoin in Africa. It’s a monetary system for the unbanked, it’s trustless and far less corruptible, and it can create a new monetary system where there’s no long legacy of banking and financials.

However, across the continent, in different countries, the uptake has been surprisingly slow. From South Africa and Nigeria, as the biggest players in Bitcoin, to smaller nations like Tanzania who are seeing big growth, but with small numbers.

Education and industry

Perhaps one of the biggest issues facing Bitcoin adoption in Africa is educating people about digital currencies. Bitcoin and the cryptocurrency world is still a foggy minefield for those who are actively using it, so it’s difficult to try and educate a whole continent

Africa is largely a cash-based infrastructure with a simplistic model, even banking is still a novel concept to a large portion of the population.

However, there’s also not much alternative, if understanding and education in digital currencies is low, their adoption in industry and retail is even lower.

Chad Robertson, co-founder and chief executive officer of South African startup Regenize, says awareness will help:

“Specifically, in South Africa, we have such a huge gap that keeps on growing regarding wealth, but also knowledge, on the ever-changing tech landscape. If I’m sitting in a coffee shop in the CBD, it’s quite likely someone will know what Bitcoin is. However, head down to the Cape Flats or townships (slums), and it’s highly unlikely that there’ll be many people who are aware of this.”

But again, Robertson brings it back to industry. Those who will accept Bitcoin in Africa are even rarer than those in the rural areas that have heard about it.

“However, this lack of education and awareness could be drilled down further on to find the root cause. There are too many people living in poverty in South Africa and Africa. They simply cannot think about using Bitcoin, as it’s not relevant to their needs. The local spaza shop (corner shop) does not accept Bitcoin, so how will someone get their bread or milk? Schools don’t accept it for school fees. You cannot buy electricity with Bitcoin to keep your lights on. So why would they care or want to be educated on it?”

Security

Of course, Africa is a diverse place, and one that has a huge gap between rich and poor. So while those near the bottom of the economic rung may not have heard of Bitcoin, or see any place to use it, those near the top have other issues.

Security concerns also need to be addressed before mass adoption, which also links back to education. Robertson said:

“There are many people who’ve been scammed on the Internet, especially those who are digitally uneducated. Therefore, there’s a fear and a stigma around using the Internet as a place to transact.”

Visibility is also an issue, with the majority of Africans used to having a brick and mortar institution available for their enquiries.

“With Bitcoin, there’s no visible place to lay a complaint or an enquiry. I would think change management would play a large role in the transition from using a bank. For generations, people have given their money to the bank and there’s a trust, as the bank is a brick and mortar institution. With Bitcoin, people might have fears of what happens to my money? Who do I complain to?”