Booming African crypto adoption drives concerns over regulation

2020 has seen an acceleration in African crypto adoption, with the continent emerging as the second-largest region for peer-to-peer trading, and two African nations ranking in the top eight of the Chainalysis crypto adoption index.

The booming growth has caught the attention of Africa's financial regulators, sparking concerns that a rush to introduce heavy-handed oversight could quell innovation in the local crypto industry.

Centralized exchanges have also reported a spike in trade activity, with Luno reporting $549 million worth of combined volume from Nigerian and South African customers last month - a 49% increase compared to the start of 2020.

Marius Reitz, Luno's general manager for Africa, told business publication Quartz that the increasing demand for crypto is being driven by the benefits that virtual currency offers over the notoriously exclusive local banking sector.

Reitz notes that crypto assets are seeing increasing popularity among Africa's large community of workers who live away from their home countries, with the steep fees on foreign exchange across the continent driving these migrants to explore crypto assets.

Lagos-based BuyCoins exchange has also noticed growth in "People trying to move money in and out of the country" with the exchange hosting $110 million in crypto volume this year, up from $28 million during the entirety of 2019.

The increasing popularity of crypto has also brought greater regulatory scrutiny - with African lawmakers analysts appearing divided on how to best respond to the crypto phenomenon.

In April, South African regulators proposed regulations that would impose strict licensing and monitoring requirements but do not recognizeng crypto assets as legal tender.

Last week, Nigeria's Securities and Exchange Commission proposed guidelines that would treat all crypto assets like securities by default.

Stephany Zoo of the Kenya-based exchange Bitpesa welcomed the consumer protections that will come from increased regulation.