The IMF wants to increase the regulation of Africa's crypto markets

The proposal comes in the context of FTX’s downfall and the subsequent drop in the prices of Bitcoin, Ethereum, and other crypto assets. According to IMF citing a Chainalysis report, Africa’s crypto market is growing at a rapid pace, but it’s still one of the smallest in the world with crypto transactions peaking at USD 20 billion per month in mid-2021. 

One of the main concerns is that cryptocurrencies can be used to transfer funds illegally out of the region, while widespread crypto use could affect monetary policy effectiveness. The IMF is particularly worried about countries where crypto is accepted as legal tender, a statement based on data from the October 2022 Regional Economic Outlook for sub-Saharan Africa report. 

For instance, the Central African Republic was the first country in Africa and the second in the world after El Salvador to designate Bitcoin as a legal tender, which has put it at odds with the Bank of Central African States (BEAC). 

IMF’s data shows that 25% of countries in sub-Saharan Africa have formally regulated crypto while two-thirds have explored and implemented a number of restrictions. On the other hand, crypto assets are banned in African countries such as Tanzania, the Republic of Congo, Cameroon, Ethiopia, Lesotho, and Sierra Leone. 

The highest number of cryptocurrency users in the region are from Kenya, Nigeria and South Africa. According to cointelegraph.com, the cryptocurrency market in Africa has seen a sharp growth of more than 1,200% between July 2020 and June 2021.

African countries and CBDCs

In October 2021, Nigeria has launched its central bank digital currency (CBDC), the eNaira, which aimed to digitise payments and increase financial inclusion in Africa's most populous country. In May 2022, the Central Bank of Nigeria (CBN) upgraded the CBDC to make onboarding easier and to allow it to be used on a wider range of goods and services. 

Ghana is another African country that has explored the implementation of a CBDC. In June 2022, The Central Bank of Ghana (BoG) has announced it granted Vodafone Cash and CalBank customers the opportunity to test the online version of its digital currency (CBDC), the eCedi.

BoG has created online and offline wallets for eCedi to ensure convenience and easy accessibility for users but has only deployed the pilot programme in a few key regions. The Central Bank’s governor claimed the pilot programme received positive feedback, indicating that the country may be ready for a nationwide roll-out of the digital currency in the future.