An Untapped Market: The Relationship of Blockchain and Regulators in Africa

When it comes to the use of digital solutions for financial transactions and the rapid implementation of that technology, African countries are not unfamiliar with it. Because of the prevalence of mobile telecommunication usage in the country, it has continued to take the lead over other, more developed countries. Because of the abundance of telecommunication companies in these countries, the use of local mobile and e-payment platforms has become widespread. In fact, multiple companies have seized this as an opportunity for innovation in terms of financial transactions throughout the continent.

However, not everyone on the continent has the capability to access these platforms and innovations. In fact, the Sub-Saharan Africa region has the second-highest population of unbanked individuals in the world. About 350 million people, in fact. It is believed that approximately two-thirds of the sub-Saharan population do not have bank accounts. Fortunately, Blockchain tech can fix this, but only if African regulators are able to address this problem quickly.


Africa’s financial environment

Foreign remittance has remained a primary source of income for multiple African communities. A high percentage of migrant workers, both within and between African countries, has resulted in an inconsistent and under-addressed need for alternative ways for remittance, ways that are separate from that of traditional banking. Although multiple factors should be taken to account, the current financial environment in sub-Saharan Africa is one of the main reasons as to why the perfect environment for innovation has been created. New, more consumer-oriented methods of moving value are needed to solve the challenges that a distributed ledger would be able to solve.


Government response

There has been a mixed response from African governments with regards to the use and regulation of cryptocurrency and blockchain within Africa. Aiming to understand how to best regulate the use of the new technology, some governments have taken a positive perception of the integration. Some governments believe that they need to wait and see what the outcome would be before they act. However, there are other governments that have been apprehensive, reserved, and even unreceptive to the use of the technologies. Countries like Zimbabwe and Namibia have expressed a harder stance towards the technology, while Mauritius has become a regional standard-bearer for Blockchain regulation. Because of the safe area created by Mauritius, they are able to present a progressive take on the general economic and financial benefits that could lead to a friendlier approach towards cryptocurrencies within Africa.

In the country of Kenya, their central bank has rejected the use of digital currencies because of its unregulated nature. No regulations have been issued by any company within the country as well. However, blockchain systems have already started infiltrating the country’s financial systems, with individuals using the system for themselves. Because of this, the government has established a task force dedicated to exploring the use of digital currencies and how it could be utilized on a bigger scale by the people of Kenya.

Even if there is a lack of specific and targeted regulation within South Africa, there has been a positive response generated from regulators who are working with FinTech and banking industries. They are making efforts in order to discover how to best regulate crypto in South Africa. So far, the country has presented positive reactions regarding the concept of cryptocurrencies and its integration within the financial system. Currently, they are researching the effect of distributed virtual currencies in order to streamline a system that is part of a project that the government is working on.

Governments are realizing that soon, there will be little differences between domestic and international payments. Given this, some believe that similar digital currencies may become more widespread and be at the heart of national payments systems in the near future.

Given the malleability of Africa’s financial environment, there are so many opportunities that are available to FinTech and RegTech companies everywhere. However, the challenges that they will be facing are still substantial. Given the speed of the innovation happening within the region, there might be a time where they are able to develop regulations for FinTech with the intention of targeting foreign investment.

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