Is Africa a Sleeping Crypto Giant?

Africa is the second-largest continent in the world, with almost 20% of the global population and more than 1.46 billion people living there. That’s why the local level of crypto adoption influences global numbers. In terms of crypto regulation, this region still stays in a grey zone. Most nations on this continent haven’t issued any legal framework on virtual currencies. Among 54 UN member states, less than 10 have legal acts on this topic.

However, Africa is moving toward the legalization of cryptocurrencies and VASP operations. The region's greatest economies by GDP, Nigeria, and South Africa, already have the following procedures. One more local country with a perspective economy, Kenya, is also working on its own crypto regulation framework. Last, but not least, Namibia and Botswana, South Africa's neighbors and former British colonies have also enacted legislation on this topic.

In this article, I’d like to describe countries that stay ahead in crypto regulation. Nevertheless, several African countries still ban crypto like Egypt and Morocco, for example.

Central African Republic

One more nation in Africa which tried to make cryptocurrencies legal was the Central African Republic (CAR). In April 2022, the National Assembly of CAR declared bitcoin legal tender on the initiative of President Faustin-Archange Touadéra. However, this intention was quickly scrapped.

In June 2022, CAR froze crypto legalization under pressure from the Bank of Central African States (BEAC). It also has postponed the ICO of the state cryptocurrency, SangoCoin. And it is still being determined when cryptocurrency payments will become legal in BEAC countries. In my opinion, BEAC agrees on this topic with IMF.

South Africa

South Africa is the most advanced African state in the field of crypto regulation. The country legalized crypto in 2022. VASP licenses are issued by the local financial regulator (FSCA) under the FAIS ACT, in March 2024 it has approved 59 VASPs to operate in the country.

Moreover, in April, the regulator claimed that already 75 VASPs are registered as crypto asset service providers (CASPs). CASP is a special category of FSP (financial service provider) license.

Virtual assets have the same legal status as financial assets, making the current framework understandable and predictable. South Africa is currently on the FATF gray list, which may be one reason the regulator introduced a requirement for all cryptocurrency companies in the country to register.

South Africa has also allowed crypto payments, and the local tax authority (SARS) and created a regulation framework for crypto taxation. The basis of this approach is that cryptocurrencies in a country are regulated and taxed like other financial assets in accordance with the country's legislation.

The capital gain tax rates for virtual assets are the same as for other forms of wealth: 18% for individuals and 21.6% for corporate capital gains tax.

Nigeria

Along with the Republic of South Africa, Nigeria is the largest economy in Africa. The country has 230 million inhabitants, at least 12 million of whom use crypto. Some sources even count more than 45% of crypto adoption there.

This fact makes Nigeria one of the largest crypto markets, comparable to Argentina and even the United States, regarding the number of crypto users. The Central Bank of Nigeria was firmly against legalizing cryptocurrencies and banned crypto transactions for a long time.

Moreover, Nigeria was one of the first major economies to implement its CBDC, E-naira. One of the goals of the CBDC issue is to offer residents an alternative to cryptocurrencies and cash in order to control all processes in the economy.

However, Nigeria's SEC took a different stance and legalized crypto transactions (exchange and storage) in May 2022. On the other hand, direct crypto payments still have no legal status, and the taxation system for cryptocurrencies is still in its infancy. According to the Finance Act, the capital gains tax (purchase of cryptocurrency) is 10%.

Unfortunately, Nigeria has recently worsened its attitude towards cryptocurrencies. The country's authorities have launched an investigation against Binance, and the exchange has officially stopped operating in the country. Other foreign exchanges also have issues with operations in the country

Kenya

This nation is the third largest economy in Sub-Saharan Africa after South Africa and Nigeria. In December 2022, local regulators issued a joint communique about crypto regulation. Based on the local Capital Markets Bill, this nation should implement a crypto regulation and taxation framework. The type of applicable tax on cryptocurrency gains depends on the time period during which the holder owns virtual assets.

Personal income tax (up to 30%) is applied if the period is shorter than 12 months, and capital gain tax (15%) is applied for a longer period. However, a complete VASP regulation framework and licensing procedures are still in progress and will probably be implemented during this year.

Other Nations

The first country in Africa that adopted crypto regulation before anyone was Mauritius. It issued a legal framework for crypto assets and ICO in December 2021. FSC of Mauritius is the regulator. However, we have no information yet on how this law is enforced and what companies operate in Mauritius.

As mentioned above, Namibia and Botswana are other African nations with crypto regulation procedures. Botswana passed the Virtual Assets Act at the beginning of 2022 and has already issued the first crypto licenses. Namibia approved the crypto bill in 2023.

Also, Ghana has been working on new regulations for cryptocurrencies since December 2023, and it has created a special task force for this purpose. Despite the formal ban on cryptocurrencies, the Central Bank of Morocco announced its desire to legalize them in 2022.

Conclusion

South Africa and Mauritius were the first African nations to adopt crypto regulation into their legislation. They were followed by Nigeria, Namibia, and Botswana. A cryptocurrency law in Kenya is also in the process of being passed. Thus, there are only six countries in Africa that have clearer regulations on virtual assets.

According to my information, the rest of African nations have no regulation of cryptocurrencies yet. Among the factors holding back the development of crypto regulation in Africa are: the high inflation rate in many countries in the region, the low standard of living, and the general difficulty in developing legislation.

Another factor that slows down the legalization of cryptocurrencies in the region is the need to coordinate these laws with international organizations such as the IMF.

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