Cryptocurrency thrives in Africa amid regulatory quagmire
Africans are immersing themselves in the booming world of cryptocurrency trading to fulfill their personal financial needs and entrepreneurial endeavors.
This is despite the risks associated with these emerging digital currencies, such as Bitcoin and Ethereum.
According to Statista, the price of Bitcoin hit an all-time high again in 2021, with values surging above $65,000 in February, April, and November 2021.
He adds that the Ethereum price in US dollars reached new highs in November 2021, reaching over $4,800.
With the rise in value of cryptocurrencies, Africans are no slouch in this global trend and people on the continent are finding unique use cases for using crypto.
ITWeb spoke to some traders who are profiting from crypto trading, to find out how they do it and the challenges that come with these new assets.
Kamau Nyabwengi is a Nairobi, Kenya-based cryptocurrency trader who started out as a forex trader before dipping his toes into the crypto world.
He is the founder of Young Entrepreneurs Network (YEN) Africa, a networking platform that connects young entrepreneurs through cryptocurrency-focused events and training programs.
“I started as a forex trader in 2011. I traded currency pairs for a while before taking a long break [until] 2016 when I discovered Bitcoin,” he says.
From his experience in forex trading, Nyabwengi saw great potential in cryptocurrency trading due to the many options available and the volatility in the market.
“I immersed myself in learning how to trade them and in the process I became interested in the technology behind cryptocurrencies – blockchain. Since then I have been trading Bitcoin and developed the idea of YEN.
Kamau Nyabwengi, a cryptocurrency trader based in Nairobi, Kenya.
Just like in many African jurisdictions, Nyabwengi points out that cryptocurrencies are not illegal in Kenya.
In South Africa, major cryptocurrency exchanges recently told ITWeb that they expect greater regulation of the sector this year.
The Kenyan government has, however, repeatedly issued statements warning but not prohibiting the use of cryptography.
He says this was due to the many scams which saw many people losing money. “The scams promise huge returns either by buying the crypto cheaply with skyrocketing expectations of them or in return from the mining pools.
“Several business entities in Kenya, including ourselves, accept Bitcoin and other cryptocurrencies as payment.”
On the regulatory front, in 2019 the Kenyan government formed a Distributed Ledger and Artificial Intelligence Task Force to examine blockchain and related emerging technologies.
The working group made recommendations, including the establishment of a regulatory sandbox under the authority of the Capital Markets Authority.
Nyabwengi says two crypto start-ups have since been incubated in the sandbox. He adds that currently there is a bill in Kenya’s parliament to create regulations for alternative investment funds.
These regulations will include assets such as cryptocurrencies, with the aim of legally recognizing the fund managers of these assets and protecting investors.
“The Central Bank of Kenya has warned the public against getting involved in Bitcoin and other cryptocurrencies, citing that there will be no protection against loss. In jurisdictions like ours, the most big risk is regulation, in that the government does not provide protection against fraudulent practices in space.
He points out that the other huge risk of using cryptocurrency is the “hygiene” that surrounds it in terms of asset custody and transfer.
“If someone loses private keys or sends crypto to the wrong address, there’s not much you can do to recover or reverse the transactions. Volatility in the cryptocurrency markets is also a sword to double edged sword – it offers high returns, but if taken in the wrong direction of movement, an account can be wiped out.
Nyabwengi urges anyone wishing to get into crypto trading to seek out as much knowledge as possible first.
“Cryptocurrency trading is not a get-rich-quick scheme, but a skill that requires a lot of patience and experience. There are many resources online that can guide someone who wants to get started. to invest real money, there are platforms that beginners can use to test their trading strategies with virtual money in real market situations.
The biggest use case for cryptocurrency in Kenya and Africa is speculation, he says. “A lot of people buy different crypto assets in the hope that they will go up in value and make a comeback.
“The top two most purchased crypto assets for this purpose are Bitcoin and Ethereum. The use case for payments and remittances in Kenya is peer-to-peer for small transactions, as banks risk losing their license if they deal with cryptocurrencies. There are also a few cases of organizations such as the Kenya Red Cross using a blockchain-powered token called Sarafu Coin for basic income distribution.
Ray Youssef, co-founder and CEO of Paxful.
African Financial Lessons
Another company that operates the African cryptocurrency market is Paxful, a peer-to-peer crypto marketplace that operates in 50 African countries and has over 2.5 million users across the continent.
Company co-founders Ray Youssef and Artur Schaback say they started Paxful in 2015 to help everyone achieve financial freedom through equal access to funding.
CEO Youssef started as an entrepreneur in 2001; he founded a successful ringtone company, then created a series of start-ups before founding Paxful.
Schaback, who is the COO of Paxful, started out as an Android developer and previously owned his own web performance and blockchain software company.
Youssef says, “Africa is teaching us the real use cases of bitcoin and the opportunity it presents for greater financial inclusion. We have found that Africans are using crypto to meet both their personal financial needs and their entrepreneurial endeavors – through remittances, e-commerce, payments, wealth preservation and social good.
“What is most exciting is seeing users create side businesses and their own businesses, which include remittances, as well as import and export businesses.
“Take Joseph Ebuka, for example, a Paxful peer in Nigeria who buys art with bitcoin. Most of his income is in crypto and it is more convenient for him to pay for goods and services with Bitcoin.
According to Youssef, stories like Ebuka’s have global implications for showing how Bitcoin and other cryptocurrencies are becoming a serious financial competitor for everyday transactions in Africa.
Like Nyabwengi, Youssef notes that calls for cryptocurrency regulation are growing across the world, with more governments expected to formulate enabling regulations, “and rightly so as we see rapid growth in the global economy. bitcoin.
“If we are to achieve global adoption and secure the evolution of blockchain technology and cryptography, regulation will be necessary.”
However, he says any form of regulation shouldn’t hurt the value of peer-to-peer financing deals.
“The African continent can only benefit from access to a global currency such as Bitcoin which can help boost economies and create jobs. We would like to work directly with governments to issue regulations that bring clarity to our users – we are very open to dialogue in this regard.