The cryptocurrency crisis is also hitting hard in Africa
The bankruptcy of Ftx and the cryptocurrency crisis also had a strong impact in Africa, where digitization is growing but regulation is not keeping pace
The new round of cryptocurrency crisis following the bankruptcy of FTX , the popular exchange led by Sam Bankman-Fried, is hurting investors around the world. And it is also having a strong impact in Africa, where the level of digitalisation, although lower than in other continents, is growing, especially in some countries.
THE TROUBLE OF NESTCOIN IN NIGERIA
In Nigeria – Africa's largest economy: the European Union wants to support its digital transition with an investment plan of 820 million euros over three years – the blow has been blamed above all by Nestcoin, a startup founded by Yele Bademosi, ex-manager of Binance, the main cryptocurrency exchange .
The company had to lay off some employees: Bademosi explained that FTX's bankruptcy “had an impact on us, who kept our assets in FTX. As a company we have to change our plans, rethink our strategy… Unfortunately this means saying goodbye to some of our very talented Nesters”.
THE COLLAPSE OF CRYPTOCURRENCIES AND THE NIGERIAN NAIRA
Lucky Uwakwe, CEO of technology firm SaBi Groups and a key player in the African cryptocurrency industry, told Quartz that the losses caused by the bankruptcy of FTX were huge. “Many cryptocurrency investors are heartbroken and angry” about FTX's malpractices. “Some have just lost their entire fortunes. As the naira continues to fluctuate, it is a double loss for Nigerians withdrawing their money from other cryptocurrency platforms. Conversions against the dollar are lower”.
According to Uwakwe, the FTX crisis has affected six platforms in Nigeria and more than fifteen in the rest of Africa, mainly in Kenya, South Africa, Egypt, Uganda, Tanzania and Senegal.
THE REGULATORY PROBLEM IN AFRICA
Quartz writes that while some users in the Bahamas and the US were able to withdraw their crypto funds before the situation escalated, African investors may not be able to get their money back.
Uwakwe thinks the continent needs better regulation of cryptocurrencies. “It is time for Africa to enact laws that hold foreign companies accountable for their actions. If the African Union is slow to push for these laws, then regional blocs such as the Economic Community of West African States (ECOWAS), the East African Community (EAC) and the Southern African Development Community (SADC ) should lead the way in protecting Africans from future economic shocks caused by foreign actors.”
Many central banks on the continent (such as those of Ghana, Kenya, Namibia, Nigeria, South Africa, Tanzania, Uganda and Zambia) have warned of the risks of trading cryptocurrencies, but their citizens have generally continued to trust the platforms in the hope of get high returns. Only Ethiopia seems to be regulating the sector with some seriousness.
AFRICA'S ENTHUSIASM FOR CRYPTOCURRENCIES
Benjamin Arunda, a member of the Blockchain Association of Kenya, told Quartz that the collapse of FTX has damaged the reputation of centralized platforms, but has not significantly dented the enthusiasm for cryptocurrencies.
“The crypto industry,” he argues, “has gotten dynamic, with multiple aspects like NFTs and the metaverse appealing to the young audience. The collapse of FTX will make them cautious about choosing which exchange to trade.” He thinks platforms should implement transparency measures, while regulators should develop rules to protect users.
THE STEP BACK ON PAYMENTS IN CRYPTOCURRENCIES
Some African companies that had started accepting payments in cryptocurrencies have now stepped back, putting the possibility on hold, reports Quartz .
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/crisi-criptovalute-africa/ on Sun, 27 Nov 2022 08:32:59 +0000.