Regulation
US Fed Fuels Crypto Adoption, New Crypto Tax in Tanzania, WorldCoin Reboot in Kenya, Binance Nigeria Case Closed?
Go to the latest Africa Crypto Week in Review, delve into the news on Binance Nigeria, Worldcoin Kenya’s moves and Tanzania’s New Crypto Tax.
The impact of high interest rates in the United States on emerging economies, especially in Africa, accelerates the adoption of cryptocurrencies.
And in the headlines, despite Nigeria’s tussle with Binance, Kenya and Tanzania are warming up to cryptocurrencies and trying to legislate progressive policies.
Here is how the US Federal Reserve has been a key factor in the adoption of cryptocurrencies in Africa
The United States is an economic superpower. The direction of its monetary policy influences economies globally. To understand why, we need to look at what is happening in Japan, China and Africa.
If anything, the ripple effects of the Federal Reserve’s tariff policies have profound consequences, especially in emerging economies, and have inadvertently fueled cryptocurrency adoption across Africa.
First, US dollar shortages occurred against a backdrop of capital outflows and rapid currency depreciation.
This combination has inevitably led to a surge in cryptocurrency adoption across the continent. USDT, Bitcoinand other major altcoins have provided timely refuge from economic instability.
It is encouraging that African individuals and businesses are increasingly turning to BTC and USDT as a hedge against these international monetary shocks.
There is little hope that currencies like the Naira will recover, provided the Federal Reserve keeps rates high. And everyone expected it.
Over the past decade, as cryptocurrencies mature, disrupt finance and many view them as investments, it is clear that leading coins like Bitcoin are increasingly accelerating the shift of the power to create and control money from central banks into the hands of single individuals.
To quantify, between July 2022 and June 2023, Africa received $117.1 billion in on-chain crypto transactions, according to Chainalysis.
While representing a small portion of the global share, this shows that more and more users are willing to take advantage of the reliability of cryptocurrencies.
Bitcoin transactions are dominated in part because BTC is seen as a store of value and a hedge against raging inflation.
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Even so, more and more users are opting for USDT and stablecoins. It makes sense, especially when dollars were scarce. Stablecoins are digital versions of the USD, but their pure existence on the blockchain means they can be transferred at any time.
Interestingly, as stablecoins gain market share, Nigerians are resisting the digital Naira, a CBDC. Efforts to push the country towards a cashless economy are not bearing fruit. The situation is worse because despite these efforts, the government is trying to impose cash restrictions despite Nigeria’s demand for paper cash.
CBDCs are viewed with skepticism as most are concerned about privacy and financial stability.
The success of CBDCs depends on the government’s ability to captivate users. The best way to do this is to regulate rather than restrict, as the Nigerian authorities are doing.
South Africa is doing a great job of regulating cryptocurrencies. They are establishing a licensing regime for digital assets and consulting on guidance to include cryptocurrencies in the country’s travel rules.
This regulatory clarity positions South Africa as a leader in the African crypto space. This is despite political challenges and the formation of a new coalition government.
The big headlines on African cryptocurrencies this week:
To conclude, don’t miss the following news that made headlines this week in the African cryptocurrency sector:
- Is the Binance case in Nigeria closed? On June 19, a lawsuit filed by Nadeem Anjarwalla, a Binance executive who escaped from prison, was dismissed by a court in Nigeria. Before fleeing in March, the executive had been arrested on charges of violating the country’s anti-money laundering laws. In the ruling, the judge threw out the case, citing the lack of diligent prosecution. Meanwhile, another Binance executive, Tigran Gambaryan, remains in detention.
- Sam Altman’s Worldcoin reboots in Kenya: After a year of suspension due to regulatory concerns and alleged privacy violations contrary to current laws, World currency will resume operations in Kenya. This week, the Directorate of Criminal Investigations (DCI) concluded its investigations before transmitting the dossier to the Public Prosecutor, who agreed with their conclusions. However, before resuming operations, they must register as a business and obtain all necessary licenses.
- Tanzania introduces new 3% cryptocurrency tax: In Tanzania, the finance minister has proposed a 3% withholding tax on income from crypto transactions. They also want a 5% tax on income from digital content creation. While the proposal will be debated, the goal is to increase government revenue and broaden the tax base. Meanwhile, the central bank is studying central bank digital currencies (CBDCs), following those of Rwanda.
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Disclaimer: Cryptocurrencies are a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all your capital.