OP-ED: What in the crypto mayhem is going on in Nigeria?

Recent events in Nigeria spotlight Binance's alleged involvement in a massive fund transfer, exacerbating regulatory turmoil. Meanwhile, the Blockchain Association of Kenya pushes for crypto regulations amidst economic uncertainty.

OP-ED: What in the crypto mayhem is going on in Nigeria?
Photo by Etienne Girardet / Unsplash

Just a week ago, the headlines screamed about Nigeria's central bank governor, Olayemi Cardoso, pointing fingers at Binance, the world's largest crypto exchange, alleging it facilitated the transfer of a whopping $26 billion in "illicit funds". To put that into perspective, it's more than what Nigeria usually receives in remittances from its diaspora each year. And get this, leading up to June 2023, cryptocurrency transactions in Nigeria made up around 12% of the nation's GDP, according to Reuters.

These allegations have reportedly led to the arrest of two Binance executives and the Nigerian government demanding that the company fork over nearly $10 billion in compensation. In a scramble to avoid regulatory heat, other crypto platforms in Nigeria are scaling back their operations.

All this drama unfolds against the backdrop of Nigeria's currency, the Naira, plummeting, inflation inching towards 30%, and a slew of socio-economic issues hitting the everyday lives of Nigerians in Africa's largest economy.

Lobbying Kenyan Regulators

In Kenya, digital asset policy advocacy organisation the Blockchain Association of Kenya (BAK) is currently leading a lobby to ensure that the Kenyan government regulates the digital asset market in ways that safeguard citizens' interests and promote the growth and impact of the local budding crypto industry.  

Acting on a mandate granted by Kenyan parliamentarians in the wake of the nation’s interior minister hinting at a possible cryptocurrency ban, BAK has spearheaded the drafting of the country’s first-ever Virtual Assets Service Provider (VASP) bill to regulate Kenya’s digital asset industry. Consultations with industry stakeholders led by BAK directors Allan Kakai, Paul Gachora and Michael Kimani are underway ahead of the draft bill being presented to lawmakers.

The Kenyan Shilling's sustained unprecedented currency pressure in recent times has provided a complex macroeconomic backdrop for BAK’s lobbying efforts. Furthermore, despite the World Bank’s cautiously optimistic vote of confidence in the Kenyan economy delivered in mid-2023 and the International Monetary Fund’s $941 million loan boost to the country reported at the top of 2024, speculation regarding whether Kenya might be headed into economic recession continues to simmer. 

Crypto Bullish South African Regulators

South Africa continues to be widely considered the continent’s most favourable regulatory market for digital assets. 

In 2021, The South African Reserve Bank (SARB) and the Financial Sector Conduct Authority (FSCA) collaborated closely with various other entities to draft a consultation document to establish a regulatory structure for the industry. The document proposed that cryptocurrency service providers of all stripes, such as exchanges, wallet providers, and brokers, ought to undergo registration with the Financial Intelligence Centre (FIC) and adhere to Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations.

In 2022, the year that saw several major crypto company collapses, the Prudential Authority of the SARB issued guidelines to the financial institutions under its regulatory authority aimed at preventing illicit activities while encouraging the industry not to shun cryptocurrencies.

During their January 2024 meeting, the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) highlighted persistent core inflation in the global economy. Meanwhile, the Rand continues to slide against major currencies despite the global easing of headline inflationary pressures and consulting outfits like Deloitte are keeping close tabs what they consider a South African economy navigating tremendous monetary and fiscal pressures. Deloitte forecasts real GDP growth of only 1% in 2024 and an average of only 1.4% between 2024 and 2026. This falls way short of the International Monetary Fund’s 4% projection for the world’s emerging and developing economies, and 1.7% for more advanced economies. 

Awkward Tensions

In July 2019, I penned a BBC News article titled, “Will Facebook's digital money Libra be good for Africa?” In the piece, I reflected on the potential pros and cons of what would later turn out to be an ill-fated attempt to headline and monopolise both the global digital payments and digital assets industries by Facebook and Friends.

I observed then that many African governments, not least, Nigeria, Kenya, and even my native Zimbabwe, expressed significant concerns regarding the risks of embracing crypto. Skeptical policymakers held that the very premise of cryptocurrencies undermined national soverignty and tended to gloss over practical governance limitations and security threats, including difficulties in taxation, inadvertent facilitation of illegal activities like money laundering, and vulnerability to cyberattacks by crypto hackers. Far from being a means to level the global economic playing field, many African lawmakers regarded crypto and crypto companies with grave suspicion. In some ways, not much has changed in five years. 

It seems to me that the elephant in the room is the tension between the undeniable potential of blockchain technologies to help the world reimagine economic futures both on an offline, and the dizzying magnitude of the capitalist opportunity to profit from digital assets. That spectrum of opportunity attracts both the wholesome, entrepreneurial efforts of digital asset proponents like those of Riskbloq founder Nzwisisa Chidembo (and countless others), and greedy, extractive plays like those of FTX founder Sam Bankman-Fried (and even more countless others) that undermine the trust of society.

Editorial Note: This opinion editorial was first published by Business Report on 5 March 2024.