It’s Not Gonna Take a Lot to Drag Me Away From You: Why Crypto Shouldn’t Be Overregulated in Africa

By Jonathan Ovadia, CEO of OVEX

Toto’s popular track “Africa” ​​was originally inspired by the keyboardist’s love for the continent and his experiences there. If David Paich had written the song 40 years later, the lyrics might have focused on the cryptocurrency and the promise it could bring. In recent years, the financial paradigm on the continent has changed as crypto increasingly becomes a reliable exchange of values. But with January news Crypto holders in the state and beyond planning to regulate digital currencies by the South African Financial Sector Conduct Authority may feel uncomfortable about their reliable source of funding.

African fiat currencies face constant stability problems given the volatile political and economic climate of the continent. In South Africa, economic problems have created an aura of insecurity and diminished trust in the South African rand. In Nigeria, due to a lack of confidence in central banks and the ability of the authorities to manage the economy, many people have struggled to find more stable mechanisms to remain financially viable. As a result, many of these countries experience high inflation rates during turbulent times, the most extreme example being Zimbabwe. At one point, the Zimbabwean $ 1 trillion note was worth just $ 0.40.

Remittance problems relating to migrants abroad sending money home or Africans sending money to one another on the continent are widespread across Africa. An analysis report The transfer average across the continent was nine percent, more than two percent above the global average. Much of the world’s population without banks is concentrated in sub-Saharan Africa and Asia. according to the World Bank. As a result, Africans in numerous countries have turned to the digital world for answers.

Crypto Growth and Dependency

Because of these political and economic instabilities, Africans have started turning to crypto. Digital currencies have often enabled them to overcome high transfer costs and fluctuations in fiat currency value. Crypto transfers to and from Africa under $ 10,000 shot increased 55 percent between June 2019 and June 2020, peaking at $ 316 million in June, mainly due to remittance issues. Also in Nigeria Reuters reported Locals have started using Bitcoin to pay overseas suppliers as a more viable alternative to converting into US dollars and dealing with transfer fees.

Of course, while most Africans still use local fiat currencies, the cryptocurrency has provided financial viability for companies operating across borders. Now they are more dependent on these virtual currencies to run their businesses. The use of crypto allows Africans to minimize exchange rate costs and put exchange rates and subsequent competition on a much more even playing field.

Overregulation can hurt in the long run

Regulation is vital in Africa as it acts as a safety net to protect users from fraudulent systems and cyber attacks. However, overregulation will have a negative impact on companies that use virtual assets to operate. Despite their international use, overregulation across the continent could result in cryptocurrencies suffering the same devaluation fate as fiat currencies. If cryptocurrencies are regulated, the market can also cool, which devalues ​​cryptocurrencies considerably and makes them financially unprofitable for business operations.

Overregulation can slow down the actual payment process, reflecting current transfer issues that could increase business costs. The classification is also important. When cryptocurrencies are referred to as securities rather than currencies, buying and selling them can trigger unexpected tax events that can result in hefty fines or even jail sentences for unsuspecting business owners.

The crypto market has matured much of the African trading sector to the extent that some have become dependent on it for their supply chains and general operations. One misjudgment is to enact regulations that can have a spiraling, devastating effect. Regulating to protect crypto owners is a necessary step that African governments must take, but they must proceed with caution.

About the author

Jonathan is a serial entrepreneur and tech enthusiast from a young age. He started a private hedge fund when he was 16, using CFDs in South Africa and focusing on tech advisory firms. He holds a BA in Electrical Engineering from the University of Cape Town and founded four companies during his undergraduate studies. Most recently, he founded OVEX with the aim of democratizing access to cryptocurrencies and the associated innovation in Africa.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

Source link


Read Previous

World Cup 2022 qualifying: Serbia 3-2 Republic of Ireland

Read Next

Looking Behind Éric Rohmer’s Cinematic Style

Leave a Reply

Your email address will not be published. Required fields are marked *