Digital Currencies – the Fall of FTX

FTX was Becoming a Force for Normalizing Cryptocurrencies in Africa, but it has now left a trail of losses for companies and individuals. EFA believes that Africa’s financial regulators will sense an opportunity to place stricter constraints on crypto’s adoption. Some form of crypto regulation already exists in two-thirds of sub-Saharan countries, according to an IMF internal survey. Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo have outright bans on crypto, while partial restrictions are in place in Zimbabwe and Liberia. Last month, SA said every crypto platform must get a license to operate, beginning in July 2023 (see the Newsletter for October). Nigeria has not banned crypto outright, although the central bank forbids banks from processing crypto transactions. Following the fall of FTX, exchanges could now find themselves under renewed pressures.

Meanwhile in Kenya, plans are underway to amend the capital markets law and introduce a 20% excise tax on every crypto transaction fee, in a move widely seen as an ineffective strategy by the new government to reduce foreign borrowing by expanding the domestic tax net. If the bill is approved by parliament, Kenyans will be subjected to remitting capital gains tax or income tax to the Kenya Revenue Authority for the sale or use of crypto. By introducing the law, Kenya, whose central bank has been cautioning citizens against the use and trade of crypto, will be following in the footsteps of Ethiopia, which first banned crypto before regulating it. Singapore-based crypto research company TripleA estimates the number of crypto traders in Kenya at 6.1 million, out of a population of close to 55 million people. On social media, the outrage is more amplified, with many users concerned that the government is only interested in taxing the space and not regulating it fully, to protect traders.