A report released last month by pan African bank Ecobank has showed how different countries in the continent have reacted to crypto-currencies as well as technologies employing blockchain platforms. Most of governors of state banks or central banks have employed a wait and see altitude while others are outright against.
We explore what the report says about five East African countries namely Kenya, Ethiopia, Tanzania, Uganda and Rwanda.
Following a court case between Safaricom and blockchain-based start-up, BitPesa, the Kenya Central Bank were forced to clarify their position on crypto-currencies. They issued a warning stating that “Bitcoin and similar products are not legal tender nor are they regulated in Kenya. The public should therefore desist from transacting in Bitcoin and similar products”. However, appetite for virtual currencies remains strong in Kenya, and volumes transacted are the third highest in Africa (behind South Africa and Nigeria). There is some evidence that regulators may be willing to soften their position. In 2018, the Capital Markets Authority, Central Bank of Kenya, Insurance Regulatory Authority, SACCOs Societies Regulatory Authority and the Retirement Benefits Authority were due to meet to discuss how to regulate virtual currencies. The position is strengthened by the fact that Kenya has installed a Taskforce on Blockchain and Artificial Intelligence.
Rwanda has not taken an official position with regards to the legality and regulation of crypto-currencies. However, a report published in late 2017 by two senior economists at the BNR (Rwanda’s Central Bank) seemed to be largely in support of the burgeoning technology: “although crypto-currencies are not yet an issue for Rwanda, the pace at which they are growing shows that this trend will start to emerge… As Rwanda’s tech sector continues to grow, we will likely see the evolution of crypto-currencies.” The report concluded by alluding to the development of an internal Rwandan crypto-currency in the near future.
Ethiopian regulators have yet to take a public position on crypto-currencies. However, on November 22nd 2017, experts gathered in Addis Ababa to review a new UN Economic Commission for Africa (UNECA) report which aims to explore opportunities for blockchain technology in Africa. During this meeting, Kasirim Nwuke, Chief of the New Technologies and Innovation Section in the ECA’s Special Initiatives Division, said “like every new technology, blockchain faces many barriers which must be understood and overcome in order for Africa to take full advantage of it.” Though not Ethiopia-specific, the report recommended that ‘African Regulators should assess the potential of Blockchain technology to reduce costs and enhance transparency within multiple sectors of the economy.’ The Ethiopian government has recently signed an MOU with cryptocurrency startup Cardano, which will see Ethiopian developers apply blockchain technology to the country’s agritech industry
The Governor of the Bank of Tanzania (BoT), Benno Ndula, has recently acknowledged the increasing popularity of virtual currencies across the country. He warned Tanzanians that crytpto-currencies are ‘not recognised’ by the state, and that becoming involved with crypto-currencies is done so at one’s own risk, as the space is currently unregulated. He also suggested that the Central Bank is currently discussing whether to regulate or ban virtual currencies. BoT’s Director of National Payment System, Bernard Dadi, said that the Central Bank was closely monitoring virtual currencies, that they are collaborating with ‘experts’ from the UK – showing that there is an eagerness to learn more. A policy directive on the usage of crypto-currency will be announced shortly. On 1st March 2018, The BoT reiterated its warning to the public, stating: “BoT considers the recent surge in the prices of crypto-currencies to be driven by speculation. The risk of a sharp reduction in prices is high. Investors in crypto-currencies should be aware that they run the risk of losing all their capital”
The Ugandan government has yet to take an official position on crypto-currencies. In February 2017, the Bank of Uganda released a strongly-worded statement aimed to prevent people from engaging with ‘One-Coin’, a crypto-currency Ponzi scheme. During the same statement, the Bank also warned that anyone using crypto-currencies “is taking a risk in the financial space where there is neither investor protection nor regulatory purview”. Prior to this, there were positive signs that Uganda was aiming to be the first African country to regulate crypto-currencies. A round table discussion held in July 2016 looked at effective ways to regulate the new technology.