Policy Roundup: Africa's Growing Cryptocurrency Regulatory Landscape is Evolving Rapidly

July, 2023

Highlights

Africa’s growing cryptocurrency regulatory landscape is evolving rapidly, with countries like Namibia, Uganda, and South Africa taking the lead. Here are some highlights from July, 2023:

The Namibian Parliament has reportedly passed legislation to establish a regulatory body for cryptocurrencies.
The Namibian government has officially enacted the Virtual Assets Act 2023, establishing regulations for virtual asset service providers.
A bill in Uganda’s National Assembly aims to regulate virtual assets.
South Africa has issued a warning to all crypto exchanges to secure licenses by November 2023 or face potential enforcement actions.

Forecast

Africa’s cryptocurrency policy landscape is evolving rapidly, with several nations introducing new and similar regulatory frameworks to ensure greater oversight and compliance. The establishment of regulatory bodies in Namibia and Uganda, alongside South Africa’s licensing requirements, signals a move toward formalizing the industry and mitigating risks.

Opinion

“When the associated risks that come with innovations such as virtual assets in the financial system are better managed, the bank will make the necessary assessments and pronounce itself on their acceptance,” said Kazembire Zemburuka, Bank of Namibia’s (BOU) spokesperson.

Namibia, Uganda, and South Africa's Role in Africa's Growing Cryptocurrency Regulatory Landscape

Approximately 20% of countries in sub-Saharan Africa have banned crypto assets.Despite this, Sub-Saharan Africa experienced moderate growth, with an estimated $125 billion in on-chain value during this period, marking a $7.5 billion increase from the previous year.

“Like many regulators globally, regulators in Africa have been faced with the daunting task of finding the appropriate instruments to regulate the risks emanating from the increased adoption of cryptocurrency. With increased trading in cryptocurrency, it is clear that cryptocurrencies cannot continue to operate in a vacuum,” observes leading banking and finance lawyer Sonal Sejpal, a partner at ALN Kenya.

Sources: IMF and Chainalysis

In response, the Virtual Assets Act 2023 in Namibia creates a regulatory authority to supervise cryptocurrency exchanges and virtual asset service providers. The legislation is designed to safeguard consumers, curb market abuse, and combat money laundering and terrorism financing. Besides, the proposed bill in Uganda aims to grant the CMA the authority to oversee the registration of prospectuses, incorporating provisions for virtual and digital assets, tokenization, and regulatory sandboxes. With the new regulatory development, crypto exchanges are allowed to still operate without a license despite the deadline having passed.

These regulatory changes across Sub-Saharan Africa are paving the way for increased cryptocurrency growth, with countries encouraged to adopt South Africa’s proactive stance. South Africa’s Financial Sector Conduct Authority (FSCA) introduced a licensing regime for crypto businesses, classifying crypto assets as financial products. This move not only provides clearer legal guidelines but also strengthens the ability of financial investigators to combat illicit activities within the sector.