Technological change is sweeping across Africa at a rate of knots. And unlike more developed parts of the world, a relative lack of infrastructure, institutions and interests is enabling a “leapfrogging” in financial innovation – throwing up new and often profound opportunities for gaming.
Mobile phone usage in Africa grew from less than three percent only a decade ago, to 80 percent today. Yet Sub-Saharan Africa is also reported to have the second highest population of unbanked adults in the world, around 350 million people.
This dichotomy has led to an abundance of mobile and e-payment platforms seizing the opportunity to innovative ways to reduce the friction associated with transferring money across the continent. Kenya’s M-Pesa for example, which allows customers to transfer money via a basic mobile phone, already handles transfers of more than a quarter of Kenya’s GDP.
Increasingly, blockchain and bitcoin are leading the charge in African Fintech. But according to a new report from a Johannesburg-based legal team at Baker McKenzie, regulators are becoming more nuanced in their responses. While some are taking a progressive and encouraging approach to the technology, many more adopt a wait-and-see stance. But a growing number are becoming increasingly cautious.
“Whilst the private sector is blazing ahead in many countries, governments have been apprehensive and reserved, and in some instances unreceptive,” reads the report, Blockchain and Cryptocurrency in Africa.
“Countries such as Zimbabwe and Namibia have reportedly begun with a hard stance, whilst Mauritius is a regional frontrunner. The regulatory sandbox created in Mauritius, for instance, demonstrates a progressive take on the general economic benefits that could follow a friendly, and even incentivised, approach to cryptocurrencies.
“This creates another dimension for the potential for African countries to develop regulations around blockchain and cryptocurrency, with an intention to incentivise foreign direct investment.”
South Africa is also among the most proactive on blockchain. The central bank does not recognise cryptocurrencies as a “currency” and they therefore remain outside its regulatory remit. However the ministry of finance has developed an intergovernmental FinTech Working group, which recently launched Project Khokha that aims to replicate inter- bank clearing and settlement.
Furthermore, at least two major retailers accept bitcoin: Takealot.com and Pick ‘n Pay; while SA installed its first bitcoin ATM last year. A new intra-African token, Safcoin, also launched there through an ICO hoping to to “become a widely accepted form of payment across the entire African online trading community [and] simplify the cross-border payment processes between countries by eliminating red tape and bulky transaction processes.”
Kenya is perhaps the typical in a cohort of wait-and- see African states: neither fostering nor inhibiting the private sector’s exploration of the technology. It has more specifically welcomed initiatives for blockchain to be used in land-registry – eliminating the risk of multiple titles being issued for the same piece of land, which has thought to have been a dis- incentive for foreign investors.
The Central Bank has warned against the use of cryptocurrencies however, and at least one legal precedent puts their use (without CB approval) on shaky ground. But while the previous government described them as a ponzi scheme – the current president created an 11-member task force to explore the use of distributed ledger technology and artificial intelligence.
Nigeria has taken a similar position to Kenya. Its Central Bank doesn’t like them, and warns institutions off them. But in late 2017 the Deputy Director of the Bank said it “cannot control or regulate blockchain. Just the same way no one is going to control or regulate the internet. We don’t own it.”
Nigeria reportedly has the world’s third largest bitcoin holdings as a percentage of gross domestic product. While the Nigerian Senate has recently launched an investigation into “the viability of bitcoin as a form of investment.”