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Exploring the landscape of crypto regulations in sub-Saharan Africa

Exploring the landscape of crypto regulations in sub-Saharan Africa

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3 years ago

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Despite facing hot-and-cold rules, growing crypto usage in sub-Saharan Africa is forcing regulators to reconsider the industry.

Sub-Saharan Africa has no doubt suffered many regulatory setbacks in adopting cryptocurrencies. With most countries in the region struggling not to buckle under economic uncertainties and pressures looming over them even as the ripple effects of COVID-19 set in, it would appear that many Africans, especially millennials, aren’t waiting for the government anymore.

The main issue inhibiting regulation seems to be a combination of resistance and indecision both from regulators, which has majorly been a result of little or no understanding of cryptocurrencies. 

Speaking to Cointelegraph on the attitude of regulatory bodies in Africa toward cryptocurrencies, Andrew Nevin, partner and chief economist at PricewaterhouseCoopers Nigeria, said:

“I think it’s fair to say that around the continent, people are being cautious. There’s been a lot of problems with cryptocurrency and various kinds of fraud: initial coin offerings and projects that didn’t have sufficient value and have gone backwards or folded up. So, I think that the authorities are taking the right view in taking this step by step.”

For the most part, governments of most sub-Saharan countries have not taken any clear stance toward cryptocurrencies.

The waiting game

Many African governments pretty much don’t know what to do about cryptocurrencies, although recently, there has been some progress. For example, the Securities and Exchange Commission of Nigeria has officially defined digital assets under its regulatory umbrella in a recent statement. Before, the Nigerian Central Bank had flip-flopped, going from warning its citizens against doing business in digital currencies to launching research on potential policy proposals. In Kenya, authorities have gone from comparing cryptocurrencies to pyramid schemes to setting up a task force to study the challenges and benefits associated with the underlying blockchain technology.

Over the years, the legality of Bitcoin (BTC) and other crypto assets has varied significantly across the region, with over 60% of African governments yet to make their position known.

Blockchain and cryptocurrency in Africa — Geographical overview

Source: Baker McKenzie

While some nations have openly declared their support for cryptocurrencies, most countries have either issued complete or partial bans. The most common position, however, is one of caution. Countries such as Kenya, Ghana, Lesotho, Swaziland, Uganda, Zambia and Zimbabwe have warned its citizens about cryptocurrencies without actively banning crypto trading or use. Other countries such as Namibia and Burundi, while also not banning usage, have issued bans against trading, citing lack of consumer protection.

Similar to what we see in Kenya, a statement from the Ugandan government referred to “One Coin Digital Money,” as a cryptocurrency alongside Bitcoin, Litecoin (LTC) and XRP, among others, putting them all on equal footing as cryptocurrencies. OneCoin was a notorious multilevel marketing scheme that allowed “representatives” to earn incentives from selling memberships for an enterprise with no genuine product.

Taking a critical look at these countries, we could infer that Ponzi schemes have tainted the reputation of legitimate crypto projects and may be slowing things down. Paxful CEO Ray Youssef spoke with Cointelegraph on the subject. Paxful is a leading peer-to-peer crypto exchange platform that has the highest growth of P2P trading in Africa so far by providing on-ramps and off-ramps for cryptocurrencies within the region: 

“We ought to understand that regulators are just starting to figure cryptocurrencies out. Many of them have just begun their exploration and they hear about this in the worst possible ways, especially in Africa. Because nine out of 10 people you talk to in Africa have been scammed in a cryptocurrency-involved scam or know someone who has been scammed. That’s a huge number, but then you consider the proliferation of multi-level marketing scams that operate upon Africa like OneCoin, this infamous Ponzi [...] plus the crypto mining scams. Everyone in Africa has been scammed.”

Youssef also added that corruption ranks as one of the factors slowing down the regulation of cryptocurrencies within the region:

“Unfortunately in Africa, things are a little different from in the West. Everyone wants to wet their beak a little bit at the table, and that’s how regulators think [...] and that’s a challenge for people in the African crypto space.”

Possible catalysts to speedy regulation

Despite the regulatory weakness, it has become obvious that the region has seen a continuous increase in interest in cryptocurrencies. Countries such as Nigeria constantly rank first in online searches for “Bitcoin” as seen on Google Trends. A Sept. 10 blockchain analytics report from Chainalysis indicates that Nigeria, South Africa and Kenya cumulatively lead the continent in monthly crypto transfers, which totaled $316 million in June.

Africa’s interest in crypto could also likely be fueled by factors, such as worsening inflation, high remittance fees, low financial inclusion and political instability, among other factors, which, in turn, have made things difficult for the average person in sub-Saharan Africa. These would hasten the decisions of regulatory bodies in the future.

Hyperinflation 

Inflation rates across the continent have historically been much higher than the global average. An extreme example would be Zimbabwe’s hyperinflation, which led Zimbabweans to a desperate search for a store of value even as the pandemic has increased economic uncertainties. 

Inflation rate for sub-Saharan Africa vs. global average 1999–2018

Source: The World Bank

High remittance fees 

This is another factor that could hasten the decision of regulators, as they already have a growing market. According to a report from the World Bank, remittances worth less than $200 to sub-Saharan countries cost an average of about 9% compared to a global average of 6.8%, while payments between countries cost even more. For example, sending money from South Africa to Zambia costs 18% of the value of the money sent.

Political instability 

Not only does political instability exacerbate inflation and currency volatility, but it can also result in forced migration, GDP collapse and wealth confiscation, all of which lead to an intensified search for sound money to preserve wealth. This increased attention would, in turn, hasten the hand of regulatory bodies to make a decision. According to data from the World Bank, just 10 of Africa’s 53 nations have a positive score on the political stability index.

Political Stability Index in Africa — Selected countries (-2.5 weak; 2.5 strong)

Source: The World Bank and The Global Economy

The challenges of hyperinflation, high remittance fees and economic instability are more pronounced in sub-Saharan Africa than other parts of the world. These issues put more financial pressure on the average citizen — pressure that makes regular people search for options for a safer financial future. Faster response from regulators can, therefore, be linked to the astonishing increase in the people showing interest in cryptocurrencies, which are now seen as an escape route from the harsh realities facing most Africans. 

The situation in various countries within Africa is similar, as they mostly fall under regulators that are undecided when it comes to crypto. Most countries within sub-Saharan Africa have wavered. Below is an overview of what regulations in some of the largest crypto markets in sub-Saharan Africa feel like so far.

Nigeria

In a recent report, the Securities and Exchange Commission of Nigeria officially issued regulatory guidelines for digital currencies and crypto-based companies or startups. According to Nigeria’s capital market and investment regulator, the aim is to protect investors and create standards for ethical practices. The commission also added that it will regulate “all Digital Assets Token Offerings, Initial Coin Offerings, Security Token ICOs, and other Blockchain-based offers of digital assets within Nigeria.” Every crypto asset in Nigeria will be treated as securities unless the company or startup can prove otherwise. This development is a far cry from what was obtainable before now.

In 2017, the commission had taken a more antagonistic approach. It warned citizens to be cautious while investing in cryptocurrencies, as they might experience “financial losses” without guaranteed protection from the regulatory body. That same year, Nigeria’s central bank warned local banks against doing business in digital currencies. Meanwhile, the increasing adoption of cryptocurrencies in the country has brought with it a rise in bad actors seeking to exploit unsuspecting citizens.

However, it’s likely that interest in crypto from its citizens may have driven Nigerian regulators to latch on to this budding market.

Sub-Saharan Africa weekly volume

Sub-Saharan Africa weekly volume. Source: UsefulTulips

South Africa

Before Nigeria, South Africa had been the sub-Saharan jurisdiction most receptive to cryptocurrencies. In December 2014, the South African Reserve Bank put out a paper stating its position on virtual currencies. The SARB affirmed that it alone has the right to issue any legal tender and that decentralized convertible virtual currencies don’t constitute legal tender in South Africa. The SARB stated, “Only the Bank is allowed to issue legal tender i.e banknotes and coins in RSA, which can be legally offered in payment of an obligation and that a creditor is obliged to accept. Therefore the decentralised convertible virtual currencies are not legal tenders in RSA.” This was confirmed again by the SARB in its statement in 2017 as it confirmed that it does not recognize cryptocurrency as “currency” or “legal tender” in South Africa. 

Continuing the trend of inconsistency, however, the Minister of Finance in South Africa distributed authority over crypto beyond the SARB. The Minister noted in mid-2017 in Parliament that “the National Treasury together with the SARB, [Financial Intelligence Centre], and [Financial Services Board] also established an Intergovernmental Fintech Working Group in December 2016, to develop an approach and revised policy stance towards fintech, including crypto-currencies.”

The country has been trying to affix a pro-crypto stance recently, as seen in a policy paper released by South Africa’s Intergovernmental Fintech Working Group, financial regulators in the country recommended “that crypto assets remain without legal tender status” in a roadmap outlining what could become the nation’s first comprehensive crypto laws. 

Zimbabwe

Though many of the nations of sub-Saharan Africa have changed their attitude toward crypto recently, Zimbabwe has seen perhaps the most striking thaw in recent years. 

The government banned crypto in 2018. The Reserve Bank of Zimbabwe instructed the private banks of Zimbabwe’s largest virtual currency exchange, Golix, to close its accounts and made Golix itself refund its customers.

Nonetheless, peer-to-peer trading of cryptocurrencies continues to grow in Zimbabwe as the country’s monetary policies falter. In mid-2019, the crypto rush in Zimbabwe reached such a high that rumors about Bitcoin’s price reaching a 600% premium began to spread.

In its monetary policy statement from February, the Reserve Bank of Zimbabwe revealed that its focus was on stabilizing its currency. Having suffered massive hyperinflation that peaked in 2007, the bank appears intent on eradicating the volatility of its exchange rate through the establishment of a currency stabilization task force. According to the RBZ, exchange rate stabilization will result in a corresponding decrease in inflation, thus leading to significant economic recovery for the country.

Consequently, Zimbabwe has made somewhat of a U-turn in its crypto policy. A local news source reports that the RBZ is reportedly developing a regulatory sandbox for cryptocurrency companies in the country.

Other parts of Africa

For other parts of sub-Saharan Africa, the situation seems to be pretty much the same. As regulators take their time to wrap their heads around this technology and how its implementation can influence the dynamics of their economic scene, citizens are seeing it as a haven for reasons ranging from remittances to hyperinflation.

As of last year, Ghana’s Securities and Exchange Commission confirmed that cryptocurrencies were still unregulated, issuing a public warning to investors in March 2019. Meanwhile, the regulatory space for cryptocurrencies in Kenya is currently nonexistent, with only a warning from its regulator for individuals and organizations to steer clear of transacting in digital currencies.

What the future holds for Africa

For the most part, the neutral regulatory stance on crypto in most countries within sub-Saharan Africa is due to a lack of education. However, it appears that this will not remain so for much longer. The level of interest from its citizens is growing. Beyond the need to hold cryptocurrencies for speculative reasons, Africa seems to be the region with the greatest need for cryptocurrency use cases. This increasing demand will play a key role in hastening regulation across the continent. With Africa’s most populous country, Nigeria, newly involved in the space, we may be about to witness a cascade of regulation from other parts of sub-Saharan Africa.

Alo Kingsley is a content writer with 4+ years of experience in writing with the blockchain and cryptocurrency niche. He first discovered Bitcoin in 2016 and has been passionate since then about various ways Blockchain can help Africa.

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Government

Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Authored by Matthew Vadum via The Epoch Times (emphasis…

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3 hours ago

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March 17, 2024

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Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Authored by Matthew Vadum via The Epoch Times (emphasis ours),

Public officials may block people on social media in certain situations, the Supreme Court ruled unanimously on March 15.

People leave the U.S. Supreme Court in Washington on Feb. 21, 2024. (Kevin Dietsch/Getty Images)

At the same time, the court held that public officials who post about topics pertaining to their work on their personal social media accounts are acting on behalf of the government. But such officials can be found liable for violating the First Amendment only when they have been properly authorized by the government to communicate on its behalf.

The case is important because nowadays public officials routinely reach out to voters through social media on the same pages where they discuss personal matters unrelated to government business.

“When a government official posts about job-related topics on social media, it can be difficult to tell whether the speech is official or private,” Justice Amy Coney Barrett wrote for the nation’s highest court.

The case is separate from but brings to mind a lawsuit that several individuals previously filed against former President Donald Trump after he blocked them from accessing his social media account on Twitter, which was later renamed X. The Supreme Court dismissed that case, Biden v. Knight First Amendment Institute, in April 2021 as moot because President Trump had already left office.

At the time of the ruling, the then-Twitter had banned President Trump. When Elon Musk took over the company he reversed that policy.

The new decision in Lindke v. Freed was written by Justice Amy Coney Barrett.

Respondent James Freed, the city manager of Port Huron, Michigan, used a public Facebook account to communicate with his constituents. Petitioner Kevin Lindke, a resident of Port Huron, criticized the municipality’s response to the COVID-19 pandemic, including accusations of hypocrisy by local officials.

Mr. Freed blocked Mr. Lindke and others and removed their comments, according to Mr. Lindke’s petition.

The U.S. Court of Appeals for the 6th Circuit ruled for Mr. Freed, finding that he was acting only in a personal capacity and that his activities did not constitute governmental action.

Mr. Freed’s attorney, Victoria Ferres, said during oral arguments before the Supreme Court on Oct. 31, 2023, that her client didn’t give up his rights when using social media.

“This country’s 21 million government employees should have the right to talk publicly about their jobs on personal social media accounts like their private-sector counterparts.”

The position advocated by the other side would unfairly punish government officials, and “will result in uncertainty and self-censorship for this country’s government employees despite this Court repeatedly finding that government employees do not lose their rights merely by virtue of public employment,” she said.

In Lindke v. Freed, the Supreme Court found that a public official who prevents a person from comments on the official’s social media pages engages in governmental action under Section 1983 only if the official had “actual authority” to speak on the government’s behalf on a specific matter and if the official claimed to exercise that authority when speaking in the relevant social media posts.

Section 1983 refers to Title 42, U.S. Code, Section 1983, which allows people to sue government actors for deprivation of civil rights.

Justice Barrett wrote that according to the so-called state action doctrine, the test for “actual authority” must be “rooted in written law or longstanding custom to speak for the State.”

“That authority must extend to speech of the sort that caused the alleged rights deprivation. If the plaintiff cannot make this threshold showing of authority, he cannot establish state action.”

“For social-media activity to constitute state action, an official must not only have state authority—he must also purport to use it,” the justice continued.

“State officials have a choice about the capacity in which they choose to speak.”

Citing previous precedent, Justice Barrett wrote that generally a public employee claiming to speak on behalf of the government acts with state authority when he speaks “in his official capacity or” when he uses his speech to carry out “his responsibilities pursuant to state law.”

“If the public employee does not use his speech in furtherance of his official responsibilities, he is speaking in his own voice.”

The Supreme Court remanded the case to the 6th Circuit with instructions to vacate its judgment and ordered it to conduct “further proceedings consistent with this opinion.”

Also on March 15, the Supreme Court ruled on O’Connor-Ratcliff v. Garnier, a related case. The court’s sparse, unanimous opinion was unsigned.

Petitioners Michelle O’Connor-Ratcliff and T.J. Zane were two elected members of the Poway Unified School District Board of Trustees in California who used their personal Facebook and Twitter accounts to communicate with the public.

Respondents Christopher Garnier and Kimberly Garnier, parents of local students, “spammed Petitioners’ posts and tweets with repetitive comments and replies” so the school board members blocked the respondents from the accounts, according to the petition filed by Ms. O’Connor-Ratcliff and Mr. Zane.

But the Garniers said they were acting in good faith.

“The Garniers left comments exposing financial mismanagement by the former superintendent as well as incidents of racism,” the couple said in a brief.

The U.S. Court of Appeals for the 9th Circuit found in favor of the Garniers, holding that elected officials using social media accounts were participating in a public forum.

The Supreme Court ruled in a three-page opinion that because the 9th Circuit deviated from the standard the high court articulated in Lindke v. Freed, the 9th Circuit’s decision must be vacated.

The case was remanded to the 9th Circuit “for further proceedings consistent with our opinion” in the Lindke case, the Supreme Court stated.

Tyler Durden Sun, 03/17/2024 - 22:10

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Home buyers must now navigate higher mortgage rates and prices

Rates under 4% came and went during the Covid pandemic, but home prices soared. Here’s what buyers and sellers face as the housing season ramps up.

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March 17, 2024

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Springtime is spreading across the country. You can see it as daffodil, camellia, tulip and other blossoms start to emerge. 

You can also see it in the increasing number of for sale signs popping up in front of homes, along with the painting, gardening and general sprucing up as buyers get ready to sell. 

Which leads to two questions: 

  • How is the real estate market this spring? 
  • Where are mortgage rates? 

What buyers and sellers face

The housing market is bedeviled with supply shortages, high prices and slow sales.

Mortgage rates are still high and may limit what a buyer can offer and a seller can expect.  

Related: Analyst warns that a TikTok ban could lead to major trouble for Apple, Big Tech

And there's a factor not expected that may affect the sales process. Fixed commission rates on home sales are going away in July.

Reports this week and in a week will make the situation clearer for buyers and sellers. 

The reports are:

  • Housing starts from the U.S. Commerce Department due Tuesday. The consensus estimate is for a seasonally adjusted rate of about 1.4 million homes. These would include apartments, both rentals and condominiums. 
  • Existing home sales, due Thursday from the National Association of Realtors. The consensus estimate is for a seasonally adjusted sales rate of about 4 million homes. In 2023, some 4.1 million homes were sold, the worst sales rate since 1995. 
  • New-home sales and prices, due Monday from the Commerce Department. Analysts are expecting a sales rate of 661,000 homes (including condos), up 1.5% from a year ago.

Here is what buyers and sellers need to know about the situation. 

Mortgage rates will stay above 5% 

That's what most analysts believe. Right now, the rate on a 30-year mortgage is between 6.7% and 7%. 

Rates peaked at 8% in October after the Federal Reserve signaled it was done raising interest rates.

The Freddie Mac Primary Mortgage Market Survey of March 14 was at 6.74%. 

Freddie Mac buys mortgages from lenders and sells securities to investors. The effect is to replenish lenders' cash levels to make more loans. 

A hotter-than-expected Producer Price Index released that day has pushed quotes to 7% or higher, according to data from Mortgage News Daily, which tracks mortgage markets.

Home buyers must navigate higher mortgage rates and prices this spring.

TheStreet

On a median-priced home (price: $380,000) and a 20% down payment, that means a principal and interest rate payment of $2,022. The payment  does not include taxes and insurance.

Last fall when the 30-year rate hit 8%, the payment would have been $2,230. 

In 2021, the average rate was 2.96%, which translated into a payment of $1,275. 

Short of a depression, that's a rate that won't happen in most of our lifetimes. 

Most economists believe current rates will fall to around 6.3% by the end of the year, maybe lower, depending on how many times the Federal Reserve cuts rates this year. 

If 6%, the payment on our median-priced home is $1,823.

But under 5%, absent a nasty recession, fuhgettaboutit.

Supply will be tight, keeping prices up

Two factors are affecting the supply of homes for sale in just about every market.

First: Homeowners who had been able to land a mortgage at 2.96% are very reluctant to sell because they would then have to find a home they could afford with, probably, a higher-cost mortgage.

More economic news:

Second, the combination of high prices and high mortgage rates are freezing out thousands of potential buyers, especially those looking for homes in lower price ranges.

Indeed, The Wall Street Journal noted that online brokerage Redfin said only about 20% of homes for sale in February were affordable for the typical household.

And here mortgage rates can play one last nasty trick. If rates fall, that means a buyer can afford to pay more. Sellers and their real-estate agents know this too, and may ask for a higher price. 

Covid's last laugh: An inflation surge

Mortgage rates jumped to 8% or higher because since 2022 the Federal Reserve has been fighting to knock inflation down to 2% a year. Raising interest rates was the ammunition to battle rising prices.

In June 2022, the consumer price index was 9.1% higher than a year earlier. 

The causes of the worst inflation since the 1970s were: 

  • Covid-19 pandemic, which caused the global economy to shut down in 2020. When Covid ebbed and people got back to living their lives, getting global supply chains back to normal operation proved difficult. 
  • Oil prices jumped to record levels because of the recovery from the pandemic recovery and Russia's invasion of Ukraine.

What the changes in commissions means

The long-standing practice of paying real-estate agents will be retired this summer, after the National Association of Realtors settled a long and bitter legal fight.

No longer will the seller necessarily pay 6% of the sale price to split between buyer and seller agents.

Both sellers and buyers will have to negotiate separately the services agents have charged for 100 years or more. These include pre-screening properties, writing sales contracts, and the like. The change will continue a trend of adding costs and complications to the process of buying or selling a home.

Already, interest rates are a complication. In addition, homeowners insurance has become very pricey, especially in communities vulnerable to hurricanes, tornadoes, and forest fires. Florida homeowners have seen premiums jump more than 102% in the last three years. A policy now costs three times more than the national average.

Related: Veteran fund manager picks favorite stocks for 2024

 

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Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Westbrook Partners, which acquired the San…

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March 17, 2024

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Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Westbrook Partners, which acquired the San Francisco Four Seasons luxury hotel building, has been served a notice of default, as the developer has failed to make its monthly loan payment since December, and is currently behind by more than $3 million, the San Francisco Business Times reports.

Westbrook, which acquired the property at 345 California Center in 2019, has 90 days to bring their account current with its lender or face foreclosure.

Related

As SF Gate notes, downtown San Francisco hotel investors have had a terrible few years - with interest rates higher than their pre-pandemic levels, and local tourism continuing to suffer thanks to the city's legendary mismanagement that has resulted in overlapping drug, crime, and homelessness crises (which SF Gate characterizes as "a negative media narrative).

Last summer, the owner of San Francisco’s Hilton Union Square and Parc 55 hotels abandoned its loan in the first major default. Industry insiders speculate that loan defaults like this may become more common given the difficult period for investors.

At a visitor impact summit in August, a senior director of hospitality analytics for the CoStar Group reported that there are 22 active commercial mortgage-backed securities loans for hotels in San Francisco maturing in the next two years. Of these hotel loans, 17 are on CoStar’s “watchlist,” as they are at a higher risk of default, the analyst said. -SF Gate

The 155-room Four Seasons San Francisco at Embarcadero currenly occupies the top 11 floors of the iconic skyscrper. After slow renovations, the hotel officially reopened in the summer of 2021.

"Regarding the landscape of the hotel community in San Francisco, the short term is a challenging situation due to high interest rates, fewer guests compared to pre-pandemic and the relatively high costs attached with doing business here," Alex Bastian, President and CEO of the Hotel Council of San Francisco, told SFGATE.

Heightened Risks

In January, the owner of the Hilton Financial District at 750 Kearny St. - Portsmouth Square's affiliate Justice Operating Company - defaulted on the property, which had a $97 million loan on the 544-room hotel taken out in 2013. The company says it proposed a loan modification agreement which was under review by the servicer, LNR Partners.

Meanwhile last year Park Hotels & Resorts gave up ownership of two properties, Parc 55 and Hilton Union Square - which were transferred to a receiver that assumed management.

In the third quarter of 2023, the most recent data available, the Hilton Financial District reported $11.1 million in revenue, down from $12.3 million from the third quarter of 2022. The hotel had a net operating loss of $1.56 million in the most recent third quarter.

Occupancy fell to 88% with an average daily rate of $218 in the third quarter compared with 94% and $230 in the same period of 2022. -SF Chronicle

According to the Chronicle, San Francisco's 2024 convention calendar is lighter than it was last year - in part due to key events leaving the city for cheaper, less crime-ridden places like Las Vegas. 

Tyler Durden Sun, 03/17/2024 - 18:05

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