In Africa, looming Crypto Regulations threaten hundreds of billions of dollars in peer-to-peer trade
The fate of crypto ventures hangs in the balance as the flex of regulators kicks in on cue with the upcoming regulations, setting apart the winners from the losers.
First, some background On
Over the last seven years, central bank restrictions on crypto business in key markets in Africa has forked the market into two distinct business directions, one at the expense of the other.
Banking restrictions, set out by Central Banks of markets like Nigeria, and Kenya, two of several critical African central banks, cut off crypto companies from access to banking services. The result was a denial of service for essential customer operations such as processing funds or managing account balances.
This decision by the central banks inadvertently picked winners and losers, favouring bank agnostic crypto ventures such as Paxful, Localbitcoins and Binance's peer-to-peer marketplace at the expense of ❌ bank dependent custodial models ventures like Bitpesa, Chipper cash and BuyCoins Africa.
The result?
Peer-to-peer p2p platforms as an access point to crypto🏆won over Africa.
Bank-dependent custodial models got painted into a corner and forced to either cut their losses and exit the market or wait it out.
I tweeted a thread on exact🧵 on: how regulations accelerated peer-to-peer growth.
Africa’s crypto market grew by $105.6 billion in 2021.
The outcome of 🏦 Central Bank sanctions catalysed peer-to-peer (p2p) markets and trade, resulting in year-on-year growth in volumes on peer-to-peer platforms in Africa. Today, peer-to-peer (P2p) is the most ubiquitous gateway into bitcoin and crypto-assets such as stable coins in key African markets.
New data from Chainanalysis.com, a crypto tracking platform, suggests Africa’s cryptocurrency market grew over 1200% by value between July 2020 and June 2021, the fastest p2p growing region in the world 🌍 processing $105.6 billion to worth of crypto assets. Kenya, Nigeria, South Africa, and Tanzania rank in the top 20 Global Crypto Adoption Index.
But not for much longer, if regulators have any say.
🛎 “Party’s Over !” says, Regulators
Upcoming regulations will undoubtedly reset the balance favouring compliant models by consummating crypto assets with regulated financial instruments such as mobile money, bank money and capital market products.
✔️South Africa’s 🇿🇦 financial regulatory watchdog plans to introduce crypto regulations in 2022, according to Bloomberg.
✔️The Nigerian 🇳🇬 Securities and exchange commission released Statement On Digital Assets And Their Classification And Treatment
✔️Kenya 🇰🇪 leads peer to peer transactions after seven years of banking restrictions. The Capital Markets Authority has proposed a joint Fintech task-force borrowing from South Africa 🇿🇦
🔮Planning for the future
Regulations will open up millions of users and billions of dollars in transaction potential to compliant models by granting access to formal gateways, such as bank account, mobile and card payment gateways.
What should we expect ?
1️⃣ We shall see more transactions and volumes intermediated by compliant gateways.
2️⃣ I will not be surprised to see banks and mobile money operators deep a toe in the crypto business. Perhaps we shall see more partnerships between crypto ventures and formal institutions like banks and mobile money.
3️⃣ Global crypto giants such as Meta, Paypal, and Coinbase, already had their eyes set for the market, only held back by regulation clarity.
Up and coming African crypto regulations will be a good indicator for where to play for compliant crypto businesses.
End.
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🧵Source thread
How important do you think it is KYCs and self/custody in those regions?
I believe CEXs are more intuitive and user-friendly, but the CBN has already frozen crypto accounts in the past, and I would personally not be comfortable knowing this can happen again, so I would stay on DEX and self-custody.