Here’s why South Africa is embracing cryptocurrencies
South Africa’s capital market and financial regulators are forecasting growth in crypto investment nationwide, leading the country to formally pass crypto investment and trading laws. This contrasts sharply with the policies of most other African countries, which aim to avoid commercial transactions of crypto assets, Quartz Africa reports.
Main African markets
South Africa, Kenya, and Nigeria are some of the best markets for investing and trading cryptocurrencies. Nigeria is the African country with the highest Bitcoin (BTC / USD) trading volume, amounting to $ 99 million in the first quarter of this year alone, QZ notes. Kenya came second with $ 34.8 million and Ghana was third with $ 27.4 million.
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Although South Africa ranks fourth with just under $ 26 million, it could be better positioned for sustainable growth compared to its African neighbors. This is because South Africa has the most advanced financial sector in the region and its government has already recognized cryptocurrencies as an investment and as a taxable asset, the report notes.
Kenya and Nigeria, for example, oversee a mostly under-regulated cryptocurrency market. Traditional exchanges face challenges in settling transactions involving banks. Competition in the market pushes traders to adopt underground trading alternatives. In a review this month, the UN noted:
Given the ever-changing nature of the cryptocurrency world, one of the biggest risks is the lack of proper regulation. Regulation is exactly what the industry needs the most.
An impending boom in digital asset trading
South African financial experts predict a boom in cryptocurrency trading, not only nationally, but across the continent. South Africa is working to regulate the industry ahead of rapid growth and to better cope with the growing number of criminals demanding cryptocurrency ransom.
New regulations to protect against terrorist financing and money laundering will address issues such as due diligence, customer identification and verification, the retention of transaction and customer data, and the search for unusual or suspicious activity.
The South African Reserve Bank will also play a role in monitoring cryptocurrency assets and service providers and monitor “cross-border financial flows,” according to QZ. Banks and other financial institutions will limit their future exposure “because the risk could over time spill over” and lead to financial stability problems.
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