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International Monetary Fund Calls For Increased Regulation of African Crypto Markets, Says ‘Risks From Crypto Assets are Evident’

International Monetary Fund Calls For Increased Regulation of African Crypto Markets, Says ‘Risks From Crypto Assets are Evident’

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The International Monetary Fund (IMF) has urged African countries to opt for more crypto regulations, citing the recent collapse of cryptocurrency exchange FTX.

In a blog post on November 22, the financial agency, which aims to achieve sustainable growth and prosperity across its 190 member countries, called for more regulation for Africa’s crypto market, one of the fastest growing in the world.

The IMF said the collapse of FTX, once the world’s third-largest cryptocurrency, and the subsequent collapse in cryptocurrency prices “prompts new calls for better consumer protection and regulation of the crypto industry.”

“Regulating a highly volatile and decentralized system remains a challenge for most governments, requiring a balance between minimizing risk and maximizing innovation,” the post reads.

According to the IMF, only a quarter of sub-Saharan African countries have regulated crypto, while two-thirds have introduced some restrictions. On the other hand, six countries including Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania and the Republic of Congo have banned crypto.

Citing data from Chainalysis, the IMF claimed that Africa is one of the fastest growing crypto markets in the world. However, the continent has yet to experience major adoption, with crypto transactions peaking at $20 billion per month in mid-2021.

“Kenya, Nigeria and South Africa have the highest number of users in the region. Many people use cryptocurrencies for commercial payments, but their volatility makes them unsuitable as a store of value,” the report states.

The agency also expressed concern about the use of digital assets in illegal activities or the circumvention of local rules to prevent capital outflows. In addition, the IMF said that the widespread adoption of cryptocurrencies could undermine the effectiveness of monetary policy and pose risks to financial and macroeconomic stability.

“The risks are much greater if crypto is adopted as legal tender – as the Central African Republic recently did,” the IMF said. “If the state considers or accepts cryptocurrency as a means of payment, it can endanger the public finances.”

The IMF’s warning comes as the sudden fall of the crypto exchange FTX has sent shock waves throughout the industry. The FTX infection has continued to spread, most recently affecting crypto exchanges Liquid, BlockFi, Genesis and Gemini.

The collapse of FTX has also sent crypto prices into freefall. Bitcoin has been trading around the $16,000 mark for the past couple of weeks, a two-year low. The broader crypto market is also down about 20% in the past month.

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