Following the collapse of the world’s largest crypto exchange FTX, which led to the subsequent plummeting of cryptocurrencies, the International Monetary Fund (IMF) has called for the regulation of the crypto industry.
The financial agency disclosed that regulating the crypto industry was necessary to prevent financial instability and defrauding of consumers. It however disclosed that the regulation of the industry has remained a challenge for most governments across the continent.
In Africa, which is one of the fastest-growing crypto markets in the world, the IMF has proposed that this region needs better regulations, or else it can pose a serious challenge to crypto traders and investors.
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The IMF had earlier warned that as crypto assets have become more mainstream, their importance in terms of potential implications for the wider economy is set to increase.
It noted that some currencies were created solely for speculation purposes or outright fraud, as the (pseudo) anonymity of these crypto assets creates data gaps for regulators which can open unwanted doors for money laundering.
Reports reveal that only one-third of countries in sub-Saharan Africa, formally regulate their crypto industry which is not encouraging, compared to the large number of traders in the region.
In Nigeria, reports reveal that Africa’s most populous nation ranks as the world’s second-largest Bitcoin trader after the U.S. The growth in crypto adoption in Nigeria is increasing despite the lack of recognition of crypto as a legitimate means of exchange by the Central bank.
With the recent collapse of the FTX, it has left a lot of Nigerians that traded on the platform reeling in losses. A Nigerian cryptocurrency trader and investor revealed that a lot of Nigerians that traded with the platform have been left with nothing following the collapse of FTX.
In his words, “A lot of Nigerians were trading and also saving money on the platform. I once used the platform. Most Nigerian youths keep BTC, USDT, and Ethereum there just like Binance. Now, it has crashed and all is gone.
“I have a friend that works with them. He is FTX senior marketer in Africa and earns 2.3 million Naira monthly. The sad part is that he gets his salary through FTX wallet and does not save in naira. “So he stores most of his salaries there and now the platform has crashed and his seven months’ salary is gone”.
Also, Nigerian Web3 startup Nestcoin was forced to lay off part of its workforce, after the one-year-old startup disclosed it used the FTX platform as a custodian to store a significant proportion of its investment, which saw the collapse of its asset, noting that it necessitated the firm to downsize its workforce to be able to manage its operational expenses.
Reports also reveal that six platforms have been affected in Nigeria and more than 15 across the rest of the continent.
Many African central banks have previously warned their citizens against the use and trade of crypto, but they have continued to ignore and trade on different exchange platforms in the hope of high returns.
Following the FTX collapse, African businesses that had started accepting crypto payments have halted the processes, due to recent upheavals ravaging the industry.
Sources reveal that before the FTX collapse, it managed to acquire over 100,000 customers in Africa. In addition to trading on the platform, these customers used FTX to convert their local currencies to dollars and gain yield on savings.
For the past two years, FTX built a considerable following among the crypto community in Africa by capitalizing on the continent’s unstable banking access and rapid adoption of cryptocurrency (mostly via remittance use cases).
However, with its collapse, the FTX bankruptcy filings state that it owes money to over a million people and businesses after it was discovered that the CEO Sam Bankman-Fried (SBF) used billions of dollars from customer money to prop up Alameda Research.
As he currently undergoes criminal investigation, this event will spur regulatory changes for crypto across various markets.