Ghana and the crypto regulation global race

Fitzgerald Lamptey, Accra
August 14, 2024

In February 2018 the Bank of Ghana (BoG) issued a notice to inform the public that they do not license activities in digital currency. A year later, in March 2019, the Ghana Security Exchange Commission (SEC) doubled down. In a public notice, the SEC informed the public that it does not recognize crypto currencies as currency or legal tender. The market regulator also reminded the public that crypto currencies platforms are neither licensed nor regulated by the SEC. Since the publication of the notices by the financial authorities, global crypto currencies have experienced positive developments but also setbacks amidst global turmoil.

Developments

Outside of Africa, over 100 countries are exploring or piloting Central Bank Digital Currencies (CBDCs); a digital form of a country’s sovereign currency. Major international banks have started crypto trading activities. In March 2021, US investment bank, Morgan Stanley launched a Bitcoin fund. The same year, Elon Musk, CEO of Tesla and SpaceX CEO, bought the equivalent of US$1.5 billion in Bitcoin, then signaled plans to accept it as payment. On September 7th, 2021, El Salvador, in Central America, passed a law, which made the digital currency Bitcoin legal tender within the country despite warning from the International Monetary Fund (IMF)¹.

On March 9th, 2022, President Joe Biden issued an executive order to co-ordinate the regulation of digital assets. According to the White House, digital assets, including crypto currencies, surpassing a US$3 trillion market cap in November 2022 (up from US$14 billion just five years prior) ². In the United States, 16 percent of adult Americans (40 million people) have invested in, traded, or used crypto currencies.

In Europe, the European Parliament adopted the Markets in Crypto assets (MiCA) regulation in June 2023. MiCA will govern issuance and provision of services related to crypto assets and stablecoins.

On the African continent, the Central Bank of Nigeria (CBN) launched the “eNaira”, a central bank digital currency (CBDC), on October 25th, 2021. In a similar move, 12 countries, including Ghana, launched pilot studies for their respective CBDC. In another bold move, in July 2022, the Central African Republic (CAR) announced the launched a national crypto coin called “Sango Coin”, described as a “national digital currency”. The Sango Coin was supposed to serve as a legal tender alongside the CFA. However, CAR eventually postponed plans after reluctance from the regional central bank, the Central Bank of Central Africa (BEAC), which is also considering a regional CBDC.

A litany of bad news

In June 2021, the Chinese government banned the mining of crypto currencies and transactions, then, declared them illegal. The world of Crypto has also made the headlines with negative news. On November 7th, 2022, U.S. Attorney announced a historic US$3.36 billion crypto currency seizure and conviction in connection with Silk Road dark web fraud³. In the same month, crypto currency exchange FTX, once valued at US$32 billion, collapsed⁴. In May 2021, Tesla CEO Elon Musk appeared to reverse his decision about accepting digital payments, citing concerns about the environmental impact of crypto mining.

On June 5th, 2023, the US Securities and Exchange Commission (SEC) filed 13 charges against entities of Binance, the world’s biggest crypto currency exchange and founder Changpeng Zhao. According to releases from the SEC, charges include operating unregistered exchanges, broker-dealers, and clearing agencies. The SEC also accuse Binance of misrepresention, lack of trading controls and oversight on the Binance.us platform. Binance conducted unregistered offer and sale of securities, the SEC said. However, on June 18th, 2023, Binance and the SEC agreed to a settlement to avoid a full asset freeze of the platform in the US.

Binance agreed to keep customer assets in the United States. To complete the catalogue of negative news, Bitcoin, the largest crypto currency, lost two-thirds of its value, after the COVID-19 pandemic. According to the IMF, it continues to exhibit a high volatility. The year 2023 ended with the conviction of Sam Bankman-Fried after the collapse of FTX and with the arrest of Binance executives in Nigeria for illegal foreign exchange transactions⁵.

Interest in Crypto increases despite bad news

The crypto market appears to be active throughout despite the regulators’ warnings. In September 2021, the BoG changed its approach by launching a pilot study of the e-Cedi. The pilot projects concluded that blockchain technology has the potential to transform the payment system and promote financial inclusion. On December 1st-3rd, 2022, Accra hosted the African Bitcoin Conference. Representatives of the major trading platforms travelled to Accra to attend the event. Users of Binance P2P, Paxful, Yellow Card, Kraken, Coinbase also took part in the event.

Online, Binance says that Ghana has witnessed “substantial grassroots adoption of crypto currency.” Sub-Saharan Africa represents only 2.3 percent of the global transaction volume. But, it has accumulated US$117.1 billion of assets between July 2022 to June 2023, according to Binance⁶. Nigeria ranks second on Chainalysis’ Global Crypto Adoption Index, with Kenya, Ghana, and South Africa also ranking high⁷.

The IMF remains cautious even when it says that Africa is one of the fastest-growing crypto markets in the world. Citing Chainalysis, the IMF said that Africa remains the smallest market, with crypto transactions peaking at US$20 billion per month in mid-2021. Kenya, Nigeria, and South Africa have the highest number of users in the region⁸. Crypto currency volatility and perceived risks⁹ have prompted calls for regulations.

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