Crypto: Is regulation lagging behind technological and financial innovations?

Bukari Mahama, London, UK
November 14, 2024

T he government of Ghana does not recognize cryptocurrencies as an official medium of exchange or a means to store value. In March 2019, the Ghana Security Exchange Commission of Ghana (SEC) said it does not authorize crypto activities offered by unregistered and unlicensed entities. As examples of crypto firms and assets, the SEC specifically named Bitcoin, XRP, Lite Coin and Ethereum. The SEC also mentioned Monero, Tether and Tron. Other crypto currencies and coins that appeared in this list included Neo, IOTA, NEM, Holo, Waves, Ontology, Maker, Tezos, USD Coin, Ripple, Dash, Cardano, Stellar, ZCash and EOS. Crypto exchanges such as Binance, Kraken, Paxful are included in this list of companies banned by the SEC.

In April 2022, the Bank of Ghana banned the pricing, advertising, receipting and payments for goods and services in foreign currency in Ghana, without written authorization. However, the position of the central bank has developed. In August 2024, the Bank of Ghana issued a draft guideline on digital assets¹, in which it announced a ‟wait and see” approach. The BoG said that it continues to prohibit engagement in foreign exchange business without a license, while acknowledging that ‟The digital asset landscape in Ghana is evolving, with increasing interest and adoption of crypto assets and blockchain technology, supported by a growing number of exchanges and initiatives in the country’s financial ecosystem”.

In this changing landscape, companies, entrepreneurs, and individual investors are struggling to navigate between illegality and a certain level of regulatory tolerance.

Are crypto companies and entrepreneurs ignoring regulations?

Despite these stern warnings from regulators, major crypto trading companies, exchange, and entrepreneurs continue to target Ghana. In fact, the Bank of Ghana acknowledges that ‟the digital assets ecosystem in Ghana is primarily controlled by entities facilitating the buying, selling, and trading of virtual assets”². These platforms, the central bank says, provide liquidity and access to cryptocurrencies. However, the banking regulator has not removed the regulatory ristrictions. In this context, an apparent regulatory tolerance exposes investors to serious risk of illegality.

On the internet, example abounds of companies offering crypto services and investment opportunities in Ghana. For example, Yellowcard offers its customers a platform to buy and sell stable coins like USDT & PYUSD, plus other popular coins like BTC & ETH with mobile money in Ghana³. Coinbase converts and swaps Bitcoin BTC to Ghanaian Cedi GH₵⁴. Paxful offers similar services. But, Binance has gone a step further by launching an advertising campaign that displays billboards in Ghana’s major cities.

In Ghana, entrepreneurs are also attempting to enter the market despite regulatory restrictions. Ghana’s MybitStore describes itself as an online application and an infrastructure provider for cryptocurrency exchange⁵. Like MybitStore, eBipoint also claims to be a digital currency exchange platform ‟where you can buy and sell your bitcoin, ethereum, bitcoincash litecoin”⁶. The two companies are based in Accra, Ghana.

Other domestic crypto businesses have tuned out to be pernicious and dubious initiatives, forcing the Bank of Ghana to clamp down. The banking regulator warned the public against ‟Sidicoin” an unauthorized investment scheme, In June 2020⁷. In February 2022, the central Bank banned a money doubling scheme under the name ‟BitCash Currency Exchange” that claimed to have approval from Bank of Ghana. The BoG explained in a public notice that ‟this fraudulent scheme does not reward investors as promised”⁸.

As cyber criminality spreads, the central bank says that it has to remain vigilant in addressing potential drawbacks. Risks include money laundering and terrorism financing (ML/TF), fraud, cyber-theft, illicit capital flows, and consumer protection concerns. In 2023, Ghana banks lost USD$10 million (GH₵160 million) because of a variety of fraudulent schemes including electronic fraud⁹.

Crypto Appeal

In Ghana, the perception of crypto currencies as an asset whose value continues to appreciate persists, especially amongst the younger generation. This perception grows as the internet penetration and financial literacy increase. According to the Ghana National Communication Authority (NCA), Ghana had an internet penetration rate is 71.51 percent, with 23 million users as of January 2023 (two third of the population). The country also record of 38.95 million active cellular mobile connections in early 2024 (equivalent to 113.1 percent of the total population)¹⁰.

Also, the Bank of Ghana’s 2023 payment oversight shows an increase of 16.60 percent (to in 2023) of the number of registered internet banking customers. The number of registered mobile banking customers increased by 51.54 per cent (Year on year). Ghana has 53 FinTech companies, of which the majority are active in the provision of payment systems. The total volume of mobile money transactions grew by 34.30 percent 2023 from 2022. The Bank of Ghana acknowledges that ‟The digital asset landscape in Ghana is evolving, with increasing interest and adoption of crypto assets and blockchain technology, supported by a growing number of exchanges and initiatives in the country’s financial ecosystem”¹¹.

The Ghana Security and Exchange Commission has also reached the same conclusion and has set up a task force to help it develop the capacity to regulate crypto assets¹². Other incentives for the development of digital assets are coming from multilateral banks. For example, in April 2022, the World Bank provided US$200 Million to a government program called ‟Accelerate Ghana’s Digital Transformation Agenda”. The goal of this program is to expand digital access and adoption, enhancing digital public service delivery, and promoting digitally-enabled innovation are essential for Ghana’s digital transformation¹³. On November 1st, 2023, Ghana signed a €27 million with the European Union. One of the goal of this agreement is the acceleration of Ghana’s digital and green transition¹⁴.

How does the crypto world perceive Ghana?

The crypto trading industry see Ghana as one of the best potential markets in West Africa. The country ranks 46 in the world in the Chainalysis Global Crypto Adoption Index. Binance has organized many outreach event in Ghana including a ‟Traders Meetup” in Accra in August 2022 and ‟Campus Tour” in 2023. Dubai-based Bybit and Binance offer opportunities for Ghanaians resident to use Ghana Card for KYC and ID verification. Similarly, Crypto.com Exchange lists Ghana as one of the countries, where customers are eligible to open a USD SWIFT Wallet. Customers can open a USD wallet for SWIFT deposits and withdrawals. In December 2023, Taiwan based HTC crypto exchange disclosed that ‟Ghanaian residents have continued to trade and invest in cryptocurrencies and this has forced the regulator to think of ways to protect crypto users”¹⁵.

Ghana has gone through several boom-bust cycles over the past decade. The country is still reeling from the negative consequences of Covid-19, as high inflation and depreciation national currency maintain a firm grip on the country since 2020. This economic situation has forced the Bank of Ghana to adopt a tight monetary policy and high interest rates to curb rising inflation. In this mayhem, traditional financial asset prices have fallen, and financial market liquidity has worsened across asset classes. In this context, Ghana’s connected millennials see crypto assets as a reliable value refuge, especially during turbulent economic times. This situation is creating a paradox where regulations continue to lag behind rapid technological and economic changes.

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