By Harold Kwabena FEARON and Dennis AKWABOAH
Cryptocurrencies and digital assets in general have become a transformative force across the globe, reshaping traditional financial systems and introducing new paradigms for value transfer, investment, and innovation.
Africa, in particular, has emerged as a fascinating frontier for cryptocurrency adoption, driven by its unique economic landscape, rapid technological adoption, and widespread use of mobile money platforms.
From peer-to-peer trading hubs in Nigeria and Kenya to blockchain-powered land registries in Ghana, the continent is witnessing a burgeoning interest in digital assets despite regulatory uncertainty.
Amid this evolving scene, the regulatory response has been mixed. While some African nations, have introduced forward-thinking frameworks to encourage innovation, others have opted for caution, issuing warnings or outright bans against cryptocurrency use. This signals a recognition of the dual need to harness the benefits of digital assets while safeguarding financial stability and consumer interests.
Therefore, the purpose of this article is to examine the impact and regulation—or lack thereof—of cryptocurrencies and other digital assets across key African jurisdictions, with a particular focus on Ghana. Drawing insights from regulatory developments in countries such as Kenya, Nigeria, and South Africa, it evaluates the progress and challenges in establishing robust regulatory frameworks.
Ultimately, it seeks to propose a structured and forward-looking approach to digital asset regulation in Ghana, emphasizing innovation, consumer protection, and financial inclusion.
The evolution of digital financial services and the emergence of cryptocurrencies in Africa
Africa’s journey toward digital financial services is one of transformation, defined by innovation, adaptation, and the quest for financial inclusivity. The continent has long been celebrated for its ability to leapfrog traditional financial systems, particularly with the rise of mobile money platforms that revolutionized how individuals transact, save, and engage with financial services.
Starting with Kenya’s groundbreaking M-Pesa platform in 2007, Africa demonstrated how mobile technology could be leveraged to reduce financial barriers, facilitating peer-to-peer transfers, bill payments, and micro-loans. By 2018, mobile money accounted for over 25percent of Kenya’s gross national product (GNP), cementing its role as a cornerstone of Africa’s digital financial ecosystem.
Building on this digital finance foundation, Africa witnessed the emergence of cryptocurrencies and blockchain technology as a new frontier for innovation. Cryptocurrencies such as Bitcoin and Ethereum offered a decentralized alternative to traditional finance, enabling faster and more cost-effective cross-border transactions. This was particularly valuable in Africa, where remittances play a critical role in many economies.
With an estimated 350 million unbanked adults in Sub-Saharan Africa and remittances constituting up to 30percent of GDP in countries like Lesotho, cryptocurrencies provided a solution to challenges such as high transaction fees and limited access to foreign currency.
Despite these advancements, the reception of cryptocurrencies and blockchain technology across Africa has been mixed. While private-sector innovation has surged, many governments have approached these technologies with caution. Regulatory responses have ranged from Mauritius’ forward-thinking sandbox for fintech startups to Zimbabwe’s outright bans.
Concerns over money laundering, consumer protection, and financial stability have led central banks and regulators to adopt cautious stances or issue warnings. It can therefore be said that Africa is well-positioned to be a leader in the global digital economy. However, fully harnessing the potential of cryptocurrencies and blockchain will require careful regulatory frameworks that balance innovation with risk management.
Cryptocurrency adoption in Africa
Cryptocurrency adoption in Sub-Saharan Africa has surged, with the region receiving an estimated US$117.1 billion in on-chain value between July 2022 and June 2023, marking a 16percent growth from the previous year. Leading the charge, Nigeria ranks second globally on the Global Crypto Adoption Index, receiving approximately US$59 billion in cryptocurrency value from July 2023 to June 2024, with most transfers under US$1 million, highlighting the strength of both retail and professional markets.
Other countries like Kenya, Ghana, and South Africa also show strong adoption, ranking 21st, 29th, and 31st on the index. A key driver of this adoption is the use of cryptocurrencies as a hedge against inflation and economic instability. For instance, when Ghana’s inflation hit 29.8percent in mid-2022, many adopted Bitcoin and stablecoins to preserve value.
Stablecoins, especially those pegged to the US dollar, have become essential for cross-border payments, offering a cost-effective and reliable alternative to traditional remittance channels. In Nigeria, stablecoins make up about 40percent of all stablecoin inflows in Sub-Saharan Africa.
The region’s cryptocurrency market is characterized by a retail-driven approach, with a large portion of transaction volume coming from transfers under US$1 million. Despite accounting for only 2.7percent of global cryptocurrency volume, Sub-Saharan Africa is a leader in Decentralized Finance (DeFi), driven by a demand for accessible financial services in a region where only 49percent of adults had access to banking in 2021.
An overview of the state of cryptocurrency regulation in Africa
Africa’s approach to cryptocurrency regulation is diverse in the sense that it reflects a mix of opportunity, caution, and national priorities. While mobile money has revolutionized financial access, cryptocurrencies pose unique challenges, as regulators must balance innovation with concerns about financial stability and criminal activities.
Regulatory stances vary across the continent, from outright bans to proactive frameworks. South Africa, for instance, has classified crypto assets as “financial products” and requires licenses for crypto service providers.
Countries like Nigeria and Kenya have partial regulations, with Nigeria’s central bank prohibiting crypto transactions through financial institutions, though peer-to-peer trading persists. In contrast, nations such as Cameroon, Ethiopia, and Morocco have imposed outright bans due to concerns over fraud and financial instability. Some countries, like Mauritius and Ghana, are embracing innovation. Mauritius has introduced a regulatory sandbox to attract crypto startups, while Ghana has released draft guidelines focusing on innovation, consumer protection, and risk management.
The current state of the cryptocurrency market and regulation in Ghana
Ghana has emerged as one of the most engaged countries in Africa in terms of cryptocurrency interest and ownership. Google Trends consistently places Ghana among the top 20 countries for cryptocurrency-related searches, signaling a significant organic demand for knowledge and engagement with digital assets.
According to the State of Crypto: Africa report, over 900,000 Ghanaians, or approximately 3.01percent of the population, own at least one type of cryptocurrency. This adoption rate reflects a growing recognition of the benefits of digital currencies in an economy facing instability and inflation.Though the precise rate of stablecoin usage in Ghana remains unclear, stablecoins such as Tether (USDt) and USD Coin (USDC) are seen as viable options for individuals looking to safeguard their assets.
Cryptocurrencies in Ghana have several distinct use cases that respond directly to the country’s economic challenges. The rapid depreciation of the cedi and the high cost of maintaining foreign accounts have made digital currencies an attractive alternative for both savings and payments. For many Ghanaians, stablecoins provide a way to store value in a currency less susceptible to inflationary pressures, thereby preserving purchasing power in a way that the cedi currently cannot.
In addition to saving, cryptocurrency has become an increasingly popular tool for cross-border transactions and remittances. As a top recipient of remittances within sub-Saharan Africa, Ghana has seen growing interest in cryptocurrencies as a cheaper, faster alternative to traditional banking channels. Cryptocurrency allows for instantaneous transfers with significantly reduced fees, facilitating smoother and more cost-effective remittance processes for the over 3 million Ghanaians living abroad.
Notwithstanding the above, Ghana has no specific legislation regulating cryptocurrency. The Bank of Ghana had issued several public notices in the past, highlighting that cryptocurrencies were not recognized as legal tender in the country, with people trading in these digital assets doing so at their own risk as same were not regulated under any existing laws in Ghana, and thus lacked any legal safeguards or guarantees.
Similarly, the Securities and Exchange Commission (SEC) had warned against the use of cryptocurrencies in Ghana through the issuance of similar notices. However, in a notable shift, the Bank of Ghana has issued its Draft Guidelines on Digital Assets in August 2024, signaling a change in stance.
These guidelines aimed to regulate digital asset activities, emphasizing goals of financial inclusion, economic stability, and enhanced consumer protection. The guidelines also set out stringent requirements related to anti-money laundering (AML), cybersecurity, and licensing for virtual asset service providers, marking a significant step toward a more structured regulatory environment for digital assets in the country.
Lessons from the cryptocurrency regulatory frameworks of other African jurisdictions
The Bank of Ghana’s Draft Guidelines on Digital Assets represent a significant step toward regulating the cryptocurrency space in the country. These guidelines aim to protect consumers by requiring risk disclosures, enforce strict anti-money laundering (AML) and counter-terrorism financing controls, and create room for innovation through a regulatory sandbox.
While the specifics of the guidelines are still in the works, this moves signals the Bank of Ghana’s intention to build a safer and more structured environment for cryptocurrency activities.
As Ghana moves forward with these draft guidelines, there is still a lot to learn from other countries that have successfully addressed the complexities of cryptocurrency regulation. By considering these lessons, Ghana can strike a balance between fostering innovation and ensuring financial stability and consumer protection through the following:
- Phased approach & regulatory sandboxes: Countries like Mauritius have adopted regulatory sandboxes, allowing new technologies and policies to be tested in a controlled environment before being widely implemented. Ghana’s draft guidelines mention a similar sandbox testing process, which will be crucial for understanding how regulations affect the market in real time and refining them accordingly.
- Balancing innovation & risk: Many successful regulatory models focus on promoting innovation while keeping risks like fraud and market manipulation in check. Ghana could engage with experts in the local and international fintech sector to develop a framework that encourages innovation but still protects consumers from potential harm.
- Clarity and transparency: Unclear regulations can breed uncertainty and hold back adoption. Ghana’s decision to publish a draft is a positive step, but providing clear, detailed guidelines on obligations and procedures in the future will build confidence in both local and international stakeholders.
- Financial inclusion & consumer protection: Cryptocurrencies have the potential to bring financial services to underserved communities, but this must be done with strong consumer protection in place. Ghana can work to expand financial services while promoting crypto literacy to ensure citizens are aware of the risks involved.
- International collaboration & standards: Given the borderless nature of cryptocurrency, international cooperation is vital. Ghana could benefit from working with regional bodies like ECOWAS, as well as global organizations like the Financial Action Task Force (FATF), to ensure it follows global best practices for AML and combating financial crimes.
- Taxation guidelines: Clear taxation policies for cryptocurrencies are essential for compliance and revenue generation. Ghana should establish straightforward guidelines, similar to South Africa’s, to ensure crypto businesses and individuals are properly taxed while also promoting industry growth.
- Monitoring & enforcement: Strong enforcement mechanisms are key to successful regulation. Ghana should either strengthen existing agencies or create new ones to handle crypto-related activities, ensuring compliance with AML and KYC measures.
- Energy consumption & sustainability: Given the environmental concerns around cryptocurrency mining, Ghana should promote energy-efficient practices and incentivize the use of renewable energy in mining operations to minimize the industry’s ecological impact.
- Decentralization & open systems: Overly centralized regulations can stifle innovation. Ghana should aim for a regulatory framework that encourages decentralization, which would help avoid corruption and unnecessary barriers while allowing the crypto industry to flourish.
Proposed framework for cryptocurrency regulation in Ghana
This proposed framework seeks to outline clear steps to regulate cryptocurrency activities while fostering innovation and safeguarding stakeholders.
- Definition and scope: The framework should clearly define crypto-assets and their categories, such as utility tokens, stablecoins, and asset-referenced tokens. It should also outline the entities to be regulated, including Crypto Asset Service Providers (CASPs,) exchanges, and issuers.
- Regulatory objectives: Key goals of a potential framework should include protecting consumers from fraud and misinformation, promoting financial inclusion, ensuring market integrity, combating illicit activities through AML/CFT compliance, and fostering responsible innovation.
- Licensing and authorization: CASPs and exchanges should be required to obtain licenses through a rigorous licensing process, demonstrating secure infrastructure, financial solvency, and AML compliance. New offerings must submit detailed disclosures, including a “crypto-asset white paper.”
- AML compliance: CASPs must register with the Financial Intelligence Centre (FIC) and enforce measures such as KYC processes, transaction reporting, regular audits, and record-keeping.
- Consumer protection: Transparent disclosures on risks and fees should be made mandatory. Existing or potential insurance or compensation funds should protect user deposits, and dispute resolution mechanisms should be established.
- Financial inclusion: Cryptocurrencies should be leveraged to lower cross-border remittance costs and extend financial services to the unbanked. Partnerships between CASPs and fintechs should address infrastructure challenges.
- Taxation: Clear tax policies should be defined for crypto transactions, gains, and income. CASPs should be required to report transaction data to ensure tax compliance.
- Cross-border transactions: Policies should be developed to monitor and regulate cross-border activities while aligning with regional frameworks like AfCFTA.
- Risk management: Measures should limit traditional financial institutions’ exposure to high-risk crypto-assets and require CASPs to maintain liquidity and manage systemic risks.
- Sustainability standards: Environmental impact disclosures would be required, and the adoption of energy-efficient blockchain technologies should be encouraged.
- Education and awareness: Public campaigns should be established to educate consumers on crypto risks and benefits, while training programs should prepare regulators, law enforcement, and financial institutions.
- Monitoring and supervision: Finally, a dedicated regulatory body or a new Bank of Ghana department or office (Similar to the Bank of Ghana’s Fintech and Innovation Office) should be set up or enhanced to oversee crypto activities, using a risk-based approach and engaging stakeholders to refine policies.
Conclusion
Ghana’s move toward regulating cryptocurrencies is both timely and encouraging. The Bank of Ghana’s Draft Guidelines hint at a future where innovation and safety can coexist, providing a clearer path for cryptocurrency adoption in a way that benefits everyone.
While challenges in implementation and enforcement persist, the framework holds promise for positioning Ghana as a leader in the continent’s cryptocurrency scene. By fostering collaboration, embracing global best practices, and ensuring clear, equitable regulations, Ghana has the potential to unlock the benefits of digital assets while safeguarding its financial system for the future.
>>>Harold Kwabena Fearon is an Associate at Sustineri Attorneys PRUC with its Corporate, Governance, and Transactions Practice Group, specializing in legal service provision for Startups/SMEs, Fintechs, and Innovations. He welcomes views on this article via [email protected]
>>>Dennis Akwaboah is an Associate at Sustineri Attorneys PRUC with its Technology and Emerging Innovations, Corporate, Tax and Trade Practice Group, specializing in legal service provision for Startups and SMEs, Fintechs, and other Technology companies. He welcomes views on this article via [email protected]
