The collapse of FTX and subsequent calls for tougher regulation by the likes of U.S. Senator Elizabeth Warren have increased the likelihood of regulators adopting even stricter crypto laws. In Africa, crypto industry participants warn of the unintended consequences arising from rushed and over-restrictive regulations.
The Game-Changing Role of Crypto in Africa
As the crypto industry continues to grapple with the ramifications of FTX’s collapse and the resulting loss of trust, regulators have been quick to use this incident to support their call for more stringent regulations. Opponents of bitcoin and decentralized digital assets like U.S. Senator Elizabeth Warren have blasted regulators for allowing entities such as FTX to operate outside regulation.
Compounding matters for crypto enthusiasts who may want to lobby against damaging legislation is the impression that crypto entrepreneurs are not bound or guided by any known code of conduct. Critics of the industry believe this lack of rules or ethics is what motivates scammers, and those with an insatiable desire for high-risk trades, to experiment with customer funds.
Yet, when these experiments and gambles fail to pay off, the investors often lose everything while the culprits like Sam Bankman-Fried — founder and CEO of FTX — play the video game Storybook Brawl which he says helps him to “unwind a bit.”
Many in the crypto industry now fear the collapse of FTX will see regulators around the world use this as a pretext for installing tougher regulatory regimes which may stifle innovation.
In Africa, where FTX had a minimal footprint, commenters believe regulators there are likely to use the crypto exchange’s collapse as justification for refusing to regulate or for banning crypto entities altogether. This will be despite crypto assets’ game-changing role in Africa’s remittances and cross-border payments arena.
To understand the African crypto and blockchain industry’s perspective, Bitcoin.com News spoke to several industry participants from the continent including Senator Ihenyen, the president of the Nigerian lobby group Stakeholders in Blockchain Technology Association of Nigeria (SIBAN). Ihenyen said it is correct to believe that the global crypto industry is headed for an era that is characterized by even tougher regulation, and more skeptical governments.
Tougher Regulation Leads to Reduced VC Funding
However, Ihenyen said while it is understandable that politicians like Warren may want tougher regulation, he reckons that this may not be the best approach. He explained:
Rather, as I have continued to advocate, regulators need to reimagine the role of regulation in today’s increasingly decentralized economy.
Instead of introducing tougher laws, the SIBAN boss said it would be best if the U.S. Congress, the U.S. Securities and Exchange Commission (SEC), and other regulators were to consider regulatory “frameworks that encourage and require accountability, security, and transparency in the crypto market.”
Concerning how any tougher regulation of the crypto industry by the U.S. authorities will affect industry players in Africa, Ihenyen said there are likely to be two outcomes. The first outcome is the drying up of venture capital funding “for crypto projects, particularly exchanges and token-based platforms.” The second likely outcome would be that of U.S. and European Union-based investors “becoming more interested in exploring opportunities in Africa’s fast-growing retail crypto market.”
BTC ‘a Financial Lifeline’
Rume Ophi, a crypto enthusiast and educator, told Bitcoin.com News that the collapse of FTX had hit very close to home and that his own education efforts have been affected. While he said he sympathizes with affected users, Ophi notes regulators should not use this to justify imposing stricter regulation as this can create other problems.
“Stricter regulation will only promote money laundering,” Ophi argued.
Another industry voice from Africa, Nathaniel Luz, a Nigeria-based crypto advocate and author of the book titled “Bitcoin is Cash,” concurred that the U.S. regulators are now under increased pressure to respond. However, just as he has argued in his book, Luz told Bitccoin.com News that since Africans see cryptocurrencies like BTC differently from Westerners, any regulatory response must be cognizant of this fact. He explained:
While bitcoin is a luxury for the West, it is a lifeline for Africans. For them, it is just another asset or stock but for us, it is a financial lifeline.
Meanwhile, in their joint response to questions sent by Bitcoin.com News, Daniel Mulondo and Killian Mugenyi, the co-founders of the crypto academy Nileone, advised regulators to take advantage of the situation to engage with all stakeholders including educators. To crypto critics using the FTX collapse as fodder, Mulondo and Mugenyi said:
Has anything fundamentally changed regarding the technology? The answer is no. This is a failure of a centralized entity, an exchange. It has sadly tarnished the industry and no doubt delayed adoption.