Cointime

Download App
iOS & Android

FTX Collapse: African Crypto Industry Leaders’ Perspective and Advice to Regulators

Validated Individual Expert

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.

Comments

All Comments

Recommended for you

  • Bitcoin Layer 2 Project Bitlayer Launches $50 Million Ecosystem Incentive Program

    Bitlayer, a Bitcoin Layer2 infrastructure project based on the BitVM paradigm, announced the launch of a $50 million ecological incentive plan to promote the development of its mainnet ecosystem. The first phase of the incentive program, named "Ready Player One," will begin registration at 09:00 UTC on March 29th, 2024 and end at 09:00 UTC on April 29th, 2024, and will officially start after the Bitlayer mainnet is launched. Specific rules and reward allocation guidelines for the event will be disclosed in subsequent announcements. Through the "Ready Player One" and other ecological incentive plans, Bitlayer aims to accelerate ecosystem development and incentivize projects to deploy on the Bitlayer mainnet. In addition, Bitlayer promises comprehensive ecosystem support for all projects, including potential foundation and institutional investment, initial liquidity support, comprehensive product development resources, guidance and investment opportunities from top incubators, support from the Bitcoin community and OGs, ecosystem cooperation, and co-creation.

  • Stablecoin protocol Ethena on BNBChain has been hacked

    The stablecoin protocol Ethena on BNBChain has been hacked, causing a loss of 480 BNB, worth about $290,000, as monitored by PeckShieldAlert.

  • Singapore-based Bitcoin Layer2 Project BEVM Raises Tens of Millions in Seed and Series A Funding

    Singapore-based Bitcoin Layer2 project, BEVM, has completed its seed round and part of its Series A round, raising tens of millions of USD from over 20 investors including RockTree Capital, Waterdrip Capital, and ViaBTC Capital. The project's Series A valuation has reached $200m and aims to accelerate its international development and roll-out. BEVM is an EVM-compatible Bitcoin Layer2 network built on Taproot Consensus, which uses $BTC as gas and aims to bring 10% of $BTC into its Layer2 network environment. The project's mainnet is scheduled to launch on March 28th and has already implemented decentralized Bitcoin cross-chain custody services through Schnorr Signature, MAST, and Bitcoin SPVs.

  • Ethereum on-chain DEX transaction volume exceeded $2.1 billion yesterday

    According to DeFiLlama data, the trading volume of DEX on the Ethereum blockchain on March 28th was 2.111 billion US dollars, ranking first. The daily trading volume of DEX on the BSC chain was 1.398 billion US dollars, ranking second; the daily trading volume of DEX on the Solana chain was 1.097 billion US dollars, ranking third.

  • Taiwan’s Ministry of Interior has approved the establishment of a cryptocurrency industry association

    Taiwan's Ministry of the Interior has approved the application of the local cryptocurrency industry to establish an industry association. The local cryptocurrency industry working group, which was established last year to prepare for the establishment of the industry association, said that the working group now needs to complete all preparations and officially establish the cryptocurrency industry association by the end of June as required by the government. The working group is currently composed of 22 cryptocurrency companies, including Taiwan's major exchanges such as MaiCoin and BitoPro. The working group pointed out that ACE Exchange has been expelled from the group because the troubled exchange is under investigation by prosecutors for improper behavior by its former executives.

  • Grayscale ETH Trust negative premium rate is 22.77%

    According to ChainCatcher news and Coinglass data, the Grayscale Bitcoin Trust Fund (GBTC) has a premium rate of 0.02%. The Grayscale ETH Trust has a negative premium rate of 22.77%, and the ETC Trust has a negative premium rate of 36.58%.In addition, the Grayscale BCH Trust has a premium rate of 238.13%, the LTC Trust has a premium rate of 380.60%, the SOL Trust has a premium rate of 515.93%, the MANA Trust has a premium rate of 726.65%, the LINK Trust has a premium rate of 713.66%, and the FIL Trust has a premium rate of 3057.89%.

  • Net inflows into spot Bitcoin ETFs reached $179 million on March 28

    Spot on Chain, a blockchain data monitoring platform, posted on social media that the net inflow of spot bitcoin ETF on March 28th reached 179 million US dollars, a decrease of 26.9% compared to the previous trading day. After 54 trading days, the total net inflow accumulated to 12.13 billion US dollars, which is the level before the last fully negative trading week. BlackRock's iShares Bitcoin ETF (IBIT) and Grayscale's GBTC both saw a significant slowdown in daily inflows and outflows on March 28th.

  • Bitcoin spot ETF had a total net inflow of US$179 million yesterday, and the ETF net asset ratio reached 4.25%

    According to SoSoValue data, the Bitcoin spot ETF had a total net inflow of $179 million yesterday (March 28th, US Eastern Time).Yesterday, Grayscale's ETF GBTC had a net outflow of $104 million, and its historical net outflow is $14.77 billion. The Bitcoin spot ETF with the highest net inflow yesterday was BlackRock's ETF IBIT, with a net inflow of approximately $95.12 million, and its historical total net inflow has reached $13.96 billion. The second is Fidelity's ETF FBTC, with a net inflow of approximately $68.09 million yesterday, and its historical total net inflow has reached $7.56 billion.As of now, the total net asset value of Bitcoin spot ETF is $59.1 billion, and the ETF net asset ratio (market value compared to the total market value of Bitcoin) is 4.25%, with a historical total net inflow of $12.12 billion.

  • Ethereum Inscription ETHS rose over 95% in 24H

    CoinGecko data shows that Ethereum Inscription ETHS has risen by 95.9% in the last 24 hours, now reporting at 7.51 USDT. Earlier, Ethereum founder Vitalik released the latest long article "Ethereum has blobs. Where do we go from here?". As a result of this news, the price of Ethereum Inscription ETHS soared.

  • Binance exec sues Nigeria’s National Security Agency over detention

    According to CoinGape, Tigran Gambaryan, a detained executive of Binance, has filed a lawsuit against the National Security Adviser (NSA) and the Economic and Financial Crimes Commission (EFCC) in Nigeria. Local media reported that on March 28th, Tigran Gambaryan sued the National Security Agency, accusing it of violating his basic human rights and seeking five major remedies from the court.He urged the court to approve the return of his passport and to release him immediately after more than three weeks of detention. He also requested a ban on future detention in similar investigations and demanded public apologies from the National Security Agency and the EFCC.In addition, he requested that the court pay the full amount of compensation for the lawsuit.