Crypto Adoption in Africa Is Outrunning Regulations

One of the most important use cases for cryptocurrencies is to provide financial services free from outdated or inefficient financial institutions that charge high fees or refuse to serve certain segments of the population. Protection against inflation and currency devaluations provided by Bitcoin and other cryptos’ fixed supply is another important service provided by cryptos to the public.

These are especially serious issues in developing countries, with Africa as a whole a prime candidate for the adoption of cryptocurrencies. And indeed, this has been the case that the region has embraced crypto usage.

“Cryptocurrency adoption on the continent has accelerated, largely driven by practical needs such as affordable remittances, cross-border transactions, and financial inclusion. ”

However, the region is made up of many different countries with little harmonization of the regulatory framework and financial institutions’ response to cryptocurrencies. As a result, Africa is still presenting a highly fragmented crypto landscape, slowing down adoption, and preventing the continent from fully integrating with global digital finance.

Raphael Esu, a researcher at the University of Hertfordshire in the UK, has written a review of Africa’s regulatory response to cryptocurrencies and its effect on the region’s economy. It was published in Computer Law & Security Review¹, under the title “Africa’s cryptocurrency market: Regulatory fragmentation and barriers to global integration and economic opportunity”.

Africa’s Remittance and Unbanked People

A lot of African economies are supported by remittances, the money that people who have left the country send back home.

Inflows to Sub-Saharan Africa exceeded USD 100 billion in 2022, a figure that outstripped both foreign direct investment and official development assistance. In several countries, remittances account for more than one-fifth of GDP.

Which is why crypto adoption in Africa has been bottom- up and purpose-driven, with remittances representing a significant proportion of use cases.

However, up to 8.5% of this money is lost in transfer fees. One key reason is that anti-money laundering and other financial regulations weigh more heavily on low-value transactions common to remittance flows.

In parallel, Africa is unique in that as much as 57% of adults in the region remain unbanked, with limited or no access to formal financial services. One way to solve this issue has been mobile money platforms, which are now more and more integrating with crypto payment and money transfer infrastructures.

A Fragmented Regulatory Framework

As it lacks a central authority or strong collaboration structure like the EU in Europe, Africa has not created a common regulatory framework for cryptocurrencies.

So far, the attitude toward cryptocurrencies has been a spectrum, ranging from total prohibition to authorized licenses.

Source: Do4Africa

Absolute Bans

This is an approach that entirely outlawed crypto usage, and has been most common in North Africa, notably Algeria, Morocco, and Egypt.

For example, Algeria already had laws entirely banning any “virtual currency”. In most cases, no crypto-specific legislation has been enacted, and previous laws regarding unauthorised or counterfeit currency have been used to enact this ban.

A key reason advanced for these laws is generally to protect the national currency from capital outflow and devaluation. However, the nature of blockchain and cryptocurrency technologies means that underground or peer-to-peer use remains widespread.

Banking restrictions / “Soft” bans

In this model, cryptocurrencies are not outlawed for individuals, but banks and financial institutions are prohibited from interfacing with crypto transactions or businesses.

This strictly constrains the convertibility of cryptos to local currency and vice versa. The justification is generally to avoid contamination of the national regulated financial system with crypto- related hazards.

Countries that have followed this approach include Zimbabwe, Nigeria, and Ghana.

Unregulated Passive Tolerance

This is the case when cryptos are not explicitly prohibited, including for banks, but not clearly authorized either; a situation familiar to the crypto actors everywhere in the early days of the technology.

This can create a lot of confusion. For example, Kenyan authorities have been aware of crypto for years and have issued periodic warnings, yet have not enacted any binding legal framework to govern it.

Still, despite this lack of regulation, Kenya has emerged as one of Africa’s leading cryptocurrency markets by usage and among the top countries globally for peer-to-peer Bitcoin trading volumes.

Many African countries fall into this category of passive or uncertain crypto governance, such as Uganda, Tanzania, Cameroon,  and Zambia.

On one side, such a situation allows experimentation and can drive financial inclusion in a way that strict regulation might inhibit.

On the other side, it can lead to unchecked risks. Especially Ponzi schemes and fraudulent “crypto investment clubs” preying on users enticed by the high returns without understanding the lack of legal protections.

“For example, in Uganda, scams like the Dunamiscoins scheme (which imploded in 2019) led to public outcry and calls for government action, highlighting that doing nothing is not a sustainable strategy once significant public harm is felt.”

Licensing Models

Lastly, some countries are categorizing businesses that deal in cryptos as “virtual asset service providers” (VASPs) and require them to be licensed. This includes AML/KYC enforcement, consumer protection rules, etc.

This helps such countries to position themselves as crypto-friendly (to different degrees), which could attract investment and tech talent.

South Africa has emerged as a regional leader in crypto regulation, driven by the country’s relatively advanced financial system and several high-profile crypto-related incidents that spurred regulatory action.

This has not always gone smoothly, for example, the collapse of Mirror Trading International (MTI), a South African cryptocurrency scheme exposed in 2020 as a multi- billion-rand Ponzi, affected over 290,000 investors globally.

Nearby Botswana has enacted one of Africa’s first stand-alone crypto-specific laws, the Virtual Assets Act 2022. High entry requirements indicate a strategy of trying to only attract serious, well-resourced players who can invest in compliance, thus weeding out fly-by-night operators.

Meanwhile, Mauritius stands out as one of the first African jurisdictions to enact a holistic regulatory regime for crypto- assets and ICOs, with the Virtual Asset and Initial Token Offering Services Act 2021 (VAITOS Act).

It categorizes several classes of licenses, tailored to different activities. Each class has its own minimum capital requirements and ongoing obligations.

“The Act established Class M for broker-dealers operating exchanges, Class R for custody services, Class S for marketplace operators, Class O for wallet services, and Class I for investment advisors and for token issuance.”

A Missed Opportunity

International Reputation Risks

Despite a high rate of adoption by the public, Africa as a whole has mostly failed to capitalize on crypto to attract investments or boost its financial industry compared to developed nations or other regions.

Small, fragmented, and often unregulated markets have been a key factor in this result, and institutional participation remains minimal.

This also represents a problem for the rest of the world, as the global regulation of crypto-assets has been shaped by the Financial Action Task Force (FATF), which sets the benchmark for anti-money laundering (AML) and counter-terrorist financing (CTF).

So far, the implementation of these measures regarding crypto has been at best incomplete in Africa.

This can lead to serious issues for the country and its financial systems as a whole. In February 2023, both South Africa and Nigeria were placed on the FATF list of jurisdictions under increased monitoring, with weaknesses in VASP supervision among the factors.

Fighting crime power by illegal use of cryptos is also an issue when regulations are lagging, alongside the technical ability of the judicial authorities.

“Confiscation of cryptocurrencies stolen by criminals, or seized in execution of court orders, depends on technical capacities that few African judicial and policing institutions presently possess, including the secure custody of seized private keys. Cross-border enforcement of domestic court decisions is similarly constrained.”

Stablecoin & Currency Risks

Widespread adoption of dollar-pegged stablecoins in jurisdictions with weak or volatile national currencies poses a credible risk to monetary stability.

This is because such “dollarization” would reduce the central bank’s capacity to conduct monetary policy, manage capital flows, and respond to shocks.

As the region is regularly suffering from inflation or chronic currency depreciation, this can partially explain the reluctance to embrace cryptos. Volatile Bitcoin and other cryptos are also hard to control for these countries.

At the same time, the reluctance to embrace cryptocurrencies amidst currency and price instability is an extra factor in people adopting them anyway, leaving both the financial system vulnerable to disruption and the sector unregulated.

“Outright bans are largely ineffective against borderless networks and push activity into unregulated channels. Banking “soft bans” disrupt formal rails yet fuel peer-to-peer trading. Passive tolerance permits experimentation but leaves consumers exposed to fraud and offers little legal certainty for firms. ”

Cryptos’ Future In Africa

Like most of the world, Africa is embracing cryptos in response to public demand for more efficient financial infrastructure, be it lower fees, faster payments, or greater anonymity.

These needs are especially dire in a region where the majority of the population is unbanked, remittances are an essential lifeline, and national currencies experience regular crises.

At the same time, the lack of coordination between the major economies of the continent has somewhat hindered the safe deployment of cryptos, leaving legitimate users vulnerable to scams, Ponzi schemes, and illegal activities.

Overall, the licensing approach adopted by South Africa, Mauritius, and Botswana has produced measurable progress compared to the more restrictive approaches adopted by the rest of the region.

A coordinated regional response, including the possibility of a multilateral central bank digital currency project under the African Continental Free Trade Area (AfCFTA) or other regional economic community, offers a partial answer to fragmentation.

AfCTFA’s Digital Trade, adopted in 2024, seeks to facilitate cross-border digital services, though it omits explicit provisions for virtual assets.

Better implementation of the African Union’s Digital Transformation Strategy 2020–2030 could help push for a harmonized adoption method of cryptos as well.

Study Referenced

^{1. Raphael Esu. Africa’s cryptocurrency market: Regulatory fragmentation and barriers to global integration and economic opportunity. Computer Law & Security Review. Volume 61, July 2026, 106335. https://doi.org/10.1016/j.clsr.2026.106335}