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The collapse of FTX and subsequent calls for tougher regulation by the likes of US Senator Elizabeth Warren have increased the likelihood of regulators passing even stricter crypto laws. In Africa, crypto industry participants warn of the unintended consequences arising from hasty and over-restrictive regulations.
As the crypto industry continues to grapple with the fallout from FTX’s collapse and the resulting loss of confidence, regulators have been quick to use this incident to support their calls for stricter regulations. Opponents of bitcoin and decentralized digital assets such as US Senator Elizabeth Warren have blasted regulators for allowing entities like FTX to operate outside of regulation.
The difficulty for crypto-enthusiasts who might want to lobby against harmful 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 fraudsters, and those with an insatiable desire for high-risk trades, to experiment with customer funds.
Yet when these experiments and gambles don’t pay off, investors often lose everything while culprits like Sam Bankman-Fried – founder and CEO of FTX – play the video game Storybook Brawl which he says helps him “relax a bit”.
Many in the crypto industry now fear that the collapse of FTX will see regulators around the world use this as a pretext to install tougher regulatory regimes that could stifle innovation.
In Africa, where FTX had a minimal footprint, commentators believe that regulators there are likely to use the collapse of the crypto exchange as justification to refuse to regulate or to ban crypto entities altogether. This will happen despite the changing role of cryptoassets in Africa’s remittances and cross-border payments.
To understand the African crypto and blockchain industry perspective, Bitcoin.com News spoke with 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 marked by even tougher regulation and more skeptical governments.
However, Ihenyen said that while it is understandable that politicians like Warren may want tougher regulation, he reckons this may not be the best approach. He explained:
Rather, as I have continued to argue, regulators must reshape the role of regulation in today’s increasingly decentralized economy.
Instead of introducing tougher laws, the SIBAN chief said it would be best if the US Congress, the US Securities and Exchange Commission (SEC) and other regulators consider regulatory “frameworks that encourage and require accountability, security and transparency in the crypto market. “
As for how any tougher regulation of the crypto industry by the US government will affect industry players in Africa, Ihenyen said there are likely to be two outcomes. The first result is the drying up of venture capital funding “for crypto projects, especially exchanges and token-based platforms.” The other likely outcome will be that US and European investors “become more interested in exploring opportunities in Africa’s fast-growing retail crypto market.”
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 educational efforts have been affected. While he said he sympathizes with affected users, Ophi notes that regulators should not use this to justify introducing stricter regulations, as this could create other problems.
“Tighter 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,” agreed that the US 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 view cryptocurrencies like BTC differently than Westerners, any regulatory response must be aware of this fact. He explained:
While bitcoin is a luxury for the West, it is a lifeline for Africans. To them it’s just another asset or stock, but to us it’s a financial lifeline.
Meanwhile, in their joint response to questions sent by Bitcoin.com News, Daniel Mulondo and Killian Mugenyi, the co-founders of 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 something fundamentally changed about the technology? The answer is no. This is a failure of a centralized entity, an exchange. Unfortunately, that has weakened the industry and arguably delayed adoption.
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