Africa gets to grips with crypto as Ghana and Kenya legislate

In recent weeks Kenya and Ghana have become the latest African countries to bring forward legislation and policy papers regulating the cryptocurrency industry, as more governments seek to get to grips with a new financial asset that over 43 million Africans now engage with.

In October, the Kenyan parliament passed the “Virtual Asset Service Providers (VASP) Bill,” putting in place clear legislation for the cryptocurrency industry for the first time. The bill defines a role for the country’s central bank in licencing stablecoins – a form of crypto that is designed to maintain a stable value by being pegged 1:1 against traditional currencies like the dollar – and other virtual assets.

Kenya’s Capital Markets Authority (CMA) has also now been mandated as the licensing authority for crypto exchanges and other platforms that facilitate crypto trading.

Shortly afterwards, in Ghana, the central bank released a draft policy paper which outlines how they plan to oversee the virtual assets industry, with a full regulatory framework expected to be in place by December.

As is now the case in Kenya, the Bank of Ghana suggests that different regulatory bodies will oversee different parts of the industry, with the central bank overseeing activities related to payments and custody, while Ghana’s Securities and Exchange Commission will regulate trading and investment. A new organisation, the Virtual Assets Regulatory Office (VARO), will also be established to help the authorities supervise effectively.

Continent catches up

These developments mean that Kenya and Ghana are joining a growing list of African countries – such as South Africa, Nigeria, and Mauritius – in bringing forward crypto-specific regulation.

What explains this growing trend? Sam Kim, co-founder of Nairobi-based blockchain firm GoChapaa, tells African Business that governments across the continent are introducing regulation to respond to increased consumer demand for virtual assets.

“It is estimated that more than six million people in Kenya – about 10% of the population – already use crypto,” Kim says.

“Stablecoins pegged to the US dollar have become particularly popular as a proxy for the greenback, allowing people to conduct cross-border trade more easily or hedge their savings against inflation and currency depreciation, although Bitcoin and other virtual assets have also gained in popularity for similar reasons. The industry is simply too big for the government to ignore.”

The Bank of Ghana struck a similar chord in its recent policy paper, arguing that “virtual assets can no longer remain outside Ghana’s financial regulatory purview […] since the release of the Bitcoin white paper more than 15 years ago, Ghana’s virtual assets ecosystem has now expanded substantially, now encompassing more than three million users.”

Awura Abena Amponsah, a fintech and virtual assets analyst based in Accra, notes that “Ghana is recognising that digital assets have shifted from being a fringe concept to a structural part of its economy – digital assets are now integrated into daily financial and remittance activities and are not just used for speculation.”

Time for taxes

The move to regulate crypto is also likely to be an attempt to formalise this emerging, but increasingly large, financial industry in order to tax it. The tax-to-GDP ratio in most African countries is already low: standing at 16.8% in Kenya in 2022 and 14% in Ghana – compared to 35.4% in the United Kingdom and 27.7% in the United States.

This chronically low tax take, caused primarily by weak tax collection structures and the dominance of cash payments in Africa’s large informal economies, further limits the amount of money African countries can spend on their development priorities.

Sanjeev Gupta, a senior fellow emeritus at the Center for Global Development, has warned that cryptocurrencies, if left unregulated, could further diminish African governments’ tax intake.  “Without robust regulatory frameworks and strengthened tax administration, stablecoins could narrow the tax base and undermine fiscal and development goals,” he said.

Awura explains that “the registration of VASPs creates a pre-taxation structure: once authorities know the players and transaction flows, they can identify taxable events such as capital gains, service fees, custody fees, and cross-border transfers.”

“This lets the government capture previously untaxed or offshore value,” she adds.

“Given Ghana’s strained public finances and need to diversify revenue, taxation is clearly a significant underlying factor [explaining the regulation].”

Opportunity for consumers

Kim believes that the new law will significantly boost consumer confidence in virtual assets and therefore contribute to increased uptake. He says that “traditionally many Kenyans have treated the virtual assets space with caution and have been concerned that an emerging, unregulated industry could be ripe for scams.”

“But with the new law creating strong licencing and oversight mechanisms, Kenya’s virtual assets space will become much safer and more transparent, allowing greater numbers of consumers to engage with confidence.”

Awura similarly notes that the regulation will prompt a period of “professionalisation” and that stricter compliance measures “will raise standards for customer service and security, reducing scams and improving trust.”

While critics of industry argue that cryptocurrencies are too volatile and unstable to be used as a formal part of the financial system, both Kim and Awura believe that this new technology can play an important role in driving up financial inclusion.

Approximately seven million people in Kenya still remain unbanked, with more than 30% of the Ghanian population lacking access to financial services. Proponents of virtual assets argue that, given the technology’s ability to bypass many of the barriers presented by traditional finance, the industry can offer faster, cheaper, and more accessible financial services – and therefore be particularly useful to underbanked communities in Africa and other emerging markets.

Kim tells African Business that “modern digital banking services, powered by blockchain technology and cryptocurrencies, can play a powerful role in driving financial inclusion by empowering those who have previously been excluded from traditional banking services.”

“Accessible blockchain-based tools can give everyone in Africa direct access to savings, investment, and cross-border payment solutions without encountering the friction associated with legacy banking infrastructure,” he adds. “When properly regulated, as they now are in Kenya, virtual assets can offer new avenues for wealth creation and economic participation.”

Risks remain

Awura is also optimistic that virtual assets can play a positive role in enhancing financial inclusion but points out that Ghana’s central bank will need to be attentive to potential risks.

On a macro level, she says that “large unmonitored crypto flows could weaken the cedi and undermine traditional banks.” Awura also notes that proper enforcement of the regulations will be key in protecting consumers.

“Without strong education and enforcement, users could face losses from scams or volatility. Weak enforcements could allow bad actors to exploit the system,” Awura tells African Business.

“If Ghana balances innovation with protection and strong execution, crypto can become a transformative tool that will create jobs, improve financial access, and strengthen remittance ties. But if mismanaged, the risks could outweigh the rewards.”

Looking forward, Kim suspects that blockchain technology will be increasingly embedded within African financial systems.

“Very soon, Kenyans and people in other African countries will be engaging with blockchain technology without even knowing it.

“In the same way that mobile money became part of everyday life without people needing to understand the technology behind it, blockchain will also embed itself into our financial systems,” he says.