🟠 The African crypto moment of truth

Patricia’s move prompts crypto credibility reflection. Is it time to take self-regulation seriously as a trust-building tool?

🟠 The African crypto moment of truth

Oluwaseun here. I’m on Mariblock Weekly duty this week — mainly because we’re taking a break from our usual news summary programming to start an important conversation that the African crypto industry needs to have.

Time to dig in!

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Rethinking Africa’s crypto future: The imperative of self-regulation

Image source: Patricia

Topline: In a move that evokes memories of the FTX saga of 2022, Nigerian cryptocurrency exchange Patricia announced on Friday, Aug. 18, that it would convert customer funds into its newly launched Patricia Token (PTK). (Details)

  • This comes months after the company blocked withdrawals after telling customers it lost funds to a security breach in which it reportedly lost $ 2 million.

The macroscopic view: The consequences of Patricia’s actions extend far beyond its own operations. This incident is a stark reminder of the cryptocurrency industry's challenges in establishing trust and credibility.

  • It reinforces negative perceptions that cryptocurrencies are susceptible to scams and security vulnerabilities. It brings regulatory scrutiny (which, one could argue, is necessary for protecting investors). It drains consumer confidence.
  • Make no mistake about it: There are no winners here. This isn’t an event that creates any meaningful competitive arbitrage. It is common across various industries for companies to launch marketing campaigns centered around a competitor’s challenges. This doesn’t create that opportunity.
  • The reality is that crypto interest has significantly waned due to bear market losses. So if I were a newbie considering a crypto exchange, Patricia’s issues make me hesitant. Converting me to crypto just got tougher for you.

The opportunity:  While “Crypto needs Africa” is a common refrain in the African crypto scene, the real question is: What is Africa actively doing to become crypto’s ideal hub? Because, as of now, it’s not fulfilling that role.

  • But it would be difficult to become crypto’s ideal hub without collaboration. Collaboration is not just about forming groups; impactful collaboration must drive meaningful activities.
  • An effective measure of this collaboration’s value could be a self-regulatory organization (SRO).
  • An SRO, with the authority to establish and enforce industry standards, can safeguard investors, promote ethics, and combat fraud. In regions like Africa, where governmental regulation is uncertain, well-run SROs could become pivotal in shaping effective crypto regulation.
  • Effective self-regulation signals to the public that you’re serious.
Meet me on Wall St
Photo by Patrick Weissenberger / Unsplash

Why it matters: Self-regulation in the financial sector has a rich history of safeguarding consumers. Through industry-led initiatives and standards, it promotes transparency, fair practices, and accountability, ensuring that financial institutions prioritize the welfare of their clients.

  • One of the earliest examples of an SRO is the National Association of Securities Dealers (NASD), now the Financial Industry Regulatory Authority (FINRA) in the United States.
  • Founded in 1939, NASD oversaw and licensed broker-dealers and securities firms. It also enforced U.S. securities laws. And they take enforcement very seriously. FINRA publishes a monthly report on its disciplinary actions.
  • All these contributed significantly to how the U.S. has maintained a leading position in global finance. It’s worth noting that the level of SRO involvement in the United States is relatively uncommon in many other countries.

SROs have been cropping up in the crypto space as well.

  • The most notable example is the Japanese Cryptocurrency Exchange Association (JCEA), formed in the wake of a high-profile breach of Coincheck, which resulted in $530 million. Japan has one of the most progressive crypto regulatory regimes globally.

In Africa: Indeed, local groups like Stakeholders in Blockchain Technology Association of Nigeria (SiBAN) have taken steps toward self-regulation in the crypto industry. As we reported in our exclusive story that detailed the behind-the-scenes of the Nigerian SEC’s circular against Binance, SiBAN did some mediation.

  • That’s not enough. At the very least, there should be specific and detailed standards covering areas such as custody (e.g., mandating members to adopt self-custody solutions for consumers), security, consumer protection and AML/CFT measures.
  • While SiBAN has a publicly available code of conduct, it falls short on detail. It reads very much like a templated agreement from an online source for use by an entity not entirely sure of its direction.
  • Also, when incidents threatening consumer confidence (such as the Patricia saga) happen, SROs must be the loudest about it, especially for an industry devoid of trust.

Of note: South Africa currently has the most advanced form of crypto-related SRO. Earlier this year, Crypto exchange Luno partnered with the Advertising Regulatory Board to issue new rules for crypto adverts.

The hard truth: The type of speculative demand that fueled the previous surge in cryptocurrency adoption in Africa is unlikely to resurface. No one knows what the next bull run will look like, but if history has taught us anything, it won’t look anything like the last one.

  • It’s time for the African ecosystem to unite and take on the daunting endeavor of establishing the continent as the prime hub for crypto — a place where impactful initiatives are pursued.  
  • Self-regulation could be the place to start.

Industry event: Web3 Lagos Conference 2.0

Topline: Curiously, I only just discovered the Web3bridge community recently. But it didn’t take long to see the impact of their work — shaping the talent pipeline required to build the future of blockchain in Africa.

  • They’re hosting the second edition of the Web3 Lagos conference this weekend. I’m told it will be a hybrid event.
  • Notably, the co-founder of Ethereum, Vitalik Buterin, will be speaking at the event.
  • It starts on Thursday, Aug. 31, and ends Saturday, Sept. 2.

Coming soon: Mariblock Roundtable

Topline: Mariblock’s top priority is fostering impactful conversations that drive the advancement of the African blockchain and digital assets space.

  • We see stakeholder engagement as a significant part of that.
  • Mariblock Roundtable will bring builders, talents, investors, enthusiasts, and regulators around the continent together to engage in discussions that move the needle for the industry.
  • This won’t be a crypto/blockchain education series.
  • We’re open to partnerships. Do reply to this email if you’d like to learn more.

Catch up

Photo by Chris Liverani / Unsplash

🇰🇪 Kenyan financial watchdog seeks public input on cryptocurrencies (Mariblock)

🌍 DeFi protocol Goldfinch demos a self-custody solution that simplifies crypto UX (Mariblock)

🌍 Egypt and Ethiopia among six countries invited to join BRICS (Mariblock)

🇳🇬  Nigerian bureau de change union asks the government to ban Binance (Mariblock)

🇨🇫 CAR expands Sango project to tokenize land and natural resources (Mariblock)

🌍 World Mobile launches its multipurpose global mobile app (Mariblock)

🌍 Bitcoin gains traction in West Africa with educational drive (Cointelegraph)

🌍  How crypto gaming in Africa can reach its full potential (Techcabal)

🌍 How Machankura Spread Bitcoin Through Africa’s Feature Phones (Bitcoin Magazine)

🌍 Cryptocurrency and blockchain technology- adoption within the AfCFTA (BusinessDay)


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