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The State of Bitcoin Regulation in Africa

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bitcoin regulation in africa

The legal status of bitcoin varies from one country to another and is mostly undefined or under review in most parts of the world. While some African central banks have explicitly banned or restricted its use, others have allowed it or have simply not issued any statement or regulations covering digital currencies.

In this guide, you will find a list of financial regulators in Africa that have made statements or issued regulations for the use of bitcoin and other decentralised cryptocurrencies within its borders.

Kenya

Kenyan Central Bank is not a Fan of Bitcoin

Buy Bitcoin in KenyaIn 2015, the Central Bank of Kenya (CBK) issued a public notice warning against the use of bitcoin citing the lack of regulations to govern its use. The CBK proceeded to send out a circular to local banks instructing them not to provide services to bitcoin startups.

However, the CBK’s stance seemed to have little impact on Kenyans appetite for bitcoin with the country being ranked third in Africa when it came to trading volumes at local exchanges such as Localbitcoins. Also, things seem to be looking up with a number of public and private entities now experimenting with blockchain technology.

In addition, some financial regulators seem to differ with CBK’s stance, such as the country’s financial market regulator, the Capital Markets Authority (CMA). The CMA announced plans in April 2017 to organise forums for fintech and cryptocurrency players to discuss the state of regulations and challenges it poses to their activities. It is also worth noting the Kenyan government and World Bank announced their intention to partner in using blockchain technology to sell government bonds earlier this year.

South Africa

South African Reserve Bank is Open to Digital Currencies

south africaThe South African market regulator was the first to warn against the use of bitcoin in Africa saying it wasn’t a legal tender. The South African Reserve bank (SARB) argued in a December 2014 public notice that while cryptocurrencies and their underlying technologies had the potential to facilitate faster transactions, efficiency and reduce payment costs, they could also, “simultaneously provide a platform for, inter alia, money laundering and the financing of terrorism, and introduce a new set of risks to consumers as DCVCs (cryptocurrencies) are susceptible to misuse and at the very worst, have the ability to disrupt the financial system.”

Having said that, in August 2016, the SARB softened its stance on digital currencies with the Reserve Bank Governor, Lesetja Kganyago hinting the bank was open to cryptocurrencies. In July 2017, the SARB indicated plans to test regulations related to bitcoin and other digital currencies and selected Bankymoon, a blockchain solutions provider for its first sandbox trial run.

The Reserve Bank had already announced its intention to undertake its own research about blockchain technology’s feasibility in South Africa. However, according to an ITWeb report, the deputy governor of the SARB, Francis Groepe indicated at an August 2017 conference in Johannesburg,

“For the central bank to issue virtual currencies or cryptocurrencies in an open system will be too risky for us. This is something we really need to think about.”

Nigeria

The Central Bank of Nigeria is Open to Digital Currencies

Bitcoin in NigeriaThe Central Bank of Nigeria (CBN) is notorious for currency controls and so it came as no surprise when it informed the public to be wary of speculating in bitcoin and other cryptocurrencies. The January 2017 directive caused uncertainty in the local bitcoin community, which is among the largest in Africa, with trading volumes on the P2P marketplace Localbitcoins showing an average of $3.2 million worth of trades being conducted every week.

Having said that, the CBN has shifted its position and is now researching blockchain technology and its possible applications in various industries. The regulator has also allocated personnel and resources to work on a whitepaper on digital currencies and its underlying technologies.

Many people in Nigeria view bitcoin as the alternative to hedge their wealth against currency losses, brought about by the constant depreciation of the local currency, the naira.

Speaking at a recent cryptocurrency conference in Lagos, CBN deputy director, Musa Jimoh said,

“[The CBN] cannot stop the tide of waves generated by the blockchain technology and its derivatives. Currently, we have taken measures to create four departments in the institution that are looking forward to harmonising the white paper on cryptocurrency.”

Uganda

The Bank of Uganda warns against Cryptocurrencies

UgandaThe Bank of Uganda sent out a strong statement cautioning investors against MLM schemes such as OneCoin, which was promising people high returns if they invested in the scheme.

The bank also warned against the use of digital currencies indicating there was lack of consumer protections or a regulatory framework to govern their use. As of the time of writing this article, the central bank’s position remains unchanged despite a growing bitcoin presence in the country.

Namibia

The Bank of Namibia bans Bitcoin for Commercial Purposes

NamibiaIn August 2015, the Central Bank of Namibia issued a statement saying that it did not support the use of digital currencies and users did so at their own risk. Similar to Kenya and other jurisdictions, the bank cited the lack of regulatory oversight as being its biggest concern with a promise to clarify its position in the future.

In September 2017, the bank proceeded to officially ban the use of bitcoin or other cryptocurrencies in the country. The directive was contained in a nine-page position paper which cited risks such as money laundering, legal, credit and operational risks as threats to Namibian users.  However, recognising the potential of blockchain technology and its possible application in various sectors, the Namibian Central bank acknowledged the need for further research stating, “the current position of the Bank may be amended and/or supplemented, should a need arise.”

Cameroon

Cameroon Still Undecided on Bitcoin

CameroonPresently, bitcoin traders and startups operating in Cameroon do not fall under regulatory oversight as the Central African Central Bank is yet to release specific guidance on the use of digital currencies. This means Cameroonians can purchase, hold or use bitcoin until specific guidance by the market regulator is issued.

The government has previously tested a cryptocurrency called Trest in 2015, which shows the country could be open to cryptocurrency solutions given its largely underbanked population.

Egypt

The Central Bank of Egypt Rejects Bitcoin Use

EgyptBitcoin and other cryptocurrencies are not officially recognised by the Egyptian Central Bank and trading them for fiat currencies is thus not authorised. In July 2017, the deputy governor of the Egyptian Central Bank, Mr Gamel Negm, responding to rumours that the bank was looking to officially adopt cryptocurrencies, insisted the bank only recognises official currencies and would not accept any digital currencies.

Mauritius

State Bank of Mauritius is Receptive to Cryptocurrencies

MauritiusThe island nation is aiming to become a leading hub for blockchain companies and serve as a gateway to African and Asian markets. Setting up this ‘Silicon Corridor’, which will be known as the Ethereum Island, is a collaborative effort between local authorities and blockchain-based companies.

Already, the country’s second-largest bank, State Bank of Mauritius (SBM) has partnered with Secured Automated Lending Technology (SALT) to allow its clients to use bitcoin or ether as a guarantee for loans. However, this was not always the case with recognition of cryptocurrencies in the country. Previously, in December 2013 the Bank of Mauritius warned the public about risks associated with the use of bitcoin. It appears the Bank reversed its position in light of the island nations ambitions to cement its position as a breeding ground for blockchain solutions.

Swaziland

Swaziland Central Bank is Studying Cryptocurrencies

swaziland cryptocurrenciesSwaziland is among the few African countries that is actively researching cryptocurrencies and their potential applications. Swaziland Central Bank Governor, Majozi Sithole, disclosed the bank was looking at potential case studies, at the Swaziland Economic Conference (SEC 2017). Speaking to the Swazi Observer, the Chief Banker said,

“It may not be wise to dismiss virtual currencies, and as the CBS we are learning, and we want to accept and support innovation. If this is innovation, we do not want to stifle it. We want to learn more about it.”

Currently, cryptocurrencies like bitcoin remain unregulated in the country and Sithole cautioned traders on local exchanges to be careful as the Central Bank seeks opinions of experts on the issue.

Algeria

Algeria Plans to Ban Bitcoin and Other Cryptocurrencies

AlgeriaBitcoin use, for the most part, has been undefined under the law in Algeria. However, a new 2018 Finance Bill being considered at the National’s People Congress (NPC) will make it unlawful to possess bitcoins or use it for transactions. The government aims to establish stricter control over cryptocurrencies, and its perceived dangers such as money laundering or tax evasion due to the pseudo-anonymity it guarantees its users.

Article 113 of the Finance Bill states,

“The purchase, sale, use and holding of the so-called virtual currency is prohibited. The virtual currency is the one used by Internet users through the web. It is characterized by the absence of physical support such as coins, banknotes, payments by check or bank cards. […] Any violation of this provision is punished in accordance with the laws and regulations in force.”

The document also recognises that cryptocurrencies such as bitcoin have no central authority, and presently escape any regulations or control by the state. This means bitcoin users in Algeria can still go about their activities until tighter restrictions are put in place.

Zimbabwe

Reserve Bank of Zimbabwe Remains skeptical about Bitcoin

ZimbabweBitcoin adoption in the Southern African country is among the highest in Africa buoyed by hyperinflation, weak local currency and limited access to financial services. This has resulted in Zimbabweans moving to local exchanges to trade for bitcoins, which are immune from inflation, and thus allow them to protect their savings.

The Reserve Bank of Zimbabwe (RBZ) has not officially permitted the use of bitcoin. In July 2016, the RBZ’s Director of National Payments, Josephat Mutepfa, warned Zimbabweans about the risks associated with bitcoin while speaking at a conference. He asserted that while they were a number of bitcoin initiatives in the country offering specific services, the central bank was yet to devise regulations for use of cryptocurrencies.

Recently, Reserve Bank of Zimbabwe director and registrar of banking institutions, Norman Mataruka, stated that the use of bitcoin is illegal in Zimbabwe. However, no actual regulations have been issued by the RBZ and no laws have been passed covering digital currencies in Zimbabwe.

Morocco

Regulators in Morocco Declare Bitcoin to be Illegal

moroccoThe central bank of Morocco, Bank Al-Maghrib and the country’s Foreign exchange office, issued a joint statement on November 20, 2017, informing the public that transacting in cryptocurrencies such as bitcoin is now considered illegal. According to the statement, transactions in digital currencies such as bitcoin, ether and others will constitute a violation of the country’s exchange regulations.

The two regulators point to the risks involved in using digital currencies for transactions as their reason for the directive. They further state,

“As a hidden payment system that is not backed by a financial institution, the use of virtual currencies entails significant risks for their users.”

This comes at a time when the demand for bitcoin in Morocco has been growing steadily for the past one and half years evident from trading volumes on the bitcoin exchange, Localbitcoins. But while the ban is a blow to bitcoin adoption in the country, it will be hard to control the cryptocurrency given its pseudo-anonymous and censorship-resistant nature.

Rest of Africa

Bitcoin regulation in the rest of Africa is essentially uncharted territory as regulators are still coming to terms with how best they can assimilate decentralised digital currencies into their economic structures without potentially destabilising their economies.

Ultimately, the challenge will be to come up with a regulatory framework that protects consumers against harmful activities and promotes cryptocurrency-based innovation. For now, bitcoin is largely unregulated and, therefore, de facto legal to use in the majority of African countries.

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3 Reasons to Use a Bitcoin Mixer in 2020

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Bitcoin Mixer

Bitcoin is not as anonymous as people think. Bitcoin transactions are viewable on the network’s public blockchain, which also means that transactions can be linked to real-world identities. As a result, bitcoin is not (yet) fungible and does not protect individuals’ financial sovereignty as much as it should. Fortunately, there is something called a bitcoin mixer that enables bitcoin users to increase their financial privacy.

In this guide, you will learn what bitcoin mixers are and why you should consider using them.

How Anonymous Are Regular Bitcoin Transactions?

Regular bitcoin transactions are not anonymous. Bitcoin addresses are pseudonymous. They do not reveal your identity as a user but can be linked to your identity.

For instance, most exchanges require you to verify your identity with legal identification (ID) documents. In a situation where you withdraw funds from an exchange into your wallet, your identity can be linked to that wallet, and all your linked transactions could be tracked.

Blockchain analysis companies can use information from your linkable transactions to track how many bitcoins you own, what you spend your coins on, and who you transact with. If you are conscious about your privacy, you might need a bitcoin mixer.

What is a Bitcoin Mixer?

Bitcoin mixing service

A bitcoin mixer allows you to mix your coins with other users. This obscures the ties between your personal identity and bitcoin transactions.

The end goal of a bitcoin mixing service is to create a misleading trail of transactions that makes it difficult to track your transactions. This is achieved by breaking down your bitcoin into smaller parts and then mixing them with coins from other transactions.

Most bitcoin mixers are non-custodial, run on the Tor network, and do not keep records of users after a couple of hours.

Why Do People Use Bitcoin Mixers?

The primary reason for using a bitcoin mixer is to increase transactional privacy. You may not want “the whole world” to be able to see what you are doing with your bitcoin. Through the use of a mixing service, you can achieve that despite Bitcoin’s public blockchain.

Moreover, there are a number of other reasons why you should consider using a bitcoin mixer. They include:

Your Transactions Reveal Personal Finance Information

Every time you send bitcoin to or receive bitcoin from an individual, the other party gains some information about your bitcoin holdings.

For example, if you have ten bitcoin in your wallet and you send two to another person. The individual who received the bitcoin now has access to your bitcoin address, which allows them to check your balance on the blockchain.

In some cases, by analyzing your inputs and outputs, they can predict other addresses you own, giving them more information about your finances and transactions you have done in the past. Mixers can prevent this. The mixer breaks the connection between addresses in your wallet by creating transactions that make it difficult for blockchain analysts to track.

Based on the example above, if you use a coin mixing service to send out the coins, the receiver can still check the blockchain to verify the transaction but will be unable to track your old transactions and find your bitcoin address.

Blockchain Analysis Companies Are Watching

Over the years, blockchain analysis companies have been established to track transactions and monitor the Bitcoin blockchain. These groups have resources to probe deeper into transactions, with some going as far as connecting IP addresses to bitcoin transactions.

Further, cryptocurrency exchange verification is required by regulators to keep an eye on how individuals use their bitcoin. This means that exchanges can still trace your transactions after you have purchased bitcoin.

Bitcoin mixers allow you to detach connections between your initial receiving address and other transactions you make. This can prevent companies from gathering data about you, which it would otherwise share with (or sell to) third parties.

To Prevent Censorship

Money has become a tool used to fund political groups and operations. In authoritarian regimes, where the financial system is highly monitored by the ruling government, critics or opposition groups may opt for bitcoin.

To ensure complete privacy while using bitcoin, such groups will require bitcoin mixing platforms. Without increased transaction privacy, these groups risk losing support in situations where the state begins to target individuals funding them by tracking their transactions on the blockchain.

This allows bitcoin to be used as a tool for freedom of speech and expression.

If you want to mix your coins to protect your financial sovereignty as a bitcoin user, check out Bitcoin Mixer.

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Bitcoin in Africa: Making A Big Difference For A Big Continent

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Big Continent

There is no doubt that bitcoin, and cryptocurrency as a whole, can have a huge impact on the world economy. Also, Africa could benefit from it more than any other region.

Jack Dorsey, CEO of Twitter and Square, recognised this fact and recently claimed that Africa will define the future of bitcoin. He might be right as Africa is predicted to have some of the most populous metropolises by 2100 and the banking situation here is abysmal.

As it stands, bitcoin literally has the power to boost the economy of the entire continent of Africa. The question is whether it will happen as regulation by local authorities plays a key part in the adoption of cryptocurrency.

Why Africa Is the Best Place for Bitcoin to Shine?

Jack Dorsey is a well-known advocate of Bitcoin, which means he understands its potential better than most. And he is right to note that Africa is an exceptionally fertile ground for cryptocurrency. The entire continent is struggling because banking services are outright unavailable to many.

Remote is the best way to decide the vast majority of towns and other settlements in Africa. Many of them are days away from any urban areas, let alone places urbanised enough to actually have banks, Yet millions of people in these remote places rely on remittances from their migrant-worker relatives to survive. With a great number of these people being unbanked getting that money to them is a huge problem. A problem that literally costs lives.

Wherever banking is available, it still leaves a lot to be desired. Many governments in Africa are not trustworthy and hardly seem to work for the people’s best interests. As all banking services are regulated at the state level, people distrust them the same way they do the governments.

The fact that the number of banks is limited doesn’t help. With very little competition they set outrageous terms, especially for those poor families relying on remittances.

The situation is changing a little with the help of online money transfer companies. A transfer from UK to South Africa now costs a MINIMUM of 0.5% in fees. This is a great improvement, but it doesn’t change the fact that such transfers still cost 7% to 10% for the majority of Africa.

In such conditions, easy and virtually free bitcoin transfers can make a huge difference in the quality of life. And people need this kind of service desperately. Therefore, it’s no surprise that if bitcoin is allowed full freedom as an accepted universal currency, Africa will adopt it wholesale.

How is Bitcoin Doing in Africa Today?

bitcoin adoption

For all its potential, bitcoin is not a big thing in Africa today. Admittedly, cryptocurrency as a whole is not yet a big enough power to be a major factor in the global economy. It has the potential but it has not yet been realised.

Bitcoin is legal in most African countries, but this hardly matters because this only means that it’s not illegal to buy and trade it. You cannot actually use this cryptocurrency to make any payments, like pay utilities or your grocery bill. The best you can hope for is to pay at some international online shopping platforms that accept bitcoin.

In the states where using bitcoin isn’t banned, the government’s stance on it is very similar. Local finance authorities are investigating the potential impact of cryptocurrency. However, no state as of yet has reached a point where it decided to actually give it a legitimate status. Therefore, cryptocurrencies remain largely unregulated.

Being unregulated is one of the main benefits of cryptocurrency in the eyes of users. It’s an even more attractive advantage for countries where the level of trust in the government isn’t high. In fact, in many developing countries with unstable political and economic environments, residents now see crypto as an effective hedge that can protect their assets in times of turmoil. But truly benefitting from crypto is still hard due to its lack of legal status as a recognised currency.

The Wealth Lost in African Remittances Every Year

To understand how much of a difference adopting bitcoin can make for Africa one should consider some simple numbers. According to the World Bank, global remittances have already exceeded $530 billion annually. And this number keeps growing fast. About $40 billion of that money is sent by immigrant workers to Africa, over half of that money coming to Nigeria, where remittances are one of the main contributors to the GDP.

However, Nigeria is among the parts of Africa where the banking situation isn’t good at all. Therefore, remittances here cost about 10% of the transaction amount. With the overall amount of transactions about $29 billion, nearly $3 billion is lost in fees. Those are $3 billion that could go to the families and be invested in the country’s economy.

To understand how much of a difference that amount would make for regular people you should remember that GDP per capita in Nigeria is a little over $2,000 a year. Compare this to the US, where GDP per capita is over $60,000. Every cent counts for the families of migrant workers, especially when you consider that the size of an average remittance is under $500.

Bitcoin in Africa: Hopes for the Future of the Big Continent

The situation with banking and remittances to Africa is rather grim. But it doesn’t have to be this way. Bitcoin offers an opportunity to change this. The question is whether local governments will accept this and take the risk of adopting a decentralised cryptocurrency. So far, there have been no official announcements from that direction.

If this does happen, the economy of the entire continent could receive a boost. And the best thing is that this would be an immediate boost because that money already belongs to Africa, it’s just lost on the way there.

Bitcoin will make a difference. Jack Dorsey is absolutely right about that. Should this change happen, the difference for bitcoin itself, and cryptocurrencies in general, will also be huge. Recognition in Africa could tip the rest of the world in favor of crypto.

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BitClub Network: The Rise And Fall of A Bitcoin Mining Scam

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Bitclub Network

Operators of the prominent bitcoin mining company, Bitclub Network, have been arrested and charged with fraud by the US Department of Justice in December 2019.

In this article, you will learn about the rise and fall of the BitClub Network scam, which has defrauded thousands of bitcoin investors.

What is BitClub?

The BitClub Network is a company that claims to enable individuals to make money through bitcoin cloud mining. Since BitClub was established in 2014, it has been in the spotlight for supposedly using MLM strategies to defraud investors.

BCN claimed on its website (before it was taken down) that it is a “team of experts, entrepreneurs, professionals, network marketers, and programming geeks who have all come together to launch a very simple business around a very complex industry.” These unspecific details about the people behind the company should have been the first warning sign.

The founders of BitClub Network have been anonymous for a long time. Only convicted sex offender, Russ Medlin, was associated with the bitcoin mining scam. However, recent arrests have brought to light other people that could be architects of the investment scheme.

Plenty of Red Flags

In addition to the acute lack of information about the company and its operators, the list of red flags was long.

  • Investors have to pay $100 to join BCN. They then choose from three packages of $500, $1,000, and $2,000. Considering that you can join other mining pools for free, BCN does not look attractive at all.
  • Generally, earning profits through bitcoin mining is difficult but on BCN, this is almost impossible. For example, an investor wrote on Steemit that he was earning $0.34 daily in 2017 with BCN’s $500 package. It would have taken nine years or more for him to get a return on his investment. But since the contract was only running for 600 days, he was never going to make any profits.
  • You can only sign up for an account on BitClub if you have a sponsor. This is characteristic of MLM schemes that thrive on referrals.
  • Russ Medlin is a convicted sex offender from the US associated with various BitClub Network YouTube videos and blog posts. He is considered the “Master Distributor” and unofficial “Owner” of the scheme.
  • Ofir Beigel, the founder of 99Bitcoins, states that the company used a criminal’s picture under a different name to display a customer testimonial. The photos were later taken down after the misrepresentation was discovered.
  • Investors are encouraged to reinvest their cloud mining earnings, which is a tactic MLM companies use to stay alive.
  • Many BitClub YouTube videos that were suspicious were deleted after catching attention from reviewers.
  • BitClub launched a “digital currency” that had no value outside its platform.

The Rise

Bitclub Scam

There is no doubt that the BitClub Network has been aggressively marketed. From Facebook and Telegram groups to Reddit, BitClub promotions have been all over social media. This attributed to its steep growth.

Although the hype surrounding making money with bitcoin is not what it once was, BCN has convinced a lot of people that they could get rich through bitcoin mining. After five years, some investors, if not all, are reportedly regretting their decisions after losing thousands of dollars to BitClub.

In Africa, BCN was just as popular as anywhere else in the world and social media was a key recruitment tool. An example is the Facebook page, BitClub Network South Africa, which is asking people to join.

Using the “fake it till you make it” approach, the leaders of the scheme defrauded investors $722 million even though earlier reports showed that the Network was contributing to bitcoin’s mining activity. However, the information from the recent arrests reveals that the BCN operators were displaying fake mining numbers to investors.

The Fall

Bitclub Network Scam

As with any Ponzi scheme operators, the law is bound to catch up with them. This is what happened to Matthew Goettsche, Joseph Abel, Silviu Balaci, and Jobadiah Weeks, the alleged operators of BCN.

The US District Court prosecutors charged the four with fraud in December 2019 with regards to the BitClub Network Ponzi scheme.

While these arrests could have brought the company to its knees, Russ Medlin, a well-known name in the BitClub Network scam, has not yet been charged.

The arrests revealed that the operators were making millions of dollars while using a small fraction of the money they received from new investors to pay the old investors. Interestingly, the leaders of BCN were not shy to state in their correspondence that they were out to profit from “the typical dumb MLM investor.” In January 2015, Goettsche told Balaci:

“We are building this model on the backs of idiots.”

Lessons Learned

The story of Bitclub is a great lesson for new and future crypto investors. There is a lot we can learn from a bitcoin scam that has been able to operate for so long.

The key points are:

  • Always do your research before investing in any opportunity
  • If you cannot find clear details about the founders of an investment company, do not invest
  • Always regard with suspicion any investment opportunity that asks for registration fees
  • Anyone who promises returns is most likely lying
  • Bitcoin mining is making people money but not as fast as you think
  • Never invest in something you do not understand

The ugly side of crypto is real. There are people intentionally starting crypto scams to make money from unsuspecting investors. Therefore, it is important to stay vigilant and to research the companies you plan on doing business with.

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