Zambia Takes The Cautious Route To Crypto Legislation
To jumpstart a digital-first economic transformation, Zambia, a country in South-central Africa, is meticulously venturing into the world of digital currencies, albeit at a pace and conduct that befits its station.
The country plans to complete tests on cryptocurrency usage by June 2023, as it looks to create a framework that would balance between innovation and citizens’ safety. According to Felix Mutati, Zambia’s minister of science and technology, the testing is being conducted through the Bank of Zambia and the Security Exchange Commission (SEC).
In February 2022, Zambia jumped aboard the bandwagon of countries exploring use cases for retail central bank digital currencies (CBDCs), in a move the country’s central bank said would promote financial inclusion.
“The results of the research will form part of the input in the policy considerations on whether to introduce a central bank digital currency in Zambia,” Nkatya Kabwe, acting assistant director of communications at the Bank of Zambia, told the media.
However, in the wake of uncertainties clouding the global CBDC industry, Zambia has moved to first meaningfully regulate cryptocurrencies in general, which makes sense. Though it has not outrightly outlawed crypto, the apex bank in 2018 warned Zambians against its use since they are not recognized by the country.
While advising its citizens to be extremely cautious when dealing with such assets, financial authorities also recognize that blockchain technology is capable of positive disruption, transformation, and “efficiency-enhancing”.
Zambia may be better known for mining copper than crypto but as of last year, a group of tech execs led by Ethereum co-found Vitalik Buterin were said to be lobbying the government to turn the country into a crypto hub.
In February 2023, Vitalik was in Lusaka meeting with the special assistant to the Zambian president, Jito Kayumba, to discuss pathways for boosting crypto development. Rumors flew about a potential adoption of Ethereum as a legal tender but such intentions or plans remain unconfirmed.
However, as Zambia gradually charts its [own] course, negotiations towards the project have been inadvertently deprioritized. Having pumped the brakes on crypto adoption, the country has its sights on properly regulating the industry. This move coincides with global efforts to slow down the rollout of retail CBDCs and devise better legislation for crypto.
Nigeria became the first country in the continent to launch a CBDC, the eNaira, in 2021, while the Central African Republic became the first to legalize Bitcoin transactions. But both these audacious projects have been challenged, particularly by low adoption, serving as a cautionary tale to other countries looking to walk similar paths.
Africa is one of the world’s fastest-growing crypto markets, with USD 20 B worth of cryptocurrency transactions per month in mid-2021. Many Africans used these assets for commercial payments but the user market remains the smallest across the board.
