Africa’s financial sector is still cautious about adopting cryptocurrencies with players in the industry warning that they may become a window for mass financial fraud.
“Cryptocurrencies started out as really fantastic ideas, but as time went on, they now look like strong indicators of illicit flows. Even as we look at the potential, we have to look at the risks,” the Central Bank of Kenya Governor Dr Patrick Njoroge said on Monday at the ongoing Africa CEO Forum in Kigali.
Regulators are concerned that with no guidelines the digital currencies could have an impact on financial stability.
“There is no shared regulation for cryptocurrencies so far. It would be very dangerous for a bank to be part of any system that is not regulated,” warned Mr Alexandre Maymat, head of Africa, Asia Mediterranean Basin & Overseas at Societe Generale, a French-owned investment bank.
Cryptocurrencies are a form of digital currencies backed by the revolutionary blockchain technology — a digital distributed ledger system for recording transactions — that looks to disrupt industries and improve service delivery.
Despite warning from regulators, the virtual currencies continue to gain traction. There are currently more than 2,000 cryptocurrencies in the world with a market capitalisation of about $140 billion. Bitcoin is the best known digital currency having been the first mover.
While financial sector captains acknowledge the potential of the blockchain technology they remain sceptical of the cryptocurrencies warning that they are prone to theft and fraud.