Recently, the International Monetary Fund called for greater regulation of crypto within Africa, noting that it is among the fastest-growing markets in the world. This comes on the heels of the FTX collapse, which the organization says is “prompting renewed calls for greater consumer protection and regulation of the crypto industry.” In particular, it speaks to the great risk of adopting cryptocurrencies as legal tender.
“The FTX debacle has stretched the crypto industry to its limit. It has illustrated what most of us have known for years — the industry needs greater regulation. Regulators who have stuck their collective heads in the sand and hoped that the industry would disappear have done a disservice to their citizenry. Cryptocurrency isn’t going away. Institutional money is invested in crypto. It is long past time for competent regulation,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.
“Regulating a highly volatile and decentralized system remains a challenge for most governments, requiring a balance between minimizing risk and maximizing innovation. Only one-quarter of countries in sub-Saharan Africa formally regulate crypto,” the blog read.
“Sam Bankman-Fried is a true villain. He’s going to be an international icon of what happens when we let arrogance and greed run roughshod over our financial system, and, make no mistake, crypto is now part of our financial system. The government needs to make an example of him. And then they need to offer a real path forward in regulation,” said Gardner.
“One of the most important regulatory reforms that countries can impose on cryptocurrency exchanges is a mandate which prohibits the co-mingling of client assets and exchange assets. This is the direction the European Union went in their MiCA regulations, and it is something concrete that would stop future operators from going the way of Sam Bankman-Fried,” said Gardner.
Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.
“Of course, such a regulation is only relevant if true third-party audits come with it. The danger that African countries face is that, even if the EU is joined by the UK and the United States in passing regulatory reform, it would only apply to exchanges operating in their jurisdictions. It is quite possible for an exchange to operate only in Africa or other areas without such oversight. That’s why African countries should move forward with their own regulatory regime,” said Gardner.