A recent study by Chainalysis showed booming crypto adoption in Africa, a finding that has raised concerns among Africa’s financial regulators

Chainalysis reported booming crypto adoption in Africa as the continent ranked #2 in P2P trading. Two African countries also emerged in the top 8 of the crypto adoption index. Nigeria leads the growth, recording weekly peer-to-peer volumes of between $5 million to $10 million. Kenya and South Africa tie at second place with an average $1 million to $2 million per week.

This accelerated growth has, however, caught the eyes of the region’s financial regulators. It has also triggered worries that hurrying to institute heavy-handed oversight might suppress breakthroughs in the crypto industry. Several centralized exchanges have reported booming adoption and increased trade activity in the region.

Luno, for instance, recorded a combined volume of $549 million from Nigeria and South Africa last month. This figure represented a 49% upswing relative to figure at the start of the year. Luno further points out that new customer sign-ups have surged by 122% between the last quarter of last year and the second quarter this year.

Marius Reitz, Luno’s GM for Africa, attributes the increased demand for virtual currency to the boons that it offers over the banking sector. He adds that “The demand we see now is a result of the challenges that people experience across Africa.”

The increasing crypto adoption has, however, provoked more scrutiny from regulatory bodies. It seems that analysts in the region are split on how to react to this discovery around crypto adoption.

South African regulators suggested the introduction of measures that would enforce monitoring requirements in April. The Securities and Exchange Commission in Nigeria also proposed regulations that would consider crypto assets as securities last week. Stephany Zoo of Bitpesa, an exchange in Kenya, acknowledged the consumer protection that would be achieved owing to better regulations.

Still, Reitz warns that rushing to introduce heavy-handed regulation could harm the sector. “What we’d like to see is a phased approach. It can be very easy for regulators to want to regulate the entire industry from the onset but it could stifle innovation. Once governments regulate better, there’s more chance of opening up integration with traditional financial infrastructure and there would be more mass adoption as well,” he explains.