By Kemi Osukoya | FINANCE & POLICY
African central bankers are confronting a reality that regulators from Washington to Frankfurt are also beginning to accept: digital assets are moving into the financial mainstream faster than policymakers can comfortably regulate them.
Across Africa, stablecoins, crypto assets and tokenized financial instruments are no longer viewed solely as speculative products traded by technology enthusiasts, they are increasingly being used for payments, remittances, savings and cross-border trade, prompting regulators to rethink approaches that until recently relied largely on warnings and cautionary notices toward formal supervisory frameworks for an industry that is becoming more deeply embedded in the financial system.
The shift comes as policymakers in the United States and Europe move to establish the rules that could define the next phase of global finance.
In Washington, nearly a year after President Donald Trump signed the Guiding and Establishing national Innovation for U.S. Stablecoins Act (GENIUS Act) bill into law—the first comprehensive federal framework for dollar-backed stablecoins, Congress continues to work on broader digital-asset market structure legislation that would clarify oversight responsibilities between financial regulators. Across the Atlantic, the European Central Bank is pressing ahead with preparations for a digital euro to complement physical banknote and coins while European regulators implement the Markets in Crypto-Assets, or MiCA, regime.
For African policymakers gathered at the BCEAO International Conference in Dakar recently, those developments are not distant regulatory debates. They are signals that the world’s largest financial jurisdictions are preparing for a future in which digital money becomes a permanent feature of the global financial system.
“We have come to the reality that we cannot run away from,” Dr. Emomotimi Agama, Director-General of Nigeria’s Securities and Exchange Commission said during a panel discussion on Digital Innovation and the Transformation of the Global Financial. “What should we naturally do?” he asked rhetorically. “What we should naturally do is assess the risk associated with it.”
That shift in thinking reflects a broader transformation underway across Africa’s financial sector.
Only a few years ago, many African central banks responded to cryptocurrencies with outright skepticism. Today, regulators from Botswana, Ethiopia, Ghana, Kenya, Namibia, Nigeria, Mauritius, Mozambique, Morocco, Rwanda, Seychelles, Sierra Leone, Tanzania, and Uganda are building licensing frameworks, establishing regulatory sandboxes and coordinating with neighboring jurisdictions to supervise an industry that increasingly transcends borders.
The urgency stems partly from the pace at which digital finance has already transformed the continent.
According to Erik Feyen, Head of Global Macrofinancial Monitoring and Financial Sector at the World Bank Group, 62 percent of adults in lower-middle-income countries now make or receive digital payments, up 27 percentage points since 2014.
“Mobile money has been the cheapest remittances channel,” he said, noting that transfer costs have fallen to around 4 percent for a $200 transaction.
The next phase of that transformation may be even more consequential as policymakers increasingly see the next wave of innovation arriving through instant payment systems, open finance, artificial intelligence and, most notably, stablecoins.
Dollar-backed stablecoins have grown into a market worth roughly $300 billion globally, creating a payments infrastructure that operates largely outside traditional banking systems. Stablecoins advocates argue it lowers remittance costs, accelerate cross-border payments and expand access to financial services.
“They have the potential to promote cross-border transactions, make them cheaper, faster and more transparent,” Feyen explained.
For Africa, where remittance costs remain among the highest in the world and cross-border payments are often slow and fragmented, that promise is difficult to ignore as the Africa Bazaar first reported in 2019 in an interview with Digital Asset economist Sonya Davidovic.
Yet the rise of privately issued digital dollars is also raising concerns that mirror debates underway in Washington, Brussels and Frankfurt.
Most stablecoins are denominated in U.S. dollars. As their adoption expands, African central bankers worry they could weaken domestic monetary policy, accelerate capital flight during periods of stress and increase dependence on foreign currencies.
Few officials articulated those concerns more directly than Kenya’s Central Bank Governor Kamau Thugge.
“We recognize that Kenyans trade in these virtual assets,” Thugge said. “We have decided to regulate the virtual assets as well as virtual asset service providers.”
Kenya’s framework includes capital requirements, reserve-backing rules, redemption protections and anti-money-laundering controls.
But the opportunities come with risks.
“The possibility of dollarization and the impact that has on the effectiveness of monetary policy” remains a concern, Thugge said. He warned that stablecoins could facilitate much faster capital outflows during periods of financial stress.
“Stablecoins are going to facilitate much faster capital outflows. When that happens, that affects the foreign exchange market, puts pressure on the exchange rate.”
Those concerns are strikingly similar to arguments advanced by European policymakers in support of a digital euro. Authorities at the ECB have repeatedly argued that a central bank-backed digital currency could help preserve monetary sovereignty as foreign payment platforms and dollar-based stablecoins gain influence.
Nigeria offers perhaps the clearest example of how regulatory thinking has evolved.
The country remains one of the world’s largest crypto markets, with annual transaction volumes approaching $96 billion, according to Agama.
“There has been this theory of denial among monetary and financial regulators as to the existence or possibility of such financial systems taking place,” he said. “But we now know that it is not only going to fly, it is probably going to take over.”
Agama was also quick to stress that digital assets are unlikely to replace traditional finance. “It certainly would not displace traditional finance. It will complement traditional finance.”
The experience of Nigeria’s eNaira, Africa’s first central bank digital currency, reinforced that lesson and have set a model that other African nations, including Uganda are emulating as they put in place frameworks, African central banks officials told the Africa Bazaar.
“The central bank actually wanted to run with it alone,” Agama said. “Without the commercial banks, it was difficult for that to happen.”
Today, Nigerian regulators are pursuing a different strategy centered on experimentation and collaboration. The SEC has established a regulatory incubation framework designed to study emerging technologies before imposing permanent regulatory rules.
“What we need to do is understand the space enough to grow with it,” Agama said.
South Africa is witnessing a similar shift.
Carel de Jager, Founder and Chief Executive of Digital Asset firm, Sixpence, said crypto-related transactions now total roughly $20 billion annually in the country. More significantly, activity has migrated away from speculative assets toward stablecoins.
“Volume was usually dominated by Bitcoin. But over the last two or three years, stablecoins have actually overtaken it,” he said.
That transition has important implications for regulators. Unlike cryptocurrencies primarily used for trading, stablecoins increasingly resemble payment instruments.
“[Stablecoins] enable payments and remittances, and therefore their standards should include things like issuer licensing, reserve assets, custody risks, independent attestations, audits and redemption rights,” de Jager said.
Those requirements closely resemble provisions now being debated in the United States under the GENIUS Act and implemented in Europe through MiCA, underscoring how regulatory thinking is beginning to converge across jurisdictions.
For many African central banks, however, the immediate challenge is not drafting regulations but building the expertise necessary to enforce them.
“We are under pressure, as a central bank, to authorize and regulate these assets,” said Ibrahim Stevens, Governor of the Bank of Sierra Leone.
“We need to build capacity in the central bank. We need to have a good regulatory framework to be able to supervise these assets.”
Mozambique’s Banco de Moçambique Governor Rogerio Zandamela expressed a similar concern.
At first the country felt that warnings were not enough, he said. However, it has since adopted a comprehensive framework governing virtual assets and service providers.
“But it’s not enough just to have regulation requirements,” Zandamela cautioned. “You have to move from registration to effective supervision.”
Mauritius, one of Africa’s earliest movers in digital asset regulation, has adopted what Governor Priscilla Muthdora Thakoor described as a strategy of “test, learn and adapt.”
“The rapid pace of innovation forces regulators to constantly catch up. Consequently, our legal, regulatory and supervisory framework must remain agile,” she urged.
That requires investment in technology, training and data analytics, particular as regulators confront cyber risks, illicit finance concerns and increasingly sophisticated financial products.
As adoption grows, regulators are increasingly focused on another concern: systemic risk.
Ivan Odonnat, Deputy General Director at the Banque de France said authorities are paying close attention to the growing interconnectedness between crypto markets and traditional finance.
“The reason we are already paying attention to the systemic risk dimension of crypto-assets is the issue of interconnectedness,” he said.
“When we talk about crypto-assets, digital assets and systemic risk, there is now also an operational dimension,” Odonnat added. “That operational dimension is cyber risk.”
To address and lessen those risks, Yvon Sana Bangui, Governor of the Bank of Central African States, argued that African countries should move toward harmonized regulatory standards.
“We should work together to develop a regional regulatory framework. We need to harmonize our regulations,” he said.
The consensus rationale among African central bankers is straightforward: stablecoins, digital assets and blockchain-based payment systems do not recognize national borders.
And as debate moves beyond whether digital assets belong in the financial system, the challenge now is determining how they should be governed.
Or as Agama put it, the biggest obstacle may not be technology itself. “The basic challenge we are having here is the refusal of authorities to unlearn and relearn,” in order to adopt the right regulations.
