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In line with the troubled relations with crypto in Africa, Burundi has joined the list of nations that have banned cryptocurrency trading. The reason given for this ban is the lack of user protection in the industry. Previously, in a similar development, the deputy governor of the bank of Uganda warned citizens of the country about the risks involved in investing in unregulated cryptocurrencies. These attempts at stopping crypto are perceived by many users in the region to be because of the government’s inability to completely oversee the industry, and may give rise to decentralized exchanges.
The alleged fears of the government may be tied to genuine public risk from past instances. For example, the sudden disappearance of Coinroom, a Poland-based cryptocurrency exchange, negatively impacted customers and those who had their funds trapped in the exchange. Apart from exchange hacks or disappearances, there has been a significant decline in cryptocurrency market valuations since after the industry reached a peak in 2017, causing many investors to have their fingers burnt while trying their hands on the industry. The unregulated ICO era sucked in a lot of investors, and many unfortunately became victims of failed projects and outright scams. These events may have prompted the government of Burundi to act on a ban.
Cryptocurrency retains legitimate use cases outside of risky speculation
Contrary to the take of the government of Burundi, cryptocurrency has legitimate uses for Africa outside of trading and speculation, for instance the e-commerce headache that is faced by Nigerian online users. With the projection of 128.5 million people estimated to use mobile phones in Nigeria by 2025, the country has been nickname “the Mobile Economy”. In Nigeria, international payments account for a significant portion of the GDP. Remittances and ecommerce represents a major aspect of the transaction volume that occurs within the country. Yet, certain mainstream payment systems like PayPal impose bans and restrictions on users from the country.
Another headache that Nigerians face is the problem of insufficient infrastructure. Even though electronic transaction systems like the POS are functional in the country, the rate of failure is high. Over 15% of POS transactions fail in the most populous African country. Hence, the citizens appear to be open to alternative payment systems that can provide them with improved services. Cryptocurrencies such as Dash provide a valuable alternative to these issues.
Users are turning towards decentralized exchanges, invalidating regulation issues
Although Nigeria has remained largely indifferent with regards to cryptocurrencies, the situation varies in Burundi and Uganda. The clampdown in these countries directly affect centralized exchanges that cannot run in an anonymous mode. This has encouraged crypto users to turn to peer-to-peer trading platforms like CoinCola and decentralized exchanges such as Bisq, TurtleNetwork DEX, DynX, and the Komodo AtomicDEX. These exchanges and their likes have the capacity to operate even where official cryptocurrency exchanges have been banned as they do not necessarily require to establish themselves in ways that the government clampdown will affect them directly. They only offer crypto traders the opportunity to meet and interact, or trade through an online platform where users control their own funds.
Governments and institutions may continue to make attempts to ban cryptocurrency activities as has happened in Burundi. This is normal, especially for the benefit of those who do not have adequate knowledge of the industry. However, the actual crypto users that understand the technicalities involved should not be made to suffer for nothing. Hence, legitimate alternatives like the decentralized exchanges mentioned above could offer a way out. Well established cryptocurrencies like Dash also ensure that users get the real deal when trying their hands on the industry.