We are still unsure how local regulators will classify and treat this unique asset class. One of the main difficulties that regulators face is the fact that not all cryptocurrencies are the same, so regulation must be more fluid, a characteristic that regulators are not always known for. Precisely because cryptocurrencies are different, it is more appropriate to refer to them as tokens, coins, or even digital assets. Bitcoin, the most widely known and adopted token is, for all intents and purposes, not a currency. Like gold, it is considered to be a store of value because of its limited supply. That being said, its price volatility does not qualify it as a store of value in the traditional sense. Some tokens, like Litecoin, are used as currencies because transactions are fast and cheap. Others are backed by fixed assets: Many of the stable coins are backed by a combination of fiat currency and even bonds. Yet others, like Cardano or Solana, are backed by specific projects and fulfil another function entirely. In this case, they use blockchain technology to execute smart contracts that allow them to build the infrastructure that is needed for things like Web 3.0. And then there are tokens that act like normal shares. Binance, a digital asset exchange, for instance distributes some of their profits towards those who hold the Binance token.
Each of these characteristics, collectively referred to as ‘tokenomics’, makes the token unique and desirable. For this reason, if regulators want to effectively regulate these digital assets, they must differentiate between specific groups of tokens and apply rules appropriately. In the past, Africa has been a leader in terms of creating and adopting financial technologies, like cell phone banking, and our regulations have, in many ways, allowed for the successful adoption of these technologies. We are hoping that we will, once again, lead the way.