By Jonathan Ntege Lubwama
- The collapse of FTX has far-reaching repercussions even in Africa where it had over 100,00 users
- Users across the continent are highly unlikely to recover their money due to the reluctance of African governments to regulate crypto
FTX’s collapse has sent the crypto world into a tailspin, as the extent of its founder Sam Bankman-Fried’s negligence continues to unravel. African companies are experiencing great misfortunes due to the collapse of the crypto platform that was once valued at $32 billion earlier this year, after it raised $400 million. As per the bankruptcy filings, FTX owes money to over a million customers and businesses. Some of these users and businesses are based in Africa, where it is highly unlikely that they will recover their money due to the reluctance of African governments to regulate crypto.
Why This Matters: FTX was the world’s fourth-largest crypto exchange by volume and in Africa it had over 100,000 users. The biggest user groups were in Nigeria, Kenya, Egypt, Uganda and Tanzania. The platform halted withdrawals as news of its financial misconduct began to surface.
Also, the Bankman-Fried empire (FTX Ventures and Alameda Research) was a major backer of African Web 3 startups. It held investments in Nigeria’s Nestcoin, cross-border transfer startup Chipper Cash, Congolese web 3 startup Jambo and South Africa’s crypto exchange VALR among others. Nestcoin, led by the former Binance Labs director, Yele Bedemosi announced layoffs because it had kept its assets (both cash and stablecoins) on FTX to manage operational expenses.
The Financial Times reported that the collapse of FTX has left venture capital firms including Sequoia Capital nursing big losses, along with potentially more than one million creditors. It’s not just Africa reeling from the FTX fallout, the Bahamas, one of the wealthiest Caribbean countries, is also in shambles.
“Crypto was going to be our way out. We could interact with the global economy in a way we couldn’t before,” said Stefen Deleveaux, of the Caribbean Blockchain Alliance, from a seafront restaurant in the capital Nassau to The Financial Times.”
What’s Next: African governments have been reluctant to regulate crypto. In most cases, they have warned their citizens about using crypto exchanges. However, the FTX collapse could quicken regulations to protect consumers as the next logical step. It is highly unlikely the FTX collapse will dampen crypto enthusiasm in Africa. Crypto has so many use cases on the continent, especially for cross-border transfers and as a way to hedge against inflation.
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