Crypto assets in Cameroon: a land of opportunities ?
Cameroon is witnessing a gradual and steady crypto adoption. The buying and selling of cryptocurrency is not regulated in Cameroon nor is it illegal. The regulatory fallback position is traditional contract law, either business law (BtoB) or consumer law (BtoC) for the purpose of selling digital assets. As a result, anybody in Cameroon can create their own currency and sell it to the public in Cameroon and abroad for various purposes. Cameroonians can buy and sell cryptocurrency without any oversight of the regulator and crypto projects in Cameroon attempt to abide by international (soft) laws and practices that are being applied.
Needs for regulation of cryptocurrencies
The absence of regulations designed to protect potential buyers either in the capacity of consumer or investor enable scammers to proliferate, and by way of consequence increasing the general misunderstanding or distrust in what is one of the greatest revolutions of this century.
When asked, most people declare not being very familiar with cryptocurrency. Yet, cryptocurrency is largely perceived as a profitable investment opportunity without a definite understanding of the technology upon which it is based : the blockchain. That situation is not specific to Cameroon. There is in the cryptographic assets industry a general and international consensus as to the necessity to train and educate on the topic.
Today, there is so much more than the buying and selling of cryptocurrencies. This industry is changing very fast. Crypto assets have been first democratized as a fundraising vehicle used by companies to receive capital without losing any control over their companies through various mechanisms (ICO, STO, IDO Initial, Token airdrop etc).
During the last few years, we witnessed the emergence of a new category of assets ranging from shitcoins to NFT, from stablecoins to Central Bank Digital Currency (CBDC), and a new type of legal personality (DAO) and Metaverse.
Digital assets are putting in place a new legal, financial and social paradigm that is gradually embraced by Cameroon.
Crypto assets as a means of payment
Crypto assets are used as a means of payment by some merchants in Cameroon for it is cheaper and faster than resorting to FCFA (XAF). To some extent crypto-assets present numerous advantages for international trade in Cameroon since money can move freely and goods and services are delivered faster. The proof of payment is computationally non-reversible and the gas fee can be free in some instances.
The crypto asset that is mostly used in Cameroon for business is USDT due to its inherent stability. International investments are also made in the form of digital assets but this phenomenon is marginal. I expect it to grow along with democratization of crypto.
Crypto asset as an investment instrument
This fundraising method has not been fully embraced by entrepreneurs in Cameroon and they continue to resort to traditional fundraising mechanisms (tontines, microfinance, loans, VC, etc.). There are currently obstacles preventing crypto from becoming a mainstream instrument; amongst which the fact that alternative avenues for raising capital are strongly and culturally embedded in the society, and also the large misunderstanding of blockchain. Consequently, crypto assets are at the moment used in a closed circle by crypto entrepreneurs to raise funds for their projects. Incentives will be necessary to bring crypto assets more mainstream. In that respect, NFT are more likely to succeed in the future.
There are a lot of scams projects offered to Cameroonian people in WhatsApp and Facebook groups promising impossible return on investment. People usually fall into those traps because life is tough and the perspective of making easy money is a seductive one. But there is no such thing as easy money, especially in the trading of cryptocurrency.
As a result, there is an urgent need for authoritative crypto actors in Cameroon to suggest regulations in order to restore the trust for crypto assets as an investment in a BtoC setting. Otherwise, it appears that scandals and scammers have a good time ahead of them.
Peer-to-peer trading is used by Cameroonians to acquire stablecoins in order to either trade or to keep it as reserve. Over-the-Counter is popular amongst Cameroonians to purchase crypto currency and this is because they don’t have much of a choice. Indeed, none of the top 20 crypto exchanges accept visa payment with FCFA currency. Consequently, Cameroonians may purchase digital assets created in their own country that may have no or little value on international exchanges and swap it with another coin on exchanges, or purchase it via a broker at much higher price than they could have had directly on crypto markets. As soon as major crypto exchanges accept direct purchase in FCFA and offer a trading pair on exchange in FCFA it is highly likely to see a decrease in peer-to-peer trading in Cameroon.
The tokenization of society and trade facilitation
Crypto assets are not all about legal tender. The digital asset can also represent art, music, title and proof of ownership, invoice, bills of lading. Non-Fungible-Tokens (NFTs) have created an entire new industry with far reaching implications.
For instance, the tokenization of a real estate can provide great protection against the unlawful sale of land or property in the absence of the rightful owner. The blockchain provides a cost effective and computationally non-reversible proof of ownership. Houses and lands can be registered on the blockchain. Given the booming development of real estate in Cameroon the digital assets will provide a swift and cost-effective land management tool.
Would crypto be a solution for Cameroon economic development? I firmly contend that it is part of the solution. The crypto industry is multifaceted whereby there is mining, trading, and selling digital assets and the asset itself may fulfill numerous purposes. Each of these facets can generate revenues.
Crypto assets and debt settlement in Cameroon
Cameroon should consider the creation of CBDC for its debt settlement. In 2021, Cameroon’s public debt was 18,329 million dollars. China has 61.3% of Cameroon’s bilateral debt or 27.4% of its total debt, and the African Development Bank holds 30.1% of the multilateral debt or 12.3% of its external debt.
China has already developed its own CBDC. The Banque de France successfully completed the last experiment of its program for interbank settlements in CBDC, launched in March 2020. CBDC is a useful tool to deal with the country’s debt.
If in the meantime Cameroon had purchased 1 000 Bitcoins in 2018 at $ 4 000 the country would have no public debt today.
Cameroon may well decide to mine other cryptocurrencies or attract farmers and this would generate fiscal revenue to be used for debt repayment. The country’s debt might be paid back in part with crypto assets.
A Bitcoin revolution to come in Cameroon ?
Unfortunately, Cameroon did not embrace the Bitcoin revolution and did not perceive it as an opportunity to create wealth, make money on crypto markets, and attract major companies in its jurisdiction. The country did not enable money remittance almost free of charge for its diaspora and did not choose to resort to Bitcoin as a store of wealth.
The above is a matter of public policy. It requires a complete legal arsenal to be put in place in order to establish a crypto-friendly jurisdiction and a tech hub. With the Douala port, Cameroon could even become a leader in the region for international trade based on the blockchain.
It is clear that discussing crypto adoption in Cameroon will require addressing amongst many topics, natural resources management for the purpose of mining digital assets. Electricity shortage for instance is a hindrance to the implementation of crypto farms. This shortage itself must be reconciled with a general claim that Cameroon electricity production is in excess of the population needs and ill-managed.
Given that the major oil and gas company ExxonMobil has been reported recently to be using excess natural gas to power crypto mining and expand the pilot to Nigeria, the neighboring Cameroon will eventually have to take a stand on the vision it wishes to implement in respect of digital assets regulations.
It is also likely that crypto assets will soon be used in Cameroon as a tool to fight inflation.
There is more than meets the eye on the Cameroonian crypto market, and a lot more that could not be discussed here. The absence of clear regulatory guidelines makes Cameroon a land of opportunities facing major challenges.
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Pascaline MELINON est avocate au Barreau de Paris en droit des sociétés et des actifs cryptographiques. Elle est titulaire d'un LLM European Legal Studies - Distinction de l'Université de Bristol - UK et d'un LLB European and International Law - First Class UWE-Bristol- UK). Elle est la fondatrice de son cabinet d'avocat et travaille pour des clients établis dans le monde entier sur divers aspects de l'industrie des actifs digitaux depuis 2016.
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.