As digital finance grows across Africa, so does the push to regulate it. But beneath the surface of well-meaning legislation lies a worrying trend: regulatory frameworks built on skewed, selective, or incomplete data – often to favor entrenched interests.

From digital lenders to crypto exchanges, regulation is increasingly being shaped not by what’s actually happening on the ground – but by who can best frame the narrative.

UNVERIFIED crypto data about Kenya as shared by @KuriaKimaniMP:

* 6.1 million Kenyas are in crypto * Kenyans traded over $2 billion on #DeFi protocolshttps://t.co/F90szcHNI4 @KeTreasury @chainalysis @DCI_Kenya @MzalendoWatch https://t.co/NtdZ8l9BrW

— BitKE (@BitcoinKE) June 25, 2025

Here’s why progressive regulation in Africa must be driven by real, representative data – not selectively cited figures used to gatekeep the future.

 

1.) When Data Becomes a Weapon

Data should inform good policy. But when misused, it becomes a tool of regulatory capture – used by dominant players to shape rules in their favor.

Example: In recent debates around Kenya’s Virtual Assets Bill, concerns have been raised that some of the most influential inputs came from major exchanges and legal firms aligned with industry giants – while smaller local players were sidelined.

Reports highlighting the risks of crypto are often accurate – but they fail to differentiate between Africa’s emerging ecosystem and high-risk activity in mature markets.

The result?

Local startups are held to standards designed for billion-dollar exchanges elsewhere.

[TECH] Will the Growing List of African Countries Enacting a ‘Startup Bill’ Spur Blockchain and Crypto Activity on the Continent?: Kenya has enacted and published a ‘Startup Bill’ thereby becoming the th.. https://t.co/Rub4sotFgO via @BitcoinKE

— Top Kenyan Blogs (@Blogs_Kenya) September 26, 2020

2.) Flawed Assumptions Are Driving Policy

We’ve seen regulatory proposals framed around outlier incidents:

  • A single fraud case becomes justification for overly burdensome KYC rules

  • One poorly built DeFi protocol triggers sweeping compliance demands for all blockchain projects

  • A misrepresented “surge” in illicit crypto use becomes a catch-all reason to restrict wallets and P2P platforms

But regulators rarely present aggregated data to back these claims. And when data is available, it often tells a different story.

Chainalysis, for instance, consistently finds Africa to have some of the lowest crypto crime rates per capita, despite high informal usage. And even where illicit finance is found, its often within certain channels that are easy to cramp down. 

REPORT | Money Laundering Through Cryptocurrencies Fell Substantially in 2023, Fiat Off-Ramping ‘Important in AML,’ Says Chainalysis

Chainalysis noted that fiat off-ramping services are important because they’re where criminals can convert their crypto into cash – ‘the… pic.twitter.com/zqXpSk2PDD

— BitKE (@BitcoinKE) February 24, 2024

3.) Who Benefits From Skewed Data?

Let’s be blunt: Big firms benefit from strict rules.

They can afford the legal, compliance, and lobbying costs that come with high-bar regulation. Startups, on the other hand, are pushed out – creating barriers to entry that reinforce market concentration.

Tokenization frameworks, for instance, are increasingly shaped by traditional banks and institutional players who prefer private blockchains and closed platforms – while sidelining open-source innovation.

What gets framed as ‘responsible regulation‘ often becomes a power play – ensuring only those with capital and connections can participate.

OPINION | Why the Upcoming Kenya Virtual Assets Regulatory Authority (VARA) Has Serious Governance Red Flags

In a detailed article, Muthoni Njogu, a seasoned Kenyan digital assets lawyer takes an objective look at how VARA is constitutedhttps://t.co/oRO8eVtltR @KeTreasury pic.twitter.com/qGyEMeug06

— BitKE (@BitcoinKE) June 28, 2025

4.) We Need Better, Broader Data Collection

Africa’s regulators urgently need to collect more granular, ecosystem-wide data – including:

  • Number of active wallets and users per platform

  • Cross-border transaction volumes

  • Real-world use cases for tokenized assets

  • User complaints vs. regulatory enforcement actions

  • Breakdown of startup vs. incumbent participation in sandbox programs

Without this, it’s impossible to draft inclusive laws or measure whether policies are doing more harm than good.

REPORT | South African Regulator, FSCA, to Consider Adding ‘Certain DeFi Use Cases’ onto the IFWG Sandbox, Says DeFi Users to Reach ~400,000 in 2025

Learn more about this latest development below:https://t.co/vscsJ9HNrV @fscasouthafrica @FintechHubSA pic.twitter.com/g2fUQ37DiC

— BitKE (@BitcoinKE) February 24, 2025

5.) Regulatory Feedback Loops Must Be Transparent

Progressive regulation requires dynamic feedback loops, not static laws.

That means:

  • Public audits of how regulation affects different players

  • Open consultation with a diversity of industry voices

  • Ongoing disclosure of what data is being used to inform decisions

In South Africa, regulators are working closely with fintechs through the Intergovernmental Fintech Working Group (IFWG), which regularly publishes data and invites broad stakeholder input. Kenya and other African countries must follow suit.

South Africa Regulatory Body, IFWG, Highlights the Potential Benefits and Risks of Tokenisation: https://t.co/UnXW7HP9bX

— BitKE (@BitcoinKE) August 2, 2021

The Risk: Regulation Without Representation

Without inclusive data, we risk regulating for the few – at the expense of the many.

Innovation becomes a gated club. Local startups are squeezed out. The dream of using crypto, tokenization, or open finance to democratize opportunity becomes hollow.

It’s time for African regulators to pause and ask:

Are we writing laws for innovation – or just protecting incumbents?

 

The Way Forward: Data-First, Stakeholder-Inclusive Policy

If African countries want to lead in the digital economy, we need regulatory frameworks that are:

  • Driven by transparent, inclusive data

  • Reflective of local use cases and ecosystem realities

  • Continuously updated to stay relevant and fair

We need less guesswork and more ground truth.

 

Related Stories:

  • Crypto Startups Warn Kenya’s Virtual Assets Bill Favors Industry Giants

  • The AFRINIC Saga: A Cautionary Tale for Africa’s Digital Regulators

  • How Data Can Fix Digital Regulation in Africa

 

 

 

 

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