Crypto framework needed now – expert

By Ebenezer Chike Adjei NJOKU

Financial sector regulators have been urged to adopt a proactive approach in defining digital assets, especially cryptocurrencies, as activity within the space shows no sign of slowing down.

According to Richard Nunekpeku, Managing Partner-Sustineri Attorneys PRUC, regulatory clarity is required if the nation is to harness the benefits of digital currencies while mitigating potential risks.

The global cryptocurrency market has seen unprecedented growth in recent months, partly driven by speculative expectations of favourable regulations – particularly during the Donald Trump administration. However,  international regulators remain divided on the classification of digital currencies.

While Mr. Nunekpeku agreed that regulators in volatile markets must be cautious, he added that a clear categorisation would enable Ghana to unlock the appropriate regulatory interventions to protect against the inherent risks.

“Yes, we have adopted a ‘wait and see’ attitude since the emergence and continuing market dominance of digital assets and currencies; and I think it is time for government and regulators to provide clarity on their classifications for appropriate market response and leverage,” the private legal practitioner stated.

“Therefore, the right regulatory step for Ghana is to consider the appropriate definition or categorisation of cryptocurrencies, as that has implications for the type of regulatory framework to put in place and the regulator’s responsibility for regulating, supervising  and monitoring stakeholders’ activities and the use of cryptocurrencies in Ghana,” Mr. Nunekpku added.

Developments

The cryptocurrency landscape has experienced several notable developments recently, particularly establishment of a new crypto task force by the Trump administration as announced by Security and Exchange Commission (SEC) Acting Chairman Mark Uyeda. This initiative aims to develop a clear regulatory framework for digital assets.

Also, President Trump and First Lady Melania Trump have introduced two meme coins, $TRUMP and $MELANIA, on the Solana blockchain. While these coins saw initial price surges they have since retreated, eliciting mixed reactions within the crypto community regarding their impact on the industry’s credibility.

This comes as Bitcoin surpassed the US$100,000 mark for the first time on December 4, 2024 and reached a new all-time high of US$109,225 on Inauguration Day before adjusting to approximately US$106,300.

Nevertheless, Tether – the world’s most traded stablecoin with a market cap of US$138billion – is under increased scrutiny for its use in facilitating untraceable transactions, including illicit activities. Law enforcement agencies in the U.S. and EU are closely monitoring its operations.

 

The UK’s Financial Conduct Authority (FCA) obtained a conviction against an individual – who had processed £2.6million in crypto transactions through unregistered machines – for operating illegal cryptocurrency ATMs.

 

The Bank of Ghana (BoG) has maintained a conservative stance in this regard, with various notices on the illegality of cryptocurrencies in the country. However, in August  2024 the regulator issued exposure draft guidelines on digital assets “to foster innovation while effectively managing risks associated with digital assets”.

 

It however warned that: “Notwithstanding this exposure draft, the Bank’s notice No.BG/GOV/SEC/2022/23 prohibiting banks and payment service providers (PSPs) from facilitating crypto asset transactions remains effective until formal regulatory guidelines are published.” The SEC has mirrored BoG’s position.

 

Enabling innovation, ensuring stability

 

To foster innovation in the cryptocurrency space, Mr. Nunekpeku advised government to adopt responsive and forward-looking regulatory measures. “The role of government in driving innovations must be to create an enabling environment through responsive and forward-looking legislations and regulations that balance the leverage of innovations, advance financial sector goals and protect end-users of financial services,” he stated.

 

The lawyer with expertise in technology recommended strengthening regulators’ capacities through investments in anti-money laundering (AML) compliance technologies, skill upgrades and enhanced innovation sandboxes.

 

“We must strengthen regulators’ capacities to continually monitor and improve the regulatory regime through enhanced regulatory and innovation sandboxes, collaborative stakeholder engagements, investments in new technologies for anti-money laundering compliance and risk management, staff training and skill upgrades, among others,” Mr. Nunekpeku noted.

 

He further highlighted the need for regulatory flexibility to address the volatility of cryptocurrencies. “The characteristic price or market volatility associated with cryptocurrencies means that regulatory responses must offer flexible opportunities for regulators and innovators to respond in real-time to market instabilities and reduce any exposure or risk to the entire financial market,” he explained.

 

As a potential solution to volatility concerns, he suggested considering “more stable cryptocurrencies such as stablecoins”.

 

Addressing security risks, building trust

 

The rise of digital currencies has also intensified concerns around money laundering and financial fraud. Mr. Nunekpeku pointed out that the same technologies powering cryptocurrencies can be leveraged to mitigate these risks.

 

“Emerging technologies such as blockchain, which have enabled these new financial options, can also be used to mitigate some of the associated risks or concerns,” he said.

 

He elaborated the potential of blockchain technology to create transparent and traceable systems for KYC and AML processes. “These technologies can help design transparent, traceable and robust KYC and Anti-Money Laundering processes, automate reporting requirements, audit crypto platforms, deploy digitally verifiable identities and prevent fraud,” Mr. Nunekpeku stated.

 

He highlighted the importance of collaboration, calling for a partnership built on trust and mutual commitment to drive a responsible and ethical innovation ecosystem.

 

The lawyer also underlined a need for public education on the risks associated with cryptocurrencies, stating: “End-user education and financial literacy promotion must also be prioritised to ensure users understand the underlying risks and support efforts to minimise them”.

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