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Bitcoin mining difficulty is expected to reach a new all-time high of over 50T, which may continue to increase. This surge is due to the rising value of Bitcoin and the growing popularity of the Ordinals protocol, which has made mining more profitable. Miners are installing more mining machines, leading to increased computational power and higher difficulty levels.
The popularity of the Ordinals protocol has increased transaction costs, boosting miners' revenue. The Bitcoin mining difficulty automatically adjusts to maintain a block mining time of around 10 minutes. However, as the difficulty increases, miners' profitability decreases. Some mining companies have experienced decreased profitability due to increased difficulty. Factors such as stable Bitcoin prices, infrastructure limitations, and uncertainties related to the upcoming Bitcoin halving event could slow down the rise in mining difficulty. Additionally, the concentration of hash rate in North America is causing new seasonal trends in mining.
Crypto lending in Africa refers to borrowing and lending digital assets. It has gained popularity as cryptocurrencies have become more widely accepted globally. In Africa, crypto lending services primarily operate through peer-to-peer platforms, offering an alternative to traditional banking systems. While crypto lending has the potential to enhance financial inclusion, it is not without risks. Volatility in cryptocurrency markets can impact collateral values, and borrowers may face liquidation if collateral values drop significantly.
Regulatory frameworks for cryptocurrencies vary across African countries, so understanding the legal landscape is crucial. Despite its potential benefits, crypto lending faces challenges such as limited internet infrastructure, the need for financial literacy, price volatility, and evolving regulations. To leverage the advantages of crypto lending for financial inclusion, addressing infrastructure issues, promoting financial education, implementing supportive policies, and ensuring user protection is essential. Crypto lending should be considered part of a broader range of solutions to enhance financial inclusion in Africa.
International Organization of Securities Commissions (IOSCO) has recommended that countries use traditional financial regulatory frameworks to regulate cryptocurrency. They issued 18 core recommendations to assist countries in developing a new regulatory framework for the crypto sector, emphasizing the need to achieve investor protection and market integrity goals similar to traditional financial markets. The IOSCO suggests a bilateral/multilateral cooperation approach among regulators to ensure adequate supervision of companies.
The regulatory approach in the United Kingdom contrasts with the IOSCO recommendations, as lawmakers debate categorizing cryptocurrencies as high-risk investment assets and comparing them to gambling tools rather than financial assets. In the United States, the Securities and Exchange Commission has attempted to regulate cryptocurrencies under existing financial laws but has faced challenges clarifying the regulatory approach.
African countries are at various stages of crypto regulation. South Africa, Nigeria, and Kenya have made progress in developing regulatory frameworks. South Africa has sought public input to establish clear guidelines; Nigeria's SEC recognizes cryptocurrencies as securities. It is developing a regulatory framework, and Kenya's Central Bank has issued warnings while exploring potential benefits and regulatory options. The suggested frameworks for these countries include licensing requirements, investor protection measures, AML and KYC regulations, market monitoring mechanisms, and consumer dispute resolution processes.
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