The Parliament of the Economic Community of West African States (ECOWAS Parliament) has expressed concerns over the use of cryptocurrencies in the sub-region with regards to the risk factors involved.
This was the focus of the meeting of the Joint Committees of the ECOWAS Parliament holding in Ouagadougou, Burkina Faso, which also has in attendance Cryptocurrency experts and resource persons.
Although the committee highlighted the prospects of Cryptocurrencies as facilitator for investment in West Africa, it noted that “the sharp decline in the value of Bitcoin over recent weeks is a reminder for all that Cryptocurrencies are not safe assets hence the use of Cryptocurrencies on the African continent is not without danger for several reasons.”
It said further that Cryptocurrencies can be refused for payment without contravening legal provisions, adding that Crypto-assets are not a means of payment and cannot be likened to e-cash. It also identified Cryptocurrencies as extremely volatile, owing to restrictive issuance mechanism that encourage speculation.
The Joint Committee further highlighted the security risks involved, saying that “like all other digital payment instruments, Bitcoin is always attacked by pirates and therefore Cryptocurrencies enthusiasts need to guard against the risk of theft because if the Cryptocurrency is by nature inviolable, portfolios, on the other hand, are not.”
Among the risk factors identified is the fact that Cryptocurrency is an insecure liquidity given the shallow depth of the foreign exchange market and high concentration of assets (96 per cent of bitcoins are believed to be held by 2.5 per cent of users).
factors of Cryptocurrencies identified is that it is an irreversible transaction, in other words the transaction cannot be cancelled when the sender notices a mistake, only the receiver can decide to return them.
Another source of concern to the use of Cryptocurrency is that there is almost no regulatory authority. However, the boom of Bitcoin and the growing popularity of virtual currencies have caught the attention of financial authorities and governments who have started giving them a thought.
It has been noted that even some countries have made efforts to put in place regulations, and have made some progress. Another major handicap of Cryptocurrencies identified is the weakness of AML/CFT systems which can be a real cause of vulnerability of mechanism to combat money laundering and terrorist financial.