The economic community of West African States (ECOWAS) warn West African crypto users that these digital currencies are excessively volatile, adding that “their use on the African continent is not without dangers.”
The ECOWAS Parliament has issued a warning against using cryptocurrency as a method of exchange and commerce.
The ECOWAS Parliament declared that the risk factors involved are cause for worry, following a meeting of its joint committee in Ouagadougou, Burkina Faso.
Cryptocurrency professionals and resource persons were present at the discussion, which focused on the potential of cryptocurrencies as a facilitator for investment in West Africa.
The meeting also noted that the dramatic drop in the value of Bitcoins in recent weeks serves as a warning to everybody that cryptocurrencies are not safe investments, and that their use on the African continent poses risks for a variety of reasons.
The sub-region was also warned by the joint committee that cryptocurrency can be declined as payment without violating legal rules.
It went on to say that crypto-assets are not a form of payment and cannot be compared to e-cash, despite the fact that cryptocurrencies are extremely volatile due to a constrained issuance process that fosters speculating.
According to the joint committee, Bitcoin, like all other digital payment instruments, is constantly targeted by pirates.
The committee advised cryptocurrency fans to be wary of the possibility of theft, noting that while cryptocurrencies are inherently secure, portfolios are not.
Given the poor depth of the foreign exchange market and a large concentration of assets (96% of bitcoins are expected to be held by 2.5% of users), a liquidity problem could occur.
Another danger point cited by the committee for cryptocurrency is that it is an irreversible transaction.
When the sender finds a mistake, the transaction cannot be cancelled because only the receiver can choose to return them. Another source of concern, according to the committee, is that there is essentially no authority to govern its usage.
The joint committee, on the other hand, stated that the rise of Bitcoin and the growing popularity of virtual currencies has piqued the interest of financial authorities, and governments have begun to consider them.
It was highlighted that certain countries have made some progress in putting regulations in place.