BUSINESS
Days before his FTX cryptocurrency exchange collapsed, co-founder Sam Bankman-Fried tweeted “Hello, West Africa!” – his latest nod to a region where a growing number of kitchen table investors had put their faith, and savings, in FTX.
In South Africa, Nigeria and Ghana, FTX held a series of swish events in the months leading up to its bankruptcy filing in the US on November 11, which sent shock waves through the crypto world and saw major coin prices plummeting.
At least $1 billion (R17.54 billion) of customer funds have vanished from the collapsed crypto exchange, reported Reuters, and it is now the subject of investigations by authorities in the Bahamas (where it was based) for “criminal misconduct”.
In Nigeria, where many young people see cryptocurrency as offering a chance of income amid economic woes, including double-digit inflation and high unemployment, FTX’s demise was painful.
Osarieme Aghedo, who works in marketing at a Nigerian start-up and had $8 720 in FTX as news of its implosion circulated on Twitter said:
It hurts more than I can express.
He tried in vain to withdraw his money, with which he had hoped to buy a car next year.
Aghedo said he had been trading in digital currencies since 2017 and had lost money before as their values dipped.
However, the FTX loss had hit him harder, he said, because he thought it was “risk-free” and kept his savings there.
Like him, many Africans used FTX as a bank, as it offered an 8% annual interest rate on the stablecoin stored on the platform. Customers also used FTX to convert their local currencies to dollars.
Even as regulators crack down on crypto, people in developing nations are embracing virtual currencies to avoid high commissions on remittances and to preserve their savings in times of hyperinflation and political instability.
Many exchanges have courted users in Africa and crypto adoption is growing on the continent, with Nigeria ranked 11th on a global index by research firm Chainalysis. Kenya and Morocco also featured among the top 20.
Despite the FTX blow, however, Aghedo said he was not giving up on crypto.
He said:
Crypto has connected the global economy. I receive and pay people in crypto from many countries, which would have been impossible before.
NO PROTECTION
Cryptocurrencies were designed to be free of authorities such as governments and central banks. They enable “peer-to-peer” transfers between users online without any intermediaries.
Their relative anonymity offers a haven for criminals, extremist groups and sanctioned governments – but champions of the system say they also support citizens caught up in crises.
Now crypto’s highest-profile collapse in recent years has left millions in the lurch and it is unclear how many FTX users (estimated at about 1 million in the US and many more around the rest of the world) will be able to recover their funds.
South Korea, Singapore and Japan accounted for the highest number of visitors to FTX.com until October, according to data compiled by crypto site Coingecko.
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Singaporean Edward Choy was at work when he heard about a liquidity crunch at FTX. He immediately began getting his deposits out, just hours before withdrawals were suspended.
“I was able to pull out about 90% of my funds,” said Choy, an actor and voice artist who has been a crypto investor since 2017, “but I know many others who were unable to get anything out. Some had put nearly all their assets into FTX and have now lost everything,” he said.
Regulation of cryptocurrencies has come into sharp focus following the collapse of several platforms this year, as well as increased volatility, with bitcoin down more than 70% from a record high of $69 000 in November last year.
REGULATORS BLAMED
Several investors have also blamed regulators for failing to monitor platforms and protect users.
On a Facebook group for crypto users in Singapore, Alfred Lee posted: “Shifted my six-figure portfolio from Binance to FTX. Didn’t manage to get out fast enough, as I was on vacation,” he wrote, referring to his move after Binance was banned in Singapore last year for breaching local payment service rules.
The Monetary Authority of Singapore said it could not protect local users from the FTX collapse, as it had not given FTX a licence and the exchange had operated offshore.
The authority last week said:
“As the Monetary Authority of Singapore has repeatedly stated, there is no protection for customers who deal in cryptocurrencies. They can lose all their money.”
In Ghana, where authorities have not commented on the FTX collapse, 21-year-old content creator Elisha Owusu Akyaw, who often posts about crypto on Twitter and video sharing site TikTok, said he had $200 on FTX when it collapsed.
“It’s now worth just $6,” he said, adding that he had earlier held the equivalent of about $70 000 on the platform, but had withdrawn most of it some months ago as the value of cryptocurrencies fell.
Akyaw, who has collaborated with FTX and other exchanges in boosting their products to his more than 12 000 followers on Twitter, said he was worried about how the ongoing chaos would affect his role as a crypto influencer.
“The lost money isn’t the biggest focus for me,” said Akyaw, who began trading in crypto in his teens. “It’s the impact it’s had on the reputation of the crypto industry. It’s about trust in a space to which I’ve dedicated most of my life.” – Thomson Reuters Foundation
