Digital currency regulation in Africa faces several legal and regulatory challenges, including AML/CFT enforcement gaps, capacity constraints among regulators, fraud, scams, market abuse, and data privacy issues. Despite Nigeria's progress under the ISA 2024, many African jurisdictions struggle to effectively supervise virtual asset service providers (VASPs) for anti-money laundering and counter-financing of terrorism (AML/CFT). The Financial Action Task Force (FATF) emphasizes the need for specialized teams and blockchain analytics tools, which many African capital market authorities lack due to budget constraints and limited legal mandates. Unregulated crypto markets have also become breeding grounds for Ponzi schemes and investment fraud, eroding consumer trust and necessitating robust legal tools and enforcement actions.

Effective regulation requires reliable digital identity frameworks and data protection regimes, which are often incomplete or weakly enforced in many African countries. The U.S. Treasury stresses the importance of digital identity solutions for enforcing KYC/AML requirements. Addressing these gaps through legislation that links digital ID infrastructure to financial sector supervision is crucial for effective and rights-respecting crypto regulation.

Building a continental framework for crypto regulation necessitates both continental coordination and a unifying legal framework. The African Union's AfCFTA Digital Trade Protocol (DTP) addresses electronic payments, digital identities, and consumer protection, providing a foundation for regulated crypto corridors. Aligning national crypto laws with the DTP's principles can reduce fragmentation and legal arbitrage across member states. Sub-regional initiatives like the Pan-African Payment and Settlement System (PAPSS) also offer valuable blueprints for payment system harmonization, potentially cutting transaction costs significantly.

Drawing lessons from the EU's Markets in Crypto-Assets Regulation (MiCA) and the ASEAN Digital Economy Framework Agreement (DEFA), Africa can craft a regulatory architecture that balances unified standards with flexibility. MiCA’s phased approach demonstrates how a unified rulebook can drive market integrity, while DEFA offers a model for multi-jurisdictional coordination on digital trade.

Strategic recommendations for African countries include adopting clear legal frameworks based on the principle of "same activity, same risk, same regulation," strengthening regional coordination mechanisms, fostering public-private dialogue, expanding regulatory sandboxes, and exploring state-issued stablecoins and CBDCs. Regional blocs should build on existing payment system integration platforms like PAPSS to facilitate seamless, local-currency settlement of digital assets. Public-private dialogue through fintech councils can provide real-time feedback on regulatory initiatives and emerging risks.

Regulatory sandboxes, such as those in Ghana and South Africa, offer controlled spaces for testing new products under supervision. Scaling these initiatives and embedding “sandbox-to-scale” pathways into national fintech strategies can foster innovation while preserving financial stability. Central banks should also evaluate issuing stablecoins or retail CBDCs, drawing on research from the Bank for International Settlements (BIS) on core features like resilience and privacy.

Nigeria’s Investments and Securities Act 2024 demonstrates that recognizing cryptocurrencies under a capital markets framework is transformative, providing a replicable model for licensing and investor protection. However, a single country's success is insufficient; Africa's digital asset potential relies on harmonized policies that transcend national borders, supported by the AfCFTA Digital Trade Protocol and platforms like PAPSS. A unified Digital Asset Passport, mirroring the EU’s MiCA regime, can cultivate liquidity and reduce regulatory arbitrage.

Moving forward requires collaboration among governments, regulators, and private stakeholders. Establishing multi-stakeholder fintech councils and expanding regulatory sandboxes will ensure that policy evolves with innovation. Deploying state-issued stablecoins or CBDCs, coupled with interoperable digital ID systems, can anchor financial sovereignty and extend access to the unbanked. Embracing digital asset regulation with rigor, clarity, and coordination can unlock financial inclusion, economic resilience, and technological leadership across the continent.