Exploring the Types of Crypto Licenses in Africa

Africa crypto license and solving the unbanked issue

Close to half of African citizens are unbanked, according to a study published by the World Bank Group in 2024 (1). Reasons vary depending on the region and country, but the main reasons are the lack of infrastructure and of local strong actors in the banking sector.

Africans therefore adapted. In virtually all of the continent, mobile money became the norm. Credit is stored directly on a SIM card and can be exchanged against physical currency in a dedicated change bureau. Credit can be exchanged from number to number.

Yet, this system has limits too: it may not work from a phone operator to another (even less from one country to another, Africa being a major share of the remittance market), social engineering and scams are common. The system being centralized, governments found their way to enforce automatic taxation through the wires and accounts.

And cumulated to the social, economic and political challenges faced by multiple African nations this decade, it should already make sense to you why crypto in Africa represents an opportunity for the people.

Not (only) as a speculative or reserve asset, as often considered in Western countries (especially Bitcoin, now a geopolitical asset), but as a way to store and exchange funds, and trade them for goods, in the daily life.

Crypto is borderless, instant, (mostly) decentralized. It doesn’t rely on a physical media such as a SIM card that can be stolen or duplicated. It’s a significant improvement in terms of safety, ease of use and interoperability.

A different role of crypto in the country means a different role of regulations surround crypto services providers.

The prime example of LegalBison’s client Yellow Card

Our team had the privilege of assisting a project whose goal is directly to participate in this shift: Yellow Card.

Yellow Card leverages the blockchain and stablecoin technologies to provide a financial infrastructure for African companies. The startup fills the gap between African startups and companies, facilitating international trade and simple, cheap settlements.

Read also: LegalBison helps Yellow Card with incorporation and VASP registration

This African Web3 startup secured crypto licenses in Botswana and South Africa, and has registered to the financial intelligence units of multiple other African jurisdictions to ensure compliance with national and international regulations pertaining to anti-money laundering and countering the financing of terrorism.

Onshore vs offshore crypto licenses in Africa

Africa is one of the largest continent and the territory is shared between dozens of jurisdictions, some of them being tax havens, as found in Europe or in America.

As a consequence, the main difference we point out when thinking about crypto licenses in Africa is therefore not the terminology (CASP, VASP, DASP…) but if the jurisdiction would qualify as offshore or onshore in business terms, given the impact it usually has on business conditions and application requirements.

This is the key distinction, when it comes to differentiating various types of crypto licenses in Africa: offshore licenses and onshore licenses.

The attractiveness of offshore crypto licenses in Africa

So-called offshore jurisdictions are usually tax havens. In the case of Africa, this includes famous paradisiac islands such as the Seychelles and Mauritius. Two countries facing vastly different challenges than, for example Nigeria or Zambia.

Offshore African jurisdictions are notable in two aspects:

• They mostly attract foreign companies, willing to benefit from low taxes and a more attractive regulatory environment;
• They are hardly designed to serve the domestic market, with licenses often granted to IBC companies, which aren’t supposed to do business on-site.

This fact almost creates a subcategory of offshore crypto licenses: African vs Caribbean. The general advantages are usually comparable, and the specifics really come down to each individual jurisdiction.

Our long standing experience of working with global crypto companies and innovative Web3 startups nevertheless demonstrated that both the Seychelles and Mauritius were high quality jurisdictions for getting a license.

Securing an “onshore” African VASP license for entering the domestic market

Onshore licenses, on the other hand, play a highly different role, and cater to different types of projects.

Let’s have a look, for example, at the registry of virtual assets services providers in Botswana (2), where Yellow Card is registered. Only a handful of projects appear in the register.

Though not all of them are active at the time of redacting this article, researching these projects on the internet show, as for the example of PAA Capital, solutions oriented toward replacing the banking sector on the African continent to some extent.

What type of African crypto license will suit your project

A crypto company willing to expand its market onto Africa should chose the type of crypto license to operate with depending on their goal:

• An offshore license will allow for global business, with low tax rates and high freedom of operation;
• An onshore license will build a foundation for the project on the local soil, bringing it closer to its market and potentially easing up the opening of a domestic bank account.

As of now, LegalBison has considerable experience guiding its clients toward securing offshore licenses, whether in African jurisdictions or elsewhere.

If your project requires domestic implementation in one or more African continental countries, we invite you to start a conversation with our team. We will be happy to assist you in determining the simplest way to get your business running legally and safely, by securing the proper authorizations and licenses in the right jurisdictions.

Reference:

(1) https://www.worldbank.org/en/publication/globalfindex/brief/financial-inclusion-in-sub-saharan-africa-overview/

(2) https://www.nbfira.org.bw/list-of-regulated-entities/virtual-assets-service-provider-regulated-entities/