Irlon Terblanche, founder and chief executive officer at Blockchain Capital (South Africa), argues that regulation does not stop cryptocurrency adoption except in unique cases where it is completely banned and enforced by severe penalties.
He cited the case of India and China – both have attempted to ban Bitcoin and other cryptocurrencies, but with limited practical success.
South Africa's FNB recently announced its decision to discontinue offering banking services to crypto businesses after they claimed to have assessed the risk appetite.
They did add that "future regulatory clarity" may prompt them to revise their decision.
In its response to the development, one of the affected exchanges, Luno, which serves South African and Nigerian markets, believes banks "will continue to assess their exposure to cryptocurrencies in the absence of formal regulations".
South Africa and Nigeria are Africa's top major markets for cryptocurrencies. As it is the case globally, exchanges operating in Africa struggle with the lack of a stable relationship with traditional financial institutions which brings distrust for emerging asset class like cryptocurrencies.
The lack of trust assumingly hinders cryptocurrency adoption hence calls for a regulation of the industry.
Regulation doesn't affect crypto adoption
Rather than speed up the adoption, regulation will merely serve to slow it down, Terblanche said, because the vast majority of cryptocurrencies are not sustainable and do not solve real-world problems that regular technology can't solve.
Entrepreneurs in Africa are yet to harness the technology's potential in building cross-border payment and remittance solutions based on Bitcoin. This could be partly because they don't realise that they don't need any regulatory support for Bitcoin, he said.
"Bitcoin is the only technology that cannot be touched or influenced by any regulator, bank or corporate giant. Regulators can regulate the intersection between normal currencies and Bitcoin (e.g. cryptocurrency exchanges), but not Bitcoin itself. And they don't need to. Bitcoin is a global and secure network that is more secure than any other network in the world. And because of its global, borderless nature, it lends itself well to cross-border payments," Terblanche added.
What regulators don't know
Regulators have to be fully up to speed with what cryptocurrencies are and how to regulate them for their expected regulatory role not to remain a real problem. The understanding of some governments and central bankers has obviously improved - some central banks are now less inclined to experiment with digital currencies unlike earlier this year.
Regulators need to improve on their understanding so as not to feel threatened by cryptocurrencies but be able to realise that they can shut down cryptocurrency networks by going after the legal entity that issued the coins in the first place, Terblanche said.
"If you exclude Bitcoin (and a handful of Bitcoin variants such as Litecoin or BCash), other cryptocurrencies are fundamentally flawed because they lack sufficient decentralisation," he claimed.
"Or worse, they are attempting to force traditional business models into a blockchain solution. The problems they solve can be handled by less complicated technology without the use of a costly blockchain or digital token."
Terblanche praised the Bitcoin network over other blockchains for being so decentralised that it is impossible to be attacked.
He added that its blockchain is replicated across many nodes as much as possible; its Proof of Work consensus algorithm forces miners to expend huge amounts of computing power to secure the network; its incentive mechanism rewards miners for their energy consumption; and the decentralisation of mining power across the network.