A guide to a 2019 academic paper on blockchain for African development, covering land registries, e-government, finance and the legal issues lawmakers face.
Where DLT could help, and what the law must answer
The leapfrog idea
The paper opens with a familiar African story. Mobile phone use jumped from about 3% in the early 2000s to over 80% by 2015, skipping much of the landline era. The Economist described a similar leapfrog in energy. Could distributed ledgers be the next? By 2019, the author notes, governments in South Africa, Ghana and Kenya were actively investigating applications, and conferences on blockchain had been held in South Africa since 2015.
The author, a German law academic, wrote the paper to bridge a gap: businesses were racing ahead with applications while lawyers were still working out the implications. He draws on regulatory approaches from around the world and suggests options that African lawmakers might adapt.
Where the technology could help
Cryptocurrencies. The paper counts more than 2,000 cryptocurrencies worldwide and describes the basics: each participant holds a wallet, which works like a virtual bank account, and units are either mined or bought through exchanges. Adoption in the real economy was rising even though many companies had initially been reluctant to accept them.
Digital land registries. In most African countries, more than 90% of rural land is reportedly unregistered or lacks formal title, with ownership resting on oral agreements or incomplete paperwork. That creates uncertainty, fraud and what economist Hernando de Soto called ‘dead capital’: property that cannot be used as collateral. A registry on a distributed ledger could record titles with descriptions, coordinates and satellite photos, so buyers can inspect a parcel’s history. The paper cites initiatives in Ghana, a public-private partnership in Rwanda sealed in November 2018 and an expressed interest from Kenya’s National Land Commission.
E-government. The aim is to remove bottlenecks such as weak public infrastructure, corruption and mismanagement. E-voting is the most prominent example, and Sierra Leone reportedly used a private blockchain network in its 2018 presidential election.
Supply chains. Paperwork errors, losses and misshipping drive up the cost of trade. Shared records could improve traceability between producers, distributors and retailers who may not trust each other, support responsible sourcing, and in combination with smart contracts let a proof of delivery trigger invoicing and payment automatically.
Business finance. Security tokens could replace conventional shares and bonds, representing a holder’s financial stake and rights on a blockchain through a security token offering or initial coin offering.
The legal checklist
The longest part of the paper is a legal map. The headings are a usable checklist for any country that wants to host blockchain activity:
Currency regulation: is a cryptocurrency money, property, a commodity or something else, and who supervises its exchange? Security tokens: when does a token amount to an investment contract, share or bond that securities law covers? Smart contracts: do self-executing programs count as legally binding contracts, and what if the code and the intention differ? Digital land registries: how do ledger entries fit with existing property law and the role of notaries and registrars? Money laundering and cybercrime: how do anti-money-laundering rules apply to pseudonymous transfers? Data protection: how can personal data live on a ledger designed to be permanent? Personal liability: who is responsible when a mistake or an exploit causes loss on a decentralised network?
Our editorial note: a ledger records claims; it cannot by itself verify that a claim is true. A land title entered by a corrupt official is still false once it is on the ledger, so registries still need trustworthy processes at the point of entry.
Four policy conclusions
Education first. DLT needs skills in IT and programming among entrepreneurs, and equally among lawmakers and regulators. The paper suggests working groups and consultation platforms, citing examples from the US, EU and the United Arab Emirates, and notes Africa’s young, tech-positive population as an asset.
Infrastructure. Reliable internet and electricity are prerequisites. A short-term bridge could be to connect ledgers with established mobile platforms such as the SMS-based M-Pesa payment system; long-term infrastructure is a job for institutions like the World Bank or African Development Bank.
Energy. Public blockchains can be energy-hungry, which favours more efficient permissioned designs, and the continent’s growth in renewable energy may help.
Technology-neutral law. Because the technology will change quickly, today’s blockchain may be outdated in a few years. Laws should set requirements in a way that gives future developers and supervisors leeway to adapt.
Reading it today
The paper was finalised in August 2019, so details of specific countries’ rules have moved on. Its enduring value is the framework. For examples of real central-bank work in South Africa, see our Project Khokha and South African fintech articles.
Sources
- Blockchain Technology and the Development of African Economies: Promises, Opportunities, and the Legal Issues at Stake. Alexander Wilhelm, Recht in Afrika / Law in Africa 22 (2019), 2019.
This article is our own summary and commentary. The reports remain the property of their authors and publishers; read the originals for full detail. Spotted an error? Tell us. See our editorial policy.