Cryptocurrencies have taken the entire world by storm. Across the globe, investors are on the lookout for trending cryptocurrencies to invest in and earn maximum returns. The crypto run is on the rise in different countries and continents, and Africa is no exception.
If you look at the stats, Africa doesn’t have a large share in the global value of cryptocurrencies received and sent. In fact, it amounts to only two percent in total, making us wonder whether Africa is really warming up to cryptocurrencies like the rest of the world.
But these numbers have seen a stark transition in the pandemic phase. Between July 2020 and June 2021, when the world was reeling under the Covid-19 pandemic, we had some good news in terms of crypto investment from Africa. Cryptocurrency adoption shot up by 1200% in the span of less than a year in Africa – making it the fastest adoption rate in the world. For the financial year ending June 2021, Africa amassed a whopping $105.6bn worth of cryptocurrencies.
Specific African countries such as Kenya, Nigeria, South Africa, and Tanzania topped the grass-root adoption rate, ranking in the top 20 Global Crypto Adoption Index. Thanks to the active involvement of these markets, the volume of retail-sized cryptocurrency transfers in Africa alone was 7%, while the rest of the world stood at a global average of 5.5%.
For a long time, African countries have struggled with infrastructure issues. This has only made access to financial services all the more difficult. Africans aren’t able to bank on traditional banking systems, which also explains why cryptocurrencies come in as a breather. Cryptocurrencies are seamless, easy to use, and hassle-free – all investors need is a smartphone and internet connection, and they can get started with their investments.
Reasons Behind the Rise of Crypto in Africa
The inflation rate in South Sudan in 2017 was 102%, according to the World Bank. Other African countries such as Ghana, Egypt, Malawi, Mozambique, Zambia, and Nigeria were struggling with double-digit inflation rates.
Considering these high inflation numbers, the rise of crypto in Africa is no surprise. In fact, these are the countries leading the march in terms of crypto investments in Africa. Along with the above-mentioned African countries, Botswana, Kenya, South Africa, Zimbabwe, and South Africa too are showing a rise in crypto investments. In Zimbabwe, the inflation situation was worrying – so much so, the authorities pumped in $100 trillion notes, each worth $40 – and this was the point where the people of Zimbabwe turned to cryptocurrencies.
Diaspora bonds were extremely popular in Africa, but with the country’s fiscal and monetary mismanagement, the bonds have only turned out to be an unsustainable and unappealing investment option. Africans typically tend to invest in safer, high-yielding investment alternatives. But over the years, the bonds are yielding a decreasingly lower rate of interest. This is also one of the reasons why the African population is now drawn to new, high-yielding, and dynamic investment options such as cryptocurrencies.
By 2020, the expected number of Africans investing in crypto was expected to touch 725 million. As crypto trading is accessible by smartphones, this number is only set to rise with the passing years.
Who Is Leading the Growth of Fintech in Africa?
None other than the founder of Twitter and Square – Jack Dorsey. Dorsey’s fondness for Africa in terms of investment is no secret – and he is always on the lookout to make bigger, better investments in the continent. The lockdown proved to hinder Dorsey from continuing with his investment plans for Africa, but now that things are getting better, the focus is back on investments in the African continent.
Dorsey is currently in talks with CcHub’s CEO, Bosun Tijani. CcHub also happens to be Africa’s largest tech incubator for startups. We’re hoping this collaboration would lead to something concrete that would boost the growing crypto market in Africa. Dorsey even went a step ahead to tweet that a Lightning Wallet would be attached to every Twitter account in Africa.
Native African Fintech companies, too, are showing promising results in the field of digital payment platforms. There’s Andela and Flutterwave, which are Nigerian-based companies paving the way for the growth of crypto in Africa.
Struggles of Africa’s Very Own ‘Afro’ Cryptocurrency
Afro was introduced in Africa way back in 2018, with the intention of making it one of the most popular cryptocurrencies on the continent. The idea was to introduce a cryptocurrency that would reduce transaction costs to every corner of the African continent.
While Afro started off on a good note, it’s been three years since its inception, and the cryptocurrency has not exactly caught on the way it was expected to. It did promise lower transaction fees, but of 54 African countries, only one country has actually inked a deal with the founding company of Afro – the Afro Foundation.
The foundation is still working towards making Afro the bitcoin of Africa – and is not ready to give up. The founders of Afro are banking on the increasing popularity of cryptocurrencies worldwide and hope to see Afro become an instant hit in the continent soon.
Currently, the Afro Foundation boasts of 3000 uses and 10000 Afro transactions per month. But if you compare these figures with the 1.3 billion population of Africa, these numbers aren’t really impressive.
And yes, Afro isn’t the only cryptocurrency trying to make its way through Africa. It has competitors like A Coin – which is the dreamchild of popular singer Akon. However, top economists say that these cryptocurrencies are still in their nascent phases and would need quite some time to gain the popularity and exposure they’re aiming for.
Nigeria – the Crypto Haven of Africa
Every African country responds differently to cryptocurrencies. There are blockchain-friendly markets like South Africa, Kenya, and most importantly, Nigeria. Nigeria is quite literally the bitcoin paradise of Africa. With almost 13 million bitcoin users as of 2021, it ranks 3rd after India and the USA for trading volumes of the most popular cryptocurrency in the world – bitcoin.
Statistics say that more than a third of Africa’s bitcoin users are Africans. The popularity of reputed cryptocurrencies such as bitcoins is so widespread that it is difficult for Africa’s native cryptocurrencies (Afro and Akon) to sustain in the market. The young, tech-savvy African population is looking for interesting investment options that are also safe to bet on- and popular cryptocurrencies such as bitcoins are something they can easily rely on.
The fall in official remittance numbers (up to $6 billion) is no doubt an alarming number. But the simultaneous surge in crypto trading only indicates that in the young African population this money is instead being rerouted to crypto trades – which, again, is a positive sign for the crypto market in Africa.
Reasons to Invest in Cryptocurrencies
For those hesitating to invest in cryptocurrencies, here are some reasons you need to consider investing in crypto right away:
Transparent and Secure Investment
Cryptocurrencies are powered by blockchain technology. Blockchain is nothing but an open, transparent, secure ledger that lists all the details regarding cryptocurrencies and investors. This ledger is publicly viewable and verifiable, making cryptocurrency platforms a safe, secure mode of trading.
A Good Choice for Long Term Investment
The crypto market is subject to frequent changes, ups and downs, making investors wary of the whole concept of cryptocurrencies. But despite this volatility and fluctuations, crypto investments are beneficial in the long run. In fact, cryptocurrencies can be a great way to accumulate a good enough retirement fund.
Crypto is also a good option for those looking to invest their surplus amount, that is, the amount you have in hand after you have invested in safer, more reliable investment options. The corpus you accumulate by investing in cryptocurrencies can prove to be a great buffer emergency fund over time.
Crypto isn’t regulated yet, which makes it all the more interesting to trade in. Also, you have 24/7 access to crypto trading, making it one of the most flexible trading options you can find out there. Any part of the day, you can log in and transact in different types of cryptocurrencies.
Cryptocurrencies are assets with limited supply, making them deflationary assets. Each type of cryptocurrency is regulated by an algorithm, which puts a cap on the total supply. As these are deflationary assets, their purchasing power increases over time.
Decentralized Investment Platform
Crypto trading platforms are decentralized, ensuring you have control over all your assets. There’s no involvement of any third party and middlemen, which means you have no extra charges to pay. As the exchange does not determine the value of the cryptocurrencies, traders and investors can avail maximum profits from the existing exchange rates.
Challenges for Cryptocurrencies in Africa
While we are definitely seeing a rise in cryptocurrency users in Africa, we cannot deny the fact that the crypto trade in Africa faces some challenges, like:
Lack of Trust
The first and foremost is the lack of trust in new-age investment options such as crypto. Understanding cryptocurrencies is important before we make a call on whether to invest in them or not. But being totally unaware, branding something as ‘risky,’ ‘not worth it’ or even ‘illegal’ isn’t really right.
The people in Africa need to learn more about this amazing investment option that can actually yield them high returns if done right. Building wealth is possible with the right investments, and crypto is one of those investment options we all need to be open to exploring.
The language barrier is another challenge that comes in the way. Breaking down complex crypto concepts into simpler, more understandable bite-sized versions is key if we want the majority of the African population to know, understand, and invest in crypto.
There are quite a few people, like Roselyn Wanjiru, whose efforts for crypto content are now available in Kiswahili. But there are hundreds of languages and dialects in this vast, diverse continent, which makes the translation process all the more difficult and time-consuming. So a lot still needs to be done to ensure that the essential knowledge reaches the Africans in the right way. Translation of material would also ensure that the rural and senior population too would get to know more about cryptocurrencies and how they work.
Lack of Regulation
The crypto world is dynamic and ever-evolving. There’s something new coming up every other day, which makes it challenging to keep track and monitor the crypto market. The industry needs to be regulated to ensure stability so that more people are actually incentivized to sign up for the crypto trade.
Currently, there’s no regulation – the only policies for banks to check the crypto trade are transaction limits and minimum capital – which aren’t really enough to regulate such dynamic trading platforms. Regulation would help build the trust of people who would show interest in investing in cryptocurrencies.
Along with this, some other challenges may seem small but are actually crucial for the functioning of the crypto trade. One of the major challenges faced by some parts of Africa is the lack of stable internet connectivity. This is a huge obstacle for those who wish to invest in crypto but cannot do so because of the lack of technological infrastructure.
Future of Cryptocurrencies in Africa
Africa is densely populated, with almost 1.3 billion people residing in the country. The history of the country was full of struggles, wars, colonialism, and issues due to harsh terrains, leaving almost 57% of the population with virtually no access to financial services.
The underdeveloped infrastructure of Africa is what is making it the crypto hotspot. Nigeria has topped the crypto adoption list of the entire world, and this only explains that the future of crypto is super bright in African countries.
Currently, cryptocurrency is not regulated by the African government – which adds to the ease of crypto transactions. There are no middlemen, no unnecessary laws and regulations, and the transactions happen purely over the internet. While the top cryptocurrencies worldwide are Bitcoin, Litecoin, XRP, Lisk, Monero, and Lisk, Bitcoin is the most popular cryptocurrency in Africa. Currently, Africa may not be mentioned as one of the largest cryptocurrency markets, but stats and figures show positive signs. In a couple of years, Africa is sure to take over the cryptocurrency world in no time.
Very recently, South Africa introduced strict rules for crypto traders, and it has caused quite a commotion in the African crypto world. Regulating crypto has been the need of the hour for a long time now, but these new regulations are causing problems for crypto traders, who did not have to deal with any rules or regulations until today.
Anonymity, freedom, and flexibility are the crux of cryptocurrencies. The new regulating rules are curated, keeping in mind these elements of cryptocurrencies while aiming to regulate the volatility they bring in. The regulation of the crypto market has many positives – it would help the overall economy while protecting people from the potential dangers and volatility of the crypto world.
These regulations came into place after numerous scams were reported, severely affecting South Africa’s crypto trade credibility. After the MTI Holdings scam, many others followed, calling for immediate rules to regulate crypto trading.
The South African Reserve Bank is enforcing strict rules on banks, which has led to ‘overregulation’ of the crypto space. The rules have only led to confusion among both banks and traders. The new regulations introduced are the first attempt to regulate the crypto trade and have their set of loopholes, leaving scope for confusion. As the South African Reserve Bank is looking to modify the rules and adapt them as required, crypto investors are expected to stick to the set of rules published.
The fact that the South African authorities have made efforts to develop regulations to monitor the crypto market shows that the countries in Africa are slowly and steadily accepting cryptocurrencies. This only reinforces the fact that the future of crypto in Africa is bright.