How Bitcoin is Changing Africa’s Landscape
A look at bitcoin’s evolution on the fastest-growing continent in the world.
This research was sponsored by Luno Global, a platform that allows users to buy, save and manage cryptocurrencies.
There are roughly 1.4 billion people living in Africa, the second-most populous continent in the world after Asia.
Historically, African countries have faced infrastructure issues due to colonialism, civil wars, and harsh terrain. The result is that around 52% of the population has no access to financial services.
Due to its underdeveloped infrastructure, Africa is a perfect market for Bitcoin, where a smartphone is all that’s needed to access blockchain networks.
The ease with which Bitcoin can be used in Africa, combined with the fact that it can be done through a smartphone, makes the digital currency an appealing alternative to traditional banking.
With the proliferation of digital currency, the first truly digital peer-to-peer movement, taking place on the ground, Africa is leading the way for global Bitcoin adoption.
Despite the focus on cryptocurrency speculation in many parts of the developed world, people in Africa are showing us how it can be used to increase financial inclusion for the underbanked.
Chainalysis’ 2021 Global Crypto Adoption Index ranks Kenya, Nigeria, South Africa, and Tanzania in its top 20 list, which includes the fastest-growing countries for Crypto adoption in the world.
Remittance and Wealth Preservation
The widespread adoption of Bitcoin in Africa has been gaining momentum since it both fills personal finance needs and supports entrepreneurial ventures, including remittances, e-commerce, payments, and wealth preservation.
Another driving force in the country’s mass adoption of Bitcoin has been the instability of global financial markets, stringent capital controls on outflows, as well as the cost of financial transactions. In addition, most economies around the world have been affected by the pandemic.
By reducing the high costs of international money transfers, companies have sought to draw users to bitcoin.
On a continent where two-thirds of the population is unbanked, it could even leapfrog the relatively undeveloped traditional financial infrastructure.
Mobile money payment systems have already made great strides in helping develop parts of Africa, giving millions of unbanked people a chance to move into the formal economy.
On the continent, bitcoin proponents say adoption would go a step further, but it requires an internet connection, which over three-quarters of Africans still lack.
By circumventing transfer fees that are higher in Africa than anywhere else, the use of these digital currencies provides an alternative to both traditional intraregional transfers and international remittances.
Experts point out that even though Bitcoin transactions incur a fee to transfer funds via electronic ledger technology, the blockchain can be accessed via mobile phones easily and universally, making these digital assets more convenient than rigid traditional banking and wire services.
According to a recent report, Africa had a higher rate of retail-sized crypto transfers, defined as having a monetary value below $10,000, than any other region. When explaining this development, the report pointed to the rising use of cryptocurrencies in making remittance payments.
Many African countries have a very high currency risk. In Nigeria, the central bank devalued its fiat currency by close to 15% against the U.S. dollar in 2021 alone.
The most populated economy in Africa imports far more than it exports (excluding crude oil), thus its fiat currency, the naira, suffers from constant devaluation, which erodes the wealth of the country’s citizens.
There is a growing niche market for bitcoin to be used in international money transfers. Although there was initial excitement over virtual currencies, especially as an affordable way for the African diaspora to send money home, this has subsided because of price volatility, concerns about anonymity and security, and difficulty understanding the fast-evolving financial asset.
The financial industry is undergoing the biggest change in history. In tearing down stereotypes along the way, Africa has pioneered the use of Bitcoin as a currency in a broken financial system. Humanity will live in unprecedented times in the next decade. But for now, the crypto community in Africa will continue to grow.
Facilitating the much needed Foreign Direct Investment
FDI into Africa increased 147% to $97 billion in 2021 from $39 billion in 2020, a very strong rebound partly on growing investment in the African FinTech space.
Over the past couple of years, a growing number of Africans see the pioneer crypto as a form of investment.
Having access to the multibillion-dollar flow of remittances to Africa certainly has considerable appeal, encouraging some large seed investments in African bitcoin startups.
Yellow Card, an African Crypto exchange, announced the largest-ever Series A financing for a cryptocurrency exchange in September 2021 as it ramped up hiring and expanded throughout Africa.
In a sign of a growing tech and innovation boom on the continent, Serena Williams and NBK Capital Partners have become investors in African startups.
A&T Capital, Distributed Global, Williams’ Serena Ventures, and others raised $6.5 million for Nigerian crypto product developer Nestcoin.
Nestcoin’s goal is to create Web 3.0 applications based on crypto assets and digital tokens that are tracked by blockchains. Nestcoin’s metaverse Magna is a game where players get rewarded in cryptocurrencies, mostly bitcoin.
Employment opportunities in Africa with Bitcoin technology
Against the backdrop of poverty, inflation, and unemployment levels at all-time highs, and with the outbreak of COVID-19 worsening the situation, blockchain technology has presented different opportunities for some Africans looking for alternative income streams and protection against economic downturns.
Africa is now home to a number of startups using or embracing blockchain technology, including:
- Blockchain technology is being used by BitLand to improve the land registration process in Ghana.
- Farmers can find out what market prices are by using AgriLedger, a blockchain-based startup in Kenya.
- Originally developed to be a business-to-business payment service, BitPesa is now used widely as a bitcoin payment platform.
Final Thoughts
According to a report by Enhancing Financial Innovation & Access (EFInA), a financial sector development non-governmental organization that promotes financial inclusion in Nigeria, blockchain technology can lower barriers to inclusion, potentially resulting in an increase in Africa’s largest economy’s gross domestic product of approximately $29 billion by the end of the decade.
Trade and investment on the continent take place more easily now, thanks to the African Continental Free Trade Area (AfCFTA).
As a result, Bitcoin could further boost the much-needed transformation of African economic systems with proper regulation and infrastructure.
Some of the unemployed could benefit from learning more about Bitcoin and applying their existing skills to jobs in the blockchain industry since the sector is still developing.
Young Africans are already acquiring skills in these areas to sustain and drive their income and livelihood, as it offers the safest, cheapest processes for moving capital when compared with other traditional payment methods.
An integrated capital market and Bitcoin in the African economy are essential for boosting trade and sustaining growth on the continent post-COVID-19.
There were no blockchain developers a decade ago, but now they’re among the top-paid professionals in Africa.
Finally, with Nigeria ranking near the top when it comes to searches for the term “bitcoin, according to Google Trends data, interest in the pioneer cryptocurrency has clearly grown in Africa.
This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.
If you found this content engaging, and have an interest in commissioning content of your own, check out Quantum Economics’ Analysis on Demand service.
