CRYPTOCURRENCY ADOPTION IN AFRICA: THE JOURNEY SO FAR
The story of African civilization has been one of slowed growth rate and delayed development. In the words of John Prendergast, “Africa is going through its historical process of formation just as Europe and America did. It is just happening much later than other continents.” From the scrolls of history, it’s indeed a going concern that a processional movement towards what Africa sometimes refers to as ‘the future would almost have been fully explored by the outside world before its extension to the functional frameworks of the Nations within the continent. This enigma has directly or indirectly informed the inaccessibility of financial services, leading to around 57% of the African population remaining unbanked.
In 2020, South Africa was awarded the most innovative country in Africa ranking 60th in the Global Innovation Index (GII), scoring 32.67 points out of 100. Tunisia and Morocco followed in the continent ranking 65th and 75th in the world, respectively. In identifying innovation as the key driver of long-term economic growth, competitiveness, and a better quality of life, in what ways will the adoption of crypto in Africa chart a new course in her journey to a financial future? Whether or not Africa will get enlisted among financially developed countries utilizing crypto adoption in light of the numerous advantages of cryptocurrencies, requires a validity test to prove the viability of this venture.
In the recent past, the usability of Crypto in Africa has come to the fore of global debate. Seemingly, arguments around the decentralized nature of blockchain technology viz a viz the volatility of cryptocurrencies have been leveled to reduce the use cases of crypto within the continent. To this end, The Central Bank of Kenya in 2015, was recorded to have issued a notice to not engage in Bitcoin trading, warning that: “There is no underlying or backing of assets and the value of virtual currencies is speculative in nature.” The Central Bank of Nigeria (CBN) also made similar edicts, banning all banks in 2017 from using, holding, trading, and transacting in cryptocurrencies. South Africa, awarded as the most innovative country in 2020, seems to follow the trend from her August 2021 declaration “Crypto is not currency.” Affirming its national position on the fate of digital currencies, Lesetja Kganyago, Governor of the South African Reserve Bank (SARB) commented that cryptocurrencies like Bitcoin are not currencies due to their failure to meet the key standards required of a currency. Hiding its head in the sand by focusing on vague risks, Morocco banned Bitcoin and cryptocurrency transactions since November 20, 2017.
Regardless, the economic realities of the above countries seem not to reflect the intended rationale for the ban. While Bitcoin has gained over 11,000% in value since 2015, Kenyan Shilling (KES) has lost 7% of its value. Predictably, Nigerian Naira Naira (NGN) dropped by nearly 52% since 2017. Accordingly, the devaluation of fiat currencies have only accelerated:
- Growth in grassroots adoption
- The uptick in peer-to-peer (P2P) volumes and Platforms
- Crypto-based remittances
- Recognition of crypto as a tool for wealth preservation.
Even though Africa’s cryptocurrency market share is the smallest according to various crypto research firms, a report by Chainalysis has revealed that Africa has topped peer-to-peer (P2P) payment platforms in terms of transaction volume across all regions, accounting for $105.6 billion worth of crypto assets between July 2020 and June 2021. With Kenya, Nigeria, South Africa, and Tanzania all ranking in the top 20 of the Global Crypto Adoption Index, Africa’s cross-region value received was recorded to be the highest of all regions as shown by Chainalysis. This represents the fact that more Africans are receiving remittances via crypto.
As shown by a Brookings Institute study, Sub-Saharan Africa received an estimated $48 billion worth of remittances in 2019, about half of which went to Nigeria. Following the devaluation of fiat currencies, an increasing acceptance of crypto as a tool of wealth preservation. The wide acceptance and use of Crypto in Nigeria are largely attributed to the fact that the Nigerian Central bank has devalued Naira, the Nigerian currency by 35% over the last 5 years. Following the recent surge in the crypto market, it only becomes economically viable to resort to crypto for national and individual long-term economic growth.
In an attempt at a conclusion, it needs to be reinstated that the growth of several Crypto Exchange platforms in Nigeria, accelerated over the past year during times of currency devaluation. P2P volumes in Africa habitually experienced a spike following currency devaluations in Nigeria and Kenya. It is against this background that Afridex will leverage the seeming favorable market conditions in Africa to introduce her products that have been projected to be instrumental in realizing the future of finance in Africa. The Afridex Exchange coming to live this December will guarantee the possibility for African startups to tokenize their products, crowdfund their business ideas, and have it easy listing their tokens for trading. High trading fees, liquidity mismatch, poor security architecture, and lack of a diversified portfolio option are common challenges of existing Exchange platforms. To this end, Afridex has deployed blockchain solutions in solving the Hydra-headed challenges of existing Exchange platforms. The connection of unbanked persons through the digitalization of finance in Africa and the global community will be realized by uniquely incorporated features as made available by the Afridex Exchange. The barriers to a seamless crypto trading experience have been surmounted by the model.
Let the countdown begin!
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