THE GROWING ADOPTION OF CRYPTOCURRENCIES IN AFRICA: ENABLING FACTORS AND BENEFITS
In the early years of the release of bitcoin, my parents gave a million naira to someone who offered to help them purchase Bitcoin. This turned out to be a bad idea. The man duped them of their money. While things didn’t go as planned, I can boldly say my parents are members of the bitcoin innovators, almost.
Like me, you most likely know others who bought into the bitcoin dream but didn't even know a Bitcoin white paper existed. They did not carry out any research on how to maximize the technology. They simply trusted the first set of persons who told them about bitcoin and went ahead to entrust huge sums of money with them.
While this is still the case with many who don't know the basics of investment, Africa has come a long way from "clueless and hungry" to "curious and hungry". A large majority know one or two trusted crypto wallets and know better than to deal with unverifiable dealers. We are using more trusted platforms to carry out cryptocurrency transactions and investment activities.
It is reported that between mid-2020 and mid-2021, Africans transacted over $105.6 billion worth of cryptocurrencies. This represented a 1200% increase from the previous year. Furthermore, research proves that this is not an accurate figure. Many Africans carry out transactions off the grid using private P2P vendors and platforms. In other words, we carried out transactions worth more than the figure reported.
Africa went from zero knowledge of cryptocurrency to recording above $105.6 billion worth of transactions between July 2020 and July 2021? Mind you, we constitute just 3% of the world's crypto market and a large number of us have no real knowledge of cryptocurrencies aside from the names of popular tokens like bitcoin, ether, dogecoin, ripple, Shiba, Wakanda Inu, and Solana, and where to buy and store them.
This trend can be linked to the following factors:
Africans are inspiring users of telecommunication technology. Statistically, the adoption of mobile telecommunication in Africa enabled the continent to leapfrog many first-world countries in the adoption of emerging technologies.
When the world’s first (digital money) bitcoin was released in 2009, it was met with mixed reactions worldwide. Many simply ignored it. A handful embraced it without doing their due diligence, losing money in the process. Another set did their research, applied relevant knowledge, leveraged on the internet and got rich off it.
Three good examples of this latter set in Africa are Gaius Chibueze popularly known as Bitcoin Chief, Chris Ani a major supporter of African blockchain projects, and then 14-year-old boy Elisha Owusu Akyaw. These thought leaders still leverage the internet to sensitize their audience about blockchain, cryptocurrency, and opportunities in Web 3.0.
The cryptocurrency market in Africa is expanding due to the ease of access to telecommunication technologies.
2. The Covid-19 Lockdown
When the pandemic broke out in 2020, bitcoin was valued at about $7,300. Today, post-pandemic, it costs more than $46,800. This is a whopping 600+% increase in value.
As signs of a prolonged lockdown became evident, investors saw the possibility of liquidity constraints if local governments decide to restrict regular trading activities as part of a lockdown. The fact that cryptocurrencies can be traded from anywhere in the world made traders and investors embrace them as an attractive alternative during the pandemic.
By December 2020, Nigeria was recognised as the No. 2 bitcoin market globally.
The lockdown also led to an increase in remote work and employment of remote workers worldwide. This automatically resulted in a rise in cross-border transactions.
Now, this is a good place to move on to the third reason why cryptocurrency adoption in Africa shot up.
Foreign remittance is a major source of income for many in Latin America, the Caribbean, Europe, Central Asia, the Middle East, North Africa, South Asia, China, and Sub-Saharan Africa. The increased percentage of migrant work, within and between African countries, coupled with high remittance fees led many to adjust to the alternative; cryptocurrencies.
4. DeFi offers Banking Services to the Unbanked
Two-thirds of Sub-Saharan Africans do not have a bank account. This is about 350 million people, up to 17% of the global population. Being unbanked is largely due to a lack of access to banking facilities, aversion to bank charges, and lack of national means of identification required for banking.
Even though FinTechs like Mpesa and Kuda are helping bridge this gap, there are still some limitations like which cryptocurrencies help meet faster. One is anonymity.
"Cryptocurrency basically takes what money is to many people and uses technology to make it more transparent and less centralized so that everybody has a seat at the table when it comes to the future of finance,"
~ Elisha Owusu Akyaw, CEO, BlockXAfrica
5. Cryptocurrencies serve as Store of Value against Inflation
Currency devaluation is a major reason for the adoption of cryptocurrencies. Many African users turn to cryptocurrency to preserve their savings against inflation.
This class of people do not want to lose their money, nor are they interested in taking risks, hence they deter from investing in volatile crypto assets. They only want to preserve the current value of their money, causing them to save in stablecoins like USDT.
6. Fast International Transactions
As is the case worldwide, many African users also rely on cryptocurrency transactions for international commercial transactions. It removes the delay that dealing with daily transaction limits will incur.
This further eliminates the hassle of managing an international account and the stress of exchanging fiat currencies to send abroad. Another incentive is that it saves huge sums of money that would have been spent on fiat exchange charges.
All these are some of the reasons why Africans grew by over 1200% in cryptocurrency market size in the space of 1 year. This is despite obvious shortcomings in institutional structures and governance.
If you want to find out how the major cryptocurrency markets in Africa managed to bypass the unfriendly cryptocurrency laws in their nations, look out for our future blog post on Peer to Peer Transactions (P2P).
Till then, give this piece 10+ claps and share it with your network.
This blog post is brought to you by Afridex. Afridex is a company set to help tech startups in Africa disrupt their various industries. We help tech startups to tokenize their products and have them listed on the Afridex Exchange for trading.
We are helping startups raise funds by building a decentralized structure for investment in their projects. If you are interested in this service, get started here.
If you need more information, read our white paper.
If you want to invest directly into Afridex, purchase the AFDT token. You can also generate affiliate earnings on AFDT before it gets listed on the Afridex Exchange.
Join the Afridex community on social media.