Cryptocurrency use and knowledge in Africa is driven by young people. Who are so eager to test their hands to create lasting solutions for the continent. Which many now see as the hotbed of innovation. Innovators in frontier markets such as Nigeria, Kenya or even Rwanda are taking advantage and experimenting with blockchain technology. In this post, we will look at the main barriers to full crypto adoption on the African continent. As well as what the future holds for it.
The African Crypto Journey
Transactions involving Cryptocurrency in Africa are growing at a very rapid rat. Some economists and analysts believe it is a Disruptive Innovation. It will blossom on the continent as one of the biggest reasons for poverty in Africa is fiat currencies. Especially the US Dollar.
African countries are forced to trade among themselves using Dollars instead of using their respective currencies. A good example is a trade between a country like Tanzania and Kenya, most of the time it involves Dollars. This drives up the cost of doing business and may even accelerate inflation.
Africans also lose billions in interest payment when repaying a debt that was secured using Dollars or Euros. We even have cases of some countries that were unable to import petroleum products because they had no foreign currency (Dollars) reserves.
On a continent where people readily embraced mobile money like M-PESA (a cellular-based money transfer service, payments and micro-financing service. Launched in 2007 by the largest mobile network operator in Kenya. Virtual currency offers advantages for a young, tech-savvy population like the African population. And you need not worry about not having money to invest, there are new cryptocurrencies coming up each day and some allow all users or pioneers to mine free coins before they are launched in Phase 3.
The Current State of Crypto
Over the past couple of weeks, we have seen the crypto-market stagnate quite a bit. BTC has been hovering at about $37000, ETH has been about $2700 and overall, the entire crypto-market has been staying relatively the same at about 1.6 trillion total market cap.
Overall we have not seen quite the crucial tug of war at this $37500 mark and of course that tug of war has been played between the Bull and the Bear. On some days we see the price go up all the way to $40,000 and sometimes we will see it drop all the way to $33,000. Obviously the $37,000 mark is just an average but overall, that is the price we have seen in the past couple of weeks. Though several analysts have suggested that Bitcoin has not bottomed yet.
According to Twitter user Noshitcoins, derivatives and on-chain data signal that further downside could arise. The reason for this is because ever since we saw that 48% correction to $30,000. Many traders have become somewhat dampened and are very nervous to get in the market and overall, they have become very scared to invest right now.
Currently the market is showing a similar trend to 2013 when we saw a huge-double pump. Hopefully, this tug of war ends in the next couple of months before we do see a new ATH on Bitcoin (which might likely get to $100000 this year).
What Influences Crypto Adoption in Africa?
Crypto adoption in Africa is setting ATH every week now, in just a few months P2P volumes are up astronomically. Especially in Nigeria. And this is not even where most of the volume is congregating, there is far more volume in places like Telegram, Whatsapp groups.
All these point to the fact that there is increasing crypto adoption in Africa. The reasons for this are undermentioned;
Population
The entire continent has a population of more than 1.2 billion people. This implies 1.2 billion potential adopters of cryptocurrency and blockchain technology more generally. Which of course will add a lot of buying pressure and demand for Bitcoin and other altcoins as an investment, asset and storing value.
The age of people in Africa relative to every other continent, the African population tends to be way younger.
Crypto adoption in Africa then becomes a lot simpler when there is a population of tech-literate people who have incentives to learn and adopt cryptocurrency relative to other continents with older people.
High inflation rate in African countries
When we think of people living in places like Nigeria (which post 2019 has an inflation rate of 1.8%) can look at innovations like Bitcoin as a means of combating inflation.
In terms of risk-reward payoff, there are no incentives to hold Fiat or local currencies that have very high inflation rate and little chances of increasing in value compared to cryptocurrency (though can be very volatile) which has the propensity to surge in value over a long period of time. This helps the cause of the accelerating rate of cryptocurrency adoption in Africa. We are also aware of the high number of systemic corruptions in the African continent, this makes the "common-man" more gravitated to choosing a digital currency that offers an equal treatment to all and sundry.
The unique combination of Africa's economic and demographic conditions shows the huge potential of cryptocurrencies adoption on the continent. The peer-to-peer (P2P) Bitcoin transactions in Sub-Saharan Africa (the area that lies south of the Sahara) has recently surged. Exceeding the $10 million weekly volume, and creating a new all-time high for the region. In addition, with this growth in volume, the African continent bypassed Latin America for the first time in its history.\
There were rumors that Tunisia would issue a Central Bank Digital Currency (CBDC). But it was later rejected after the country said it was still experimenting with the technology.
Senegal has tried to introduce eCFA, while Ghana and Rwanda are exploring the possibility of developing their own CBDCs. The adoption of the CBDCs will generally have a positive impact on the adoption of cryptocurrency. Because it confirms the use of non-physical means. In general, these trends in mobile and digital finance are driving the proliferation of cryptocurrencies across the African continent.
Reasons For Uncertainties Around Crypto Adoption in Africa?
The increasing popularity of cryptocurrencies has also led to increased regulatory scrutiny. And analysts in African legislatures seem to be divided on how best to deal with the cryptocurrency phenomenon.
In April 2020, South African regulators proposed guidelines that would impose strict licensing and tracking necessities and went on to reiterate that they do not recognize crypto currency as legal tender.
Using Nigeria as a case study, the first circular on cryptocurrency by the Central Bank of Nigeria was in 2017. When they referred to cryptocurrency as "virtual currencies".
The concern of CBN was that cryptocurrency is untraceable and anonymous. Hence it can be used by criminals to "launder money and finance terrorism". They were also concerned that the nature of virtual currency is unregulated all over the world and people may lose their money without any legal redress or solutions to get that money back. Especially if crypto companies close their business, which would have been true in the past. But now many crypto services have authentication methods.
The last line of that letter was, '.... Bitcoin, Dogecoin, Litecoin, Monero, Ripples, Onecoin, etc, and comparable merchandise are not legal-tenders in Nigeria, therefore, any financial institution or organization that transacts in such businesses does so at its own risk.' All of that brings us to today, when the CBN issued a letter in February 2021 that dealing in Bitcoin or any cryptocurrency for that matter by banks is prohibited, in other words, it has been banned or forbidden. Any commercial bank that breaches this sanction by the CBN will face stringent regulatory sanctions. This directive took all and sundry by surprise, knowing full well that Nigeria has traded 60,215 bitcoins in the last five years.
What Does the Future Have in Store?
For most investors around the world, Bitcoin is a volatile, highly speculative stake that is highly misunderstood, yet it still offers rare protection from the onslaught of hyper-inflation and financial implosion. Some are turning to cryptocurrency out of desperation as their bank deposits lose value almost by the day.
Suffice it to say that Bitcoin has outperformed every traditional currency every year since 2011 (except for 2014).
