Cryptocurrency: Africa’s New Common Song

By Justino | An Angle of Truth | 5 Aug 2021

Some people believe cryptocurrency is Africa’s new gold and its new common song. The movement fueled initially because of the ease it brought in sending and receiving funds from rich relatives in the diaspora has grown into startups, organizations, companies and many more. Coupled with the fact that the continent is blessed with an ever growing young and innovative population, it would seem that there is no stopping the growth of this industry soon. 

Africa Is Critical To The Future of Cryptocurrency

Artur Schaback, Co-Founder and COO of Paxful, a popular peer-to-peer cryptocurrency exchange sheds more light on the reason for this surge. Speaking on the decision to intensify operations in Africa he said, “We are very bullish on Africa and believe it is critical to the future of the crypto-economy overall. While many parts of the developed world are fixated on speculative activity in the crypto economy, people in Africa are teaching us about the true use cases of bitcoin (remittances, hedging, payment method…) and the opportunity it presents for greater financial inclusion of the under-banked. As a company, we want to do what we can to ensure that our platform continues to be a bridge to the global economy for our customers.” 

In 2020, South Africa, Nigeria, Kenya, and Ghana, alongside Uganda and Zambia, were amongst the leading African countries with growing interest in crypto according to Google Trends. Currently, at the time of the writing of this article, Nigeria has ranked the top country for the search for information relating to cryptocurrency and investment options. South Africa and Nigeria were also ranked amongst the top ten countries on the Chainalysis Crypto Adoption Index. Also, major cryptocurrency exchanges like Paxful, Binance, Huobi, NairaEx, Bundle Africa, AZA Group (formerly known as BitPesa), Quidax (started out as a WhatsApp trading group in Nigeria, which we don’t recommend. Always trade on escrow. It has now grown to 6 continents, with 70 countries trading about $110 million), LocalBitcoin and Coindirect have taken an interest in the African market. 

Luno, Africa’s earliest cryptocurrency exchange since 2013 now boasts of 4.7 million African customers out of its new total of 7 million customers as at April 2021. Also around 2020, Luno reported the South African rand (ZAR) accounting for 75% of its trading volume, the Nigerian naira (NGN) taking up 15% whilst the Zambian kwacha and the Ugandan shilling (UGX) accounted for less than 1% respectively. Paxful also reported a 45% patronage by the African market represented in 1,350,000 wallets in the past year, a figure that has surely grown since then. 

In Nigeria, after the cryptocurrency ban by the government, Binance saw a 2228.21% surge in peer-to-peer (P2P) users and an overall 389.93% in P2P trading volumes across the African continent. Users in Africa have also been said to have increased by around 114.33% between the months of January and April 2021. The international crypto exchange giant is also looking to create more opportunities for crypto and blockchain adoption in Africa through its recently concluded Masterclass and ongoing Hackathon. The AZA Group also advertises to have transacted over 3.1 billion with over 26,000 customers to the present moment. 

Speaking at their first African webinar in June 2021, LocalBitcoins’ CMO, Jukka Blomberg said the numbers from East Africa increased from a few hundred signups to a few thousand in just the first quarter of 2021. With Africa being their 3rd largest market after Latin America and Eastern Europe making up 80% of volumes traded, Kenya holds the top 2 countries recently overtaking South Africa with over $3 million traded almost consistently every month. But wait for it… Senegal had the highest volume of trades in Bitcoin on their platform in the first quarter of the year compared to all african countries. The small country is gaining ground, so watch this space. 

Here’s a sample I conducted on the ever growing young African population going into crypto. The Poll was carried out on Telegram to an estimated 1000+ members. This suggests that about 50%+ are under 40 years of age.

Crypto agegroup

Banking the Unbanked

The African continent has been and is still plagued with issues regarding devaluation of currency, hyperinflation, heavy remittance transaction fees and need for alternative sources of income because of lack of employment. According to the World Bank, traditional remittance services in Sub-Saharan Africa charge as high as 9% per $200 sent in by expats to their families. Financial inclusion has also been a problem. Because of the chronic underdevelopment in most rural areas, according to research, as many as 66% of sub-Saharan Africans do not have a bank account. The catchphrase, “Banking the unbanked”, has become a major reason for almost any crypto startup in the region. 

This is where cryptocurrency, Africa’s new common song has stepped in. Using crypto, remittance costs have reduced drastically. Most Africans now see the wave as a means of freedom. According to the Geography of Crypto 2020 report by Chainalysis, “Roughly $3.7 billion worth of cryptocurrency was transferred to and from overseas addresses to ones based in Africa over the time period studied, with $562 million of that coming in retail-sized payments under $10,000.” The top three countries represented in the continent were South Africa, Nigeria and Kenya.

Also, alternative crypto income sources like liquidity mining and staking have put many Africans in a fairly comfortable status. Decentralized finance (DeFi) has also opened doors to individuals to access quick and easy funds with no barriers.

Tying The Loose Ends

Crypto adoption in Africa is quite young, with the complexity of the space being the highest barrier to becoming mainstream. Also, the high levels of poverty leading to situations where a modest number in the otherwise rich continent have a smartphone is a cause of concern. Regulatory harshness, cue the Nigerian situation, is another major barrier

Despite all of this, crypto has proven to put the power back in the hands of the people of Africa as its new common song, which is a treasured development. We hope with time, the sphere would get friendlier and full adoption can finally be attained.

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