Crypto, blockchain and the wonderful world of Web3. Whatever you want to call it, it’s an emerging technology that is seeing rapid adoption all over the world, but if there’s one place where we can say it definitely has a future, it has to be Africa.
Africa’s appetite for blockchain is evident no matter where one looks. Not only is it a place where people have embraced the use of cryptocurrencies, it’s also home to a growing startup scene. In 2022, funding for African startups increased by an impressive five-times compared to the previous year, according to the latest CV VC Report.
All told, African blockchain startups raised $474 million in 2022, up 429% from the year before. It also saw its first two crypto unicorns emerge in KuCoin and Scoll, the same report found. The cryptocurrency exchange KuCoin was Africa’s biggest beneficiary, raising a cool $160 million, while Scroll.io, an Ethereum Layer-2 scaling solution, raised a bumper $30 million in its own funding round.
It’s also widely known that African countries have emerged as some of the friendliest places to transact with cryptocurrencies. Ownership of crypto has exploded across the continent. A report from Chainalysis in September 2022 noted that crypto is now thriving in Sub-Saharan Africa, especially in matters such as small retail payments. The region accounts for an incredible 80% of all crypto retail payments under $1,000 in value. The same report showed that peer-to-peer transactions have become more commonplace in Africa than any other region of the world, accounting for approximately 6% of all crypto transaction volume in the last year, dwarfing even Central and Southern Asia, which had the second-highest P2P transaction volume.
Chainalysis stated that crypto usage in Africa is driven primarily by necessity, rather than the speculation that has fueled its adoption in Western nations.
So why is crypto a necessity in Africa?
A look at the macroeconomic picture across Africa shows us exactly why crypto is being deemed so essential by a growing number of the continent’s inhabitants. In Nigeria, Africa’s largest economy, the local currency the naira has seen its value depreciate by a staggering 70% over the last eight years.
Added to the depreciating value of local currencies is Africa’s extremely high rate of inflation. There are also problems with Africa’s underdeveloped financial infrastructure, which simply doesn’t cater to the majority of its population. Banking in Africa is slow and expensive and inaccessible to most people, with more than 60% of its population reported to be unbanked. What’s more, it’s isolated from international banking to a substantial extent, with the World Bank saying that payments to African banks cost an average of 10% in fees, the highest in the world.
On the other hand, Africa enjoys some advantages, especially its youthful population. It’s said that 70% of all Africans are under 30 years old, and it is home to a booming technology scene. Last year, the technology sector outpaced Nigeria’s oil industry for the first time in terms of its GDP contribution. In other words, Africa is the perfect environment for the adoption of new technologies, especially fintech.
Africa Gives Crypto A Warm Reception
The blockchain industry seems to think so too, and in the last couple of years a number of its biggest players have made moves to cement themselves in Africa’s crypto scene.
Examples of blockchain initiatives in Africa include the Ethereum Foundation’s commitment to establish a crypto insurance scheme that will cater to more than six million farmers in Kenya. Then there’s the Stellar Development Foundation, which has proven to be especially receptive to Africa’s demands by launching a number of local projects. For instance, in 2021 it partnered with Flutterwave, a Nigeria-based remittances company, to create new Europe-to-Africa remittance corridors that leverage cryptocurrency payments. It also started a blockchain boot camp initiative for African startups with $30 million in funding, and has since invested in Afriex, a popular crypto and fiat payments and money transfer app in Nigeria, Ghana, Kenya and Uganda.
Another well-known blockchain investing in Africa is Celo, which launched its own stablecoin pegged to the value of the CFA franc in 2021, and followed up last year by partnering with Mercy Corps Ventures on a crypto payments pilot project for gig workers.
Cardano doesn’t want to be left behind either. Its founder Charles Hoskinson, who previously helped to co-design Ethereum, famously toured Africa in 2021, visiting countries including South Africa and Egypt to discuss his vision for the continent. Cardano later established an African commercial venture known as EMURGO, armed with $100 million to invest in local startups.
Most crypto insiders agree that the future of the industry in Africa is looking incredibly bright. At the recent Blockchain Africa Conference in Johannesburg, the Luno crypto exchange’s general manager for Africa Marius Reitz said he believes Bitcoin adoption will accelerate rapidly across the continent over the next 10 years.
“I think in the future, in 10 years or so, you could start seeing a situation where neighboring countries also start to declare bitcoin as legal tender,” Reitz said. “Bitcoin could become a regional currency or it could even become a common currency across the African Union.”
Reitz was referring to the Central African Republic’s decision last year to embrace Bitcoin as an official currency, making it only the second country in the world to adopt it as legal tender, after El Salvador in 2021.
Elsewhere, other African governments have made similar moves to open up their economies to the potential of crypto. In Nigeria, already a crypto powerhouse, the government this year announced it has approved an official national policy for blockchain.
Nigeria’s Federal Ministry of Communications and Digital Economy said its policy aims to encourage the adoption of a blockchain-based economy to facilitate data sharing and secure transactions for business, government and private individuals. It cited a report by PricewaterhouseCoopers last year that forecasts blockchain will contribute around $1.76 trillion to the global gross domestic product by 2023, accounting for 1.4% of the world’s GDP. Nigeria aims to be at the forefront of that, the FMCDE said.
Nigeria’s neighbor Ghana is also keen to establish itself as a crypto player. A report last year from the P2P trading platform Pafxul said it has identified Ghana as having the potential to achieve crypto adoption levels similar to Kenya and Nigeria, which last year ranked 11th and 19th in Chainalysis’ Global Crypto Adoption Index.
Leading establishment figures in Ghana are showing interest in blockchain too. In March, His Royal Majesty Osagyefuo Amoatia Ofori Panin II, a tribal king in the country’s eastern region, invited the founder of Turkish blockchain infrastructure platform Metatime to discuss how blockchain and digitization can help to transform its economy. Metatime is building a hugely ambitious crypto ecosystem that consists of an exchange, NFT platform and marketplace, asset tokenization, DeFi and more.
African governments are also showing interest in the idea of Central Bank Digital Coins. South Africa, for instance, is participating in a multi-CBDC experiment called Project Dunbar. Other countries, including Kenya, Morocco, Tunisia, Rwanda, Madagascar and Mauritius have also announced they’re researching the potential of CBDCs.
The Future Is Bright
As more African governments explore the possibilities of blockchain solutions, it’s expected that they’ll develop a more informed view to Web3 technology and implement policy frameworks more amenable to the needs of their citizens.
Web3 is giving birth to a myriad of opportunities and the implications are not lost on the African people. It’s clear that Web3 and crypto can have a massive impact in Africa, providing financial stability and security to millions of unbanked and underbanked individuals across the continent. There’s a lot of work to be done, but it’s exciting to see both the pace of innovation and the incredible positivity towards the technology. Web3 has a very bright future all over the world, but especially in Africa.
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