Cryptocurrency Adoption in Africa: Trends and Growth

GistReel

Cryptocurrency is gradually becoming increasingly popular in Africa due to factors such as economic pressure, advancement in technology and the presence of the youth. The socio-economic system of the continent is quite complex and poses both risks and rewards for the world’s crypto market. This article aims to discuss the trends and development of cryptocurrency usage in Africa, the factors that contributed to its increase and possible outcomes of this tendency.

The adoption of Cryptocurrencies in Africa

It has been seen in the recent past that the interest of the African continent in cryptocurrencies has been rapidly increasing with Nigeria, Kenya, South Africa, Ghana and other countries showing their keen interest. As revealed by Chainalysis, the African continent registered a 1,200% increase in crypto transactions in the period of July 2020 – June 2021, which ranks the African continent among the quickest-growing regions for cryptocurrencies. The availability of the  Live Bitcoin Market Price and other information has also helped in attracting more and more people and users because users can check where to invest and how to do it at the moment.

Economic Necessity and Financial Inclusion

Another key factor that has been contributing to the rise of cryptocurrencies in Africa is the need for better financial solutions. Most African countries are characterized by Economic instability and high rates of inflation and devaluation of their currencies thus making the conventional financial systems untrustworthy. Some of them can be considered as an alternative to fiat money stores and a tool for protection from the depreciation of local currency.

Also, financial inclusion is still a major issue in Africa with many individuals and small businesses unbanked or underbanked. As of 2017, 43 percent of the adults in sub-Saharan Africa were financially included as stated by the World Bank. Cryptocurrencies, whose operations are free from the meddlesomeness of governmental and financial institutions, give a means of financial freedom to the unbanked population.

Technological advancement and Mobile Phone Penetration

Another factor that has boosted the use of cryptocurrencies in Africa is the fast growth of mobile phone usage. Since over 500 million people in the continent own a mobile phone, it is best placed to embrace digital financial services. Other advanced examples of such services include mobile money services such as M-Pesa in Kenya which have already paved the way for mobile financial transactions thus preparing the ground for cryptocurrencies.

Cryptocurrencies as a new form of mixed innovations provide a more efficient and secure means of transacting, remitting money and availing other financial services. The core of cryptocurrencies, blockchain, guarantees the anonymity of transactions, their confidentiality and reduced fees, which attracts the users of the African market.

Young and Tech-Savvy Population

As of now, Africa has the youngest population in the world with an average age of 19. This demographic is also more receptive to technology and tends to use new digital tools more frequently. Young people’s understanding of mobile gadgets and their business-like attitude have made them willing users of cryptocurrencies, for business, investments and savings, shopping and transfer of funds.

Government Policies and Regulation

Policies and regulations put in place by governments greatly influence the use of cryptocurrencies. Some African countries have warmly received cryptocurrencies while others have either hesitated or are completely against it. For instance, Nigeria had prohibited banks from transacting in cryptocurrencies in February 2021 but in October 2021, the country introduced its digital currency called eNaira.

On the other hand, countries such as South Africa and Kenya are more receptive to the regulatory authorities striving to establish policies that would accommodate innovation while protecting consumers. The South African Reserve Bank has set up a fintech unit to investigate the application of cryptocurrencies and the blockchain, at the same time, the Capital Markets Authority of Kenya is examining rules concerning digital currencies.

Real-World Applications

Cryptocurrencies have also found themselves being applied in different innovative ways in the African market apart from being used as an investment asset.

• Remittances: Migrants send money back to their families in Africa to support them and this is a source of income. Cryptocurrencies are cheaper and faster than conventional remittance channels; hence they decrease the cost and time taken in the transactions. Cross-border payment solutions such as BitPesa, which is now AZA Finance, are made with the help of blockchain.
• Peer-to-Peer (P2P) Trading: Among the most popular modes of cryptocurrency trading that is available in Africa is the peer-to-peer mode where the buyers and sellers of the digital currencies are the users themselves. P2P marketplaces like Paxful and LocalBitcoins have been growing fast especially in African countries, thus circumventing the need for an exchange.
• E-commerce and Payments: Today, cryptocurrencies are actively used in the Purchasing process and payments. Digital currencies are slowly being adopted in businesses and such startups as Luno and Yellow Card are offering cryptocurrency payment platforms.
• Savings and Investments: Due to the lack of financial services and even considering the negative effects of financial innovations, African citizens use cryptocurrencies as an instrument of saving and investments. Stable coins, which are tied to stable assets such as the U.S. dollar provide a more stable means of value preservation.

Conclusion

The use of cryptocurrency in Africa is a relatively new and growing trend that is spurred by economic needs, technological advancement and a population with high young people. Despite the challenges that exist today, there is a world of possibilities for cryptocurrencies to revolutionize the financial sector of the continent. Having overcome the barriers of the legislation, having provided the security of digital assets and increasing the level of people’s education, Africa will be able to become one of the leaders of the cryptocurrency revolution and achieve greater financial inclusion and economic stability.