Increasingly so, and you could argue that parts of the continent are world-leading.
Back in April, Google Trends data revealed that Lagos in Nigeria has the world’s highest volume of online searches for Bitcoin (BTC). A lot of this is driven by frustration toward existing payment solutions, with the likes of PayPal actually barring Nigerians from receiving international money transfers because of the country’s reputation for fraud. Millions of innocent consumers are suffering as a result because they have no choice but to use alternatives which charge high fees. Some tout cryptocurrencies as a perfect solution, which enable enterprising Africans to receive payments as they form business connections around the world.
Surveys have also revealed that Africa, a hub for m-commerce, is a hotspot when it comes to owning crypto. About 5.5% of adult internet users worldwide own some form of digital currency, but three African nations lie above this average. According to Hootsuite’s 2019 Global Digital Yearbook, 10.7% of South Africans possess crypto — the highest of any country surveyed. Nigeria also makes the list at 7.8%, with Ghana at 7.3%.
The reasons behind its popularity are multi-faceted and fascinating.
Cross-border payments are a contributing factor, especially given how remittances are often sent from countries like South Africa to 15 other countries on the continent in what is known as the Southern African Development Community.
Unpredictability in local fiat currencies is another issue. This year, the South African rand returned to form as the world’s most volatile currency, prompting consumers to seek protection for their money.
Africans living in other countries on the continent have also been losing faith in their central banks. Just look at Zimbabwe, where levels of hyperinflation have been rife. Bitcoin has become so popular there that demand is dramatically outstripping supply, meaning BTC sometimes trades at a sizeable premium to prices in the rest of the world. Back in June, the country reinstated the Zimbabwean dollar after a 13-year absence, and simultaneously banned United States dollars, British pounds and other foreign currencies. Wary of shortages and instability that have blighted the economy in the past, Zimbabwe has become one of the continent's biggest crypto markets because some consumers believe the likes of Bitcoin and Ether (ETH) are more trustworthy.
Advocates say there are many issues beyond currency volatility where crypto and blockchain could make a difference.
Aside from remittances and currency volatility, financial inclusion is another hot-button topic in Africa. Research from the World Bank suggests that many of the world’s 1.7 billion unbanked are on the continent, while 2 in 3 adults in sub-Saharan Africa do not have access to a bank account.
In some ways, Africa is better prepared for a move to crypto than other continents. Mobile money has already been a key driver in reducing the numbers of unbanked adults, and the World Bank says the continent is home to all eight countries where more than 1 in 5 adults solely rely on a mobile-only account. Given how many consumers are already open to using this technology, crypto exchanges and wallets that offer fully functional apps for mobile users are set to benefit immensely.
Blockchain is also showing plenty of promise. As a recent Cointelegraph article explained, stakeholders in the region say distributed ledger technology will be instrumental in solving long-standing developmental issues and unlocking much-needed economic growth. Nigerian politicians believe that blockchain will drive the world’s fourth industrial revolution, and, for the first time, Africa has the opportunity to have a seat at the table. Fintech companies across the continent are growing substantially. Hotspots include Cape Town, where the number of startups being established has risen 23%, and Nairobi, where there has been a 28% rise.
There is also hope that blockchain technology can help bring around dramatic improvement to the infrastructure in Africa. In Nigeria, companies are working together to see whether blockchain can be implemented in a push to make the nation’s roads safer. The West African nation of Sierra Leone has been working on the development of a blockchain-based ID system for its citizens amid hopes it could enable financial institutions to verify identities and build credit histories in a way that wasn’t possible before. Uganda has also teamed up with a blockchain startup to clamp down on the supply of counterfeit drugs nationwide, with reports suggesting that up to 10% of prescriptions result in fake medicine.
Many African countries aren’t happy about crypto’s arrival.
A handful of African countries have banned crypto altogether, including Morocco, Algeria, Libya, Zambia and Namibia. Others have created substantial amounts of uncertainty by failing to offer a clear stance, leaving consumers in a gray area.
South Africa has been somewhat of a bright spot on the continent, where regulators have expressed enthusiasm about crypto’s potential. Official bodies have actually been working in concert with crypto companies and financial institutions to find the best way forward.
This year, work has been underway to develop an intergovernmental cryptocurrency regulatory framework, but the report is yet to be released. Many crypto advocates continue to be buoyed by an upbeat position paper released by the South African Reserve Bank all the way back in 2014, in which it said: “Increasing merchant acceptance, integrating existing conventional payment instruments with decentralized convertible virtual currency, and promoting the advantages inherent in such systems. Thus, there is potential for real growth of Bitcoin in its current operational environment.”
Aside from the regulatory headaches, crypto businesses may find it hard to gain traction on the continent.
Why will adoption be a challenge? Mainly because of the fact that it could be hard to get the word out about crypto’s potential, and some consumers may be put off for fear that it’s simply too technical to use on a daily basis. It’s also fair to say that BTC might not be the best currency to use for daily purchases for Africans who are moving away from their local fiat because it’s too volatile.
There is also a real risk that reliable access to the internet across the entire continent might be overestimated, especially considering that connectivity lags far behind other parts of the world. Plus, compelling crypto and blockchain projects that are tailored to the African market will depend on developers and entrepreneurs who can deliver it, which means training new talent and enticing expertise from around the world will be crucial in enhancing levels of mainstream adoption.