Posted By Godwin Onyemaechi
Africa has long been a continent of rich promise and potential, but has suffered due to economic underdevelopment and poverty. However, the cryptocurrency revolution which is sweeping across Africa could potentially change this narrative, bringing modern finance to the fingertips of millions of Africans who have not had access to such services so far. It is a sign of how much Africans are moving towards cryptocurrency that monthly crypto transactions, both in and out of the continent, under $10,000 in value, shot up by more than 55% over the last one year, reaching as high as $316 million in value in June 2020.
These numbers are likely to keep rising, and show an interesting trend as well, in that while cryptocurrencies are largely used by companies and financial traders elsewhere in the world, they are being primarily used for commerce in Africa. Individuals and small enterprises in Kenya, Nigeria, Ghana and South Africa are responsible for the majority of this activity. One of the biggest draws of cryptocurrency for Africans is that it cuts out the middleman, and that they are not controlled by central banks, making them theoretically impossible to restrict or manipulate by governments.
African nations have been vulnerable to economic crises which have led to the value of their currencies fluctuating wildly, so they are understandably attracted to one which is not so unstable. Additionally, most Africans use mobile banking, much more than traditional banking, which also ties in to their preference for digital currencies and cryptocurrencies.
Another factor that aids this popularity in Africa is the prevalence of online gambling. Africans are quite fond of online gambling and sports betting, and those sectors have been leading the way for crypto adoption on the internet as well.
There are several online casinos which offer the opportunity to play crypto blackjack and other popular casino games where users are able to place bets using cryptocurrencies, which makes them very attractive for those who invest in crypto, as well as those looking for safe and anonymous transactions.
According to Reuters, Africa is already on its way to becoming cashless. Telecom operators in the rainbow continent currently manage way more payment transactions than mainstream banks. Africa holds the title of world leader in mobile payments. While the big banks drag their feet, crypto, blockchain and FinTech startups are speeding up financial inclusion via mobile payment services and apps.
Smartphone penetration in Sub-saharan Africa is way higher than landline internet, which is significantly more expensive to install. 75% of web traffic in Africa is generated via smartphones and only 24% via Desktop PCs. In Kenya, internet penetration is 85.2% of the population, followed closely by Libya at 84.2%. Kenya is home to mobile payment service M-Pesa, which provides a mobile wallet and offers secure payment systems.
Nigeria has the highest number of internet users in Africa (154.3m). Kenya has 12m more internet users than South Africa. Thus, we can see how crypto can become a powerful tool on the continent. Through cryptocurrency, people without bank accounts can access the global digital economy using only a smartphone and crypto apps. They can then use cryptocurrency to pay for everyday items and services without needing a bank account.
Another factor that has aided crypto adoption is that it is much cheaper to send money back to Africa for those living abroad by using cryptocurrencies, as compared to wire transfers and other traditional methods of sending money.
Traditional remittances require the sender to pay a fee that could be as high as 20% in some cases, while also having to bear the cost of currency conversion. Cryptocurrency transactions do not have either of these costs, making them virtually free. However, there are risks that come with this usage as well. Crypto prices can be volatile, with the example of Bitcoin in 2017 as a cautionary tale, where prices rose extremely high but then fell quite as fast as well.
Given the current global situation, another area where this innovation can have an immediate impact is in the healthcare sector. Blockchain can be used to build and support better applications, systems and record management protocols, all of which will help to make healthcare services more efficient. Various African countries, such as Nigeria and South Africa, are now working on laws and regulations to help protect investors and other participants in the crypto space, which is a good thing, as the popularity of this space grows and more Africans put their money into it.