When we think about blockchain technology and its impact, other nations and economies are not really top of mind. In the western world we have many economic luxuries like developed financial markets, tools, and access. Even though countries like Venezuela, Brazil, and Russia have gotten a lot of attention these past few years for developing their own digital currencies, there’s one continent that we believe will bolster crypto adoption. Which one is it?
Africa. A continent full of untapped potential is now witnessing a financial revolution. Despite the continent’s vast resources and growing entrepreneurial spirit, many people and businesses still struggle to access traditional financial services. Crypto is bridging the gap and unlocking the financial future of Africa’s 54 countries. We’re bullish on the fact that Africa will be one of the leading continents to adopt crypto.
The Financial Landscape
Like any developing nation, Africa’s financial market has many opportunities, paired with many challenges. According to World Bank, only 49% of adults in sub-Saharan Africans own a bank account. That means half of the population lacks access to traditional banking. Here are the factors that are preventing financial inclusion in Africa:
- High banking fees
- Limited branch locations
- Strict account opening requirements like needing a government-issued ID and other KYC documents
- Cross-border friction even in the continent
- Not having a mobile phone for mobile services
- These barriers leave millions of Africans without the means to save, invest, transact, or borrow money.
The Rise of Crypto
Crypto, or cryptocurrencies, offer a solution to these problems. Because the underlying tech is blockchain, having a decentralized and transparent ledger system reduces costs and increases accessibility. In countries like Kenya, 58% of adults already had a mobile money account in 2014. According to Chainalysis, “although Sub-Saharan Africa has consistently been one of the smallest cryptocurrency markets, a closer analysis reveals that crypto has penetrated key markets and become an important part of many residents’ day-to-day lives.” In the same report there’s not another region where Bitcoin is more dominant than Sub-Saharan Africa.
How does crypto break down barriers?
1. Financial inclusion: Crypto is a great alternative to traditional banking. People can store and transfer value using only a smartphone. Mobile money services like MiniPay have shown the potential of mobile-based financial services. Crypto takes this one step further by enabling global transactions without the need for a bank. Africa would be a part of the global conversation.
2. Lower transaction costs: Traditional cross-border remittances to Africa are slow and very expensive. World Bank reports that the average transaction cost of sending $200 to Africa is about 8.9% and as high as 36%. Crypto turns that high percentage into cents if not a few dollars. Not to mention the speed of crypto (almost immediately) vs 3–7 days.
3. Economic empowerment: One of the biggest challenges for developing countries is being able to participate in the global economy. With crypto, business owners can access global markets, get foreign investments, and raise capital. Democratizing finance means more innovation and entrepreneurship across the continent.
Leaders in Cryptocurrency Adoption
Several African countries lead the way in cryptocurrency adoption:
- Nigeria: They have the largest crypto market in all of Africa, mainly because they’ve embraced digital currencies to fight against inflation and overall economic instability. More than $20 billion-worth of remittances flowed into Nigeria in 2022. Crypto ownership among Nigerians was 46% in 2023.
- Kenya: Kenya has paved the way for mobile money adoption and crypto adoption in Africa as a whole. The Central Bank of Kenya is also exploring the potential of a central bank digital currency (CBDC), paving the way for even more crypto adoption.
- South Africa: With its well-adopted financial infrastructure, South Africa serves as a hub for crypto exchanges and blockchain companies. The South African Reserve Bank actively researches and pilots blockchain applications to improve financial systems, while the Financial Sector Conduct Authority (FSCA) of South Africa has granted 63 new crypto licenses.
Challenges
While crypto has huge potential in Africa, there are several challenges that need to be addressed first. Regulatory uncertainty poses a significant hurdle as countries are still forming their stance let alone legislation on digital currencies. Cybersecurity threats and the need for greater public awareness and education on the safe use of crypto remain critical.
From the web3 perspective driving awareness, onboarding, and user experience all need to improve for mass adoption to happen. This alongside a conducive regulatory environment and promoting digital literacy will be the things that truly move the needle for financial inclusion in emerging markets like Africa.
Conclusion
Africa is ripe for an economic boom. Crypto breaks down traditional barriers to financial access and paves the way for a more inclusive, accessible, and efficient financial system. As Africa continues to embrace the digital revolution, the continent stands on the brink of unlocking its vast economic potential and ensuring a brighter financial future for all of its citizens. Here at Verda we’re very bullish on this exact idea.