How Africa became a cryptocurrency hub?
Many countries have been adopting cryptocurrencies as an alternative to traditional currency, be it developed or a developing continent like Africa.
Africa?has many problems like high inflation rates, lack of extensive infrastructure, financial issues but it hasn't stopped it from becoming a crypto hub.
You might be surprised to know that Nigeria, South Africa, Kenya, Ghana, and Uganda are always in the top position to Google search about bitcoin, this shows the growing interest towards bitcoin in the African continent.
History of crypto development in Africa
African nations have always been open to new digital innovations in money transfers. Despite the continent being so diverse and having economic and financial issues, mobile money has been quite popular and widely accepted in many countries in Africa.
Under a decade, telecommunication usage in the continent grew from a mere 3% to a whopping 80%, along with it grew alternate currencies like bitcoin, surpassing many developed countries in terms of cryptocurrency usage.
Local mobile payment providers saw this opportunity to expand their business and to make currency transfer less stressful, minimize the transactions fee and faster payments. With more than 350 million people having no bank account in the regions like Sub-Saharan Africa, alternative remittance mechanism became a need for many migrant workers.
Many African nations like Lesotho still depend on remittance from foreign to contribute to their GDP. Seizing the opportunity, many crypto-based remittance services have come up in the Africa continent like Kenya’s BitPesa, which provides services to transfer remittances to both African and international locations to and from individuals’ mobile wallets, where cryptocurrency is stored.
Even though private crypto companies are reaching new heights, governments in many African countries are looking forward to regulating cryptocurrency use.
Why is it popular?
Over the years, Africa has grown as a cryptocurrency hub, with the young generation involved in increasing their digital assets. Last decade, African nations have seen tremendous growth in technology and people were fast to adopt it. With digitalization impacting different sectors, Economic and financial growth was seen in the African continent.
In the last 10 years, many African countries have gone into an economic collapse with high inflation and devaluation of currencies. Just in 2021, South Sudan’s inflation rate was the highest in the African continent at 197%, whereas other countries like Zimbabwe and Angola have inflation rate of 99.3% and 40% respectively & currency has been highly devalued in countries like Nigeria, Ghana, Kenya, Mozambique, Zambia, and Zimbabwe. Today these same countries like South Africa, Nigeria, Ghana, Kenya are responsible for the crypto boom in Africa When Zimbabwe was facing hyperinflation, many Zimbabweans bought Bitcoin. People from Nigeria, Kenya, and others countries have started driving on the cryptocurrency road. The reason people were turning to bitcoin because people saw virtual currencies as a safer means for transaction and avoid their countries inflated currencies.
Most African nations are open-minded towards cryptocurrency adoption, according to a report titled 'The State of Crypto in Africa.' Also, the report observed that African nations share similar problems like high inflation, low employment rate, lack of financial systems paved a way for the growth of bitcoin and other cryptocurrencies.
Bitcoin has been a forerunner in the crypto market race, and since cryptocurrencies uphold privacy and anonymity with no centralized system like a traditional bank, it is seen as a source of income by many young African's--these factors contribute towards the popularity of bitcoin in Africa.?
Mobile money has achieved great success in the African continent, global investors and companies are recognizing its scope. From Twitter’s CEO Jack Dorsey, the CEO of Twitter and Square showing interest in the African cryptocurrencies market to the launch of Facebook's digital currency Libra has also helped cryptocurrency growth in the continent.
Another factor being the costly transaction fee for cross-border remittance transfer using the traditional banking system. It is estimated that remittances from foreign nations account for a large share of GDP in sub-Saharan Africa countries. Cryptocurrency enables low-cost remittance with faster transactions.
Luno, a U.K.-based crypto company founded in the year 2013, grew its customers base to 7 million as of 2021. With Africa dominating the app installs (4.7 million), the app did a total trading volume of $7 billion from $555 million after volumes skyrocketed 12x.
Currently Situation of digital currency in Africa
The rapid growth of cryptocurrency has attracted government attention with many African countries still not recognizing bitcoin as a legal tender.
From 2019 to 2021, Bitcoin prices rose from $3500 to $40000, even though the value of a bitcoin is rising, its volatile nature has affected many small investors who suffer the most when bitcoin plunges by 10% or more.
As of 2021, Africa is leading in Cryptocurrency trading volume, with countries like Nigeria, Ghana, South Africa and Kenya adding the most to this growth, according to reports.
Digital currency growth has paved a way for many frauds, financial spams have become rampant, mostly people with no knowledge of cryptocurrencies falling prey to it.
Many African nations see cryptocurrencies as an economic risk due to its anonymity. In fact, in 2021, Nigeria Central Bank issued a notice to banks to close accounts that deal with Cryptocurrencies. The main reason for this move being the adverse impact of digital currency on the financial system of the country.
The move by Central Bank has frozen many bank account dealing with cryptocurrency trading, with investors looking for alternate ways to continue their trade using an overseas bank account.
The situation in South Africa is no different, tax collectors have asserted that all crypto-asset holders need to declare their holdings and profits for crypto investments to avoid penalties. International tax expert, David Lesperance has urged crypto holders to get over “the fantasy that they are not going pay taxes.”
Cryptocurrency is spreading far and wide in the African continent even with regulations at place. There is a lot of people coming into cryptocurrency, and there's much more to expect. The future of cryptocurrency in Africa is great, which will disrupt the African and global market.
CBW - External Analyst