Terra Incognita: Africa’s Crypto Boom Is Just Getting Started

Africa is often a forgotten continent in the tech world. However, blockchain is set to boom in a big way across the landscape; in fact, it has already begun to.

There is an increasing number of examples like this – NewsBTC reported that at least fifteen new trading ventures have sprouted up in South Africa over the past year. Additionally, Kenya-based payment platform and money transfer service bitPesa has developed working relationships with at least 60 banks and operates seven mobile wallets.

BitHub Africa, an organization based in Nairobi, is seeking to fund local startups to boost blockchain adoption. The Capetown-based Blockchain Academy has engaged in community initiatives to educate local business owners and residents about the advantages of using blockchain in financial procedures.

There have also been a rising number of blockchain firms who have taken social responsibility very seriously as their presence has grown stronger in the continent. Just last week, mobile blockchain financial services platform Wala formed a strategic partnership with several other blockchain firms to lend $10 million worth of crypto tokens to sub-Saharan farmers.

A growing number of other firms, including Consensys, Ripple, Rightmesh, and Bloc, have also set up shop in parts of Africa, and are bullish on their business there.

It’s Time to ‘Leapfrog’

In order to understand why blockchain technology is positioned to impact societies across Africa in a big way, we must first understand exactly what it is that blockchain can offer, and why it is so particularly suited to the needs of African people.

In a piece for CoinTelegraph entitled “Cryptocurrency Can Leapfrog Africa Into Future,” writer Darryn Pollock explains that the progression of blockchain technology in Africa can be compared with the evolution of the telecom industry on the continent.

Before the era of mobile phones, constructing the necessary infrastructure to create a continent-wide landline network was extremely inefficient in terms of time and expenses; it was also very impractical to install telephone poles and cables in rural areas that were not easily accessible by road.

However, the mobile phone industry brought a new era of accessibility to areas of rural Africa. While the landline industry struggled from start to end, the mobile phone industry flourished across the continent, providing millions of people with myriad services, connectivity, and information.

Blockchain’s journey into African markets appears to be taking a similar course. The traditional, brick-and-mortar banks that are stalwart pillars of the ‘western’ financial world are impractical and inefficient in the same ways that the landline telephone industry was. However, the mobile banking, lending, and payment services that blockchain offers have allowed unprecedented access to banking services.

In this way, blockchain really does have the capability to “leapfrog” Africa into the future – to skip over the era of traditional banking systems, and to build the continent’s financial future on blockchain technology.

In an email to FortuneZ, CEO and Founder of African blockchain firm Wala Tricia Martinez wrote that “crypto is a solution that can effectively drive financial inclusion in Africa. Due to their own limitations, banks have done very little to help drive inclusion.”

Martinez added that while “the real success story has been mobile money,” but there are some obstacles that may present blockchain with an advantage: “mobile money fees are too high to motivate consumers to stay engaged in the formal financial system. And while high fees and poor access plague these consumers, it also sets them up for disruption and life-changing innovation.”

Financial Crises and Crypto in Africa

While the potential for blockchain adoption across Africa is massive, and blockchain is indeed gaining a greater foothold within African financial systems, Martinez wrote that the actual use of blockchain technologies is currently “minimal.”

However, there are a few instances where blockchain has made a marked difference in improving lives and increasing financial stability. Some of the most prominent examples of this happening have been in Nigeria and Zimbabwe, countries that have long been embroiled in financial crisis.

Residents of both countries have turned to cryptocurrencies, namely Bitcoin as the countries’ fiat currencies have significantly dropped in value.

Co-founder of African crypto exchange Paxful Ray Youssef told Bitcoinist that “[Africans are] converting their savings into crypto to preserve their wealth from hyperinflation.” He noted that the Naira (the national currency of Nigeria) “has lost 90% of its value when compared to the USD and EUR in the past two years alone. Meanwhile, Bitcoin rose over 1,000% in 2017.”

Light Government Regulation Across Most of the Continent Makes Africa an Attractive Base for Startups

When it comes to blockchain and cryptocurrency, the global regulatory landscape has been swiftly changing over the past several months. Following China’s dramatic set of bans and other regulations near the end of 2017, other major players in the crypto industry – South Korea, the US, the UK, the EU, and more – have embroiled themselves in the process of enacting regulation.

Many voices in the global crypto community have argued that while increasing regulation may be a good thing for the industry in the long-term, that regulations may have stifled short-term growth and contributed to the massive decline of crypto markets over the past several months.

Therefore, the (presently) rather light regulatory climate on crypto in most of Africa may have made the continent an attractive option for firms and startups who are looking to avoid extensive bureaucratic measures and regulatory rigamarole.

However, the continent does not have a unilateral view on crypto and as Tricia Martinez wrote, “with 54 countries on the continent you can imagine the differing views and understanding of blockchain technology and cryptocurrency.”

Still, “we are generally seeing that regulators view cryptocurrency as an opportunity to drive financial inclusion with its ability to solve market inefficiencies,” she explained.

For example, ”South Africa is an example of a regulator that is taking its time to understand the technology’s potential rather than implementing any rash policies. Even President Cyril Ramaphosa recently suggested that a single African currency is likely in the future–in a digital form.” The South African Reserve Bank has also been exploring and participating in several blockchain initiatives over the past several months.

Blockchain initiatives are also gaining momentum in financial and government institutions in other parts of Africa. Cryptoslate reported that Kenyan President Uhuru Kenyatta launched a blockchain and AI task force with the intent of exploring the use of blockchain technology within the country’s existing economic framework.

Similarly, the Ghanaian government has also reportedly enlisted local blockchain startups to develop blockchains to record land ownership within the country. 80% of Ghana’s land is owned communally, and an immutable, blockchain-based ledger system would alleviate bureaucratic confusion and cartel corruption.

Untapped Potential

Most of Africa is ripe for the opportunities that blockchain presents. “The biggest potential for cryptocurrency is in emerging markets,” Tricia Martinez wrote. “These countries [are] ripe for the technology, and more importantly, they aren’t encumbered by legacy systems that would make an upgrade difficult.”

“It is for this reason that many governments in Africa are intrigued by the potential of the blockchain,” she explained. ”We cannot be certain in what form that will look like in the coming years, but we are certain it is coming.”

(Photo: pixabay)

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