Africa’s economic climate is ripe for the adoption of cryptocurrency.
“The State of Crypto: Africa report” from Luno and Arcane Research, expect that the rapid adoption of cryptocurrencies in Africa will take place in the context of high inflation rates, volatile currencies and underdeveloped banking infrastructure.
Certain crypto assets combine the wealth preservation properties of hard assets such as gold with the portability of digital currencies.
Cryptocurrencies also offer lower-cost and faster remittance payments than is currently available. Traditional money transmitting services charge very high fees and intra-African payments are often slow. The need is great, with expats sending around $48-billion back to families in sub-Saharan Africa last year.
Although each country has its own particular set of circumstances, African nations share some key similarities and trends.
The growing, young and mobile-native population on the continent is more likely to adopt a new financial system, and cryptocurrency has a particular role to play servicing the unbanked. But there are obstacles that must be overcome for cryptocurrencies to reach their full potential in Africa.
“While much of the focus elsewhere has been on investment, speculation and trading, the utility benefits of cryptocurrencies are more needed in Africa than other continents. Cryptocurrencies present solutions to many of the financial challenges in Africa. The current context is ideal for an alternative money system to take root,” says Marius Reitz, GM: Africa at Luno.
Typical crypto-enabling infrastructure in other regions such as nodes, mining operations, supporting merchants, ATMs and exchanges are not prevalent in Africa. Along with regulation, these could be obstacles in cryptocurrencies reaching their full potential in Africa. Internet and electricity networks will require more investment.
Reitz also believes that the lack of crypto-specific infrastructure presents a huge opportunity to deliver the much-needed transformation of financial systems across many countries on the continent.
There is ample evidence that cryptocurrency is of much interest in Africa. According to recent Google Trends data Uganda, Nigeria and South Africa are ranked as third, eighth and thirteenth on the topic of cryptocurrency respectively.
Other surveys also highlight the growing appetite for cryptocurrencies on the continent.
According to one survey of internet users that owned cryptocurrency, 135 of South Africans aged 16-64 own cryptocurrency, making it third highest worldwide. Nigeria ranked fifth at 11%. Another survey showed that 16% of South Africans had either used or owned cryptocurrency, ranking only behind Turkey, Brazil, Colombia, and Argentina.
Tjoborn Bull Jenssen, CEO of Arcane research, says: “The State of Crypto: Africa is the most comprehensive case for adopting cryptocurrencies in Africa to date. It highlights the significant opportunity to transform financial services in Africa based on the results of analytical examination.”