In a Yahoo finance publication, Nigeria, Africa's largest economy, ranked number one for 'countries that use cryptocurrencies the most'. This was while the country plunged deep into a recession in 2020.
In fact, the trade volume of Bitcoin in Nigeria from 2020 reached 400 million U.S. dollars, which is just 20 million below Russia’s 420 million. Sadly, the sub-Saharan African country’s government clamped down on cryptocurrency exchanges, with an indefinite ban on cryptocurrency exchange operations across the country.
Also, in another exciting state, Kenya was ranked the 5th nation in the world with the most cryptocurrency adoption from 2020. In that ranking, Kenya came right behind China and ahead of the United States. South Africa also came 7th on the list.
Beyond Africa, cryptocurrency adoption and trade volume has been relatively bullish in parts of the world with oppressive economic regimes reign, which leaves the people from those parts of the world in doubt of their economy. Many believe this to be a big motivating factor in the growth of cryptocurrency in places like Africa and even Latin America.
For instance, in another analysis of Nigeria’s Crypto phenomenon, high cost in transactions, along with a huge arbitrage in diaspora remittances, all account for the country’s switch to cryptocurrency.
In other words, remitting cash flow internationally from or into the nation is cheaper with cryptocurrencies than with traditional remittances, giving huge arbitrage across the country’s local currency market.
Unreliable local currencies and increasing hyperinflation has played a significant role in cryptocurrency adoption in Africa. Zimbabwe experienced acute hyperinflation just over a decade ago, with inflation rates rising to nearly 89.7 sextillions in 2008; this lingered on through to 2016.
This forced many people to abandon the country's legal tender for a basket of international currencies spearheaded by the US dollar. But due to acute dollar shortages, many people turned their attention to Bitcoin, following the rise of Bitcoin over the last decade.
The case for cryptocurrency and blockchain success in countries like Zimbabwe cannot be overemphasized. According to the World economic forum, full-fledged cryptocurrency adoption in Zimbabwe will make transactions in the country virtually tamperproof. Not just that, a full-fledged cryptocurrency adoption will save the country a whopping $90 million annually in remittance.
Africa leads the pack when it comes to the production of many agricultural products like Cocoa, tomatoes, Vanilla, and others. Also, a large majority of the continent's working population are farmers.
“More than 60 percent of the population of sub-Saharan Africa is smallholder farmers, and about 23% of sub-Saharan Africa’s GDP comes from agriculture.” according to a McKinsey research, “Yet, Africa’s full agricultural potential remains untapped,” the authors added.
“There is no one-stop-shop for trading agricultural commodities, especially those of African origin, stocks, indices, forex, and cryptocurrencies," said Ian Mvula, the CEO of TE Markets Limited. With this huge unoccupied market, Mvula and his business partners are working at creating Africa’s first Consolidated Exchange (ACEX). With ACEX, African’s will not only be able to trade cryptocurrencies but also trade publicly traded African stocks, including exotic African currencies, forex, and more.
In a world bank report on remittance cost, “Africa is the most expensive region to send money to, where sending $200 costs an average of 8.2 percent in the fourth quarter of 2020.”
Also, Bitstika is providing a rather niched remittance service within Africa. This company allows for remittance between Ghana, Nigeria, Cameroon, Gabon, Senegal, Ivory Coast, Mali, and Mauritius.
With the likes of Twitter’s CEO Jack Dorsey showing overwhelming interest in the African crypto space and regulatory moves by several African governments, blockchain and cryptocurrency adoption will likely unfold like fintech is doing in the continent.
For the records, fintech services have seen a rather positive response in Africa. This situation could be traced to Africa’s limited financial services, against a rapidly growing population of 1.2 billion people, a drop in internet cost, and a growing smartphone usage, among other things.
That being said, in the last few years, African countries like Seychelles are beginning to open up to cryptocurrency, positioning themselves as the next global crypto hub, much like island states like Malta, Caymans, Gibraltar, Jersey, and Zug in Switzerland. Like all these countries, Seychelles is taking a progressive stand and has offered insightful regulatory frameworks for blockchain and cryptocurrencies in a tax-neutral setting.
Thanks to the increasing popularity of cryptocurrencies, financial regulators in South Africa earlier this year released a policy paper with more than 30 recommendations on how to regulate cryptocurrency and other related blockchain services. The goal of the policy paper was to ensure compliance with the cryptocurrency standards adopted by the Financial Action Task Force (FATF)
Elsewhere, BBC reported last year that many Kenyan businesses have begun receiving Bitcoin as payments for products and services. Even with the warnings issued by the Central Bank of Kenya, the massive adoption of cryptocurrency in Kenya hasn’t slowed a bit.
As per the report, the total number of Bitcoin transactions in Kenya last year eclipsed $1.5 million and is expected to double significantly as cryptocurrencies continue to enjoy massive adoption in the continent.
With the unfolding cryptocurrency scene in Africa against an inefficient financial system and lessons to be learned from the Fintech evolution in Africa, the continent is likely to see massive crypto adoption and innovation in the coming years.