The crypto industry in Africa witnessed significant turbulence last year, marked by: the aftereffect of the implosion of a giant crypto exchange, a crypto winter, shutdowns, acquisitions, scandals, and regulatory instability. Although FTX’s implosion happened in November 2022, its ripple effects spread to 2023.

Throughout the year, crypto startups faced significant setbacks globally with some losing money, others with damages to their reputation, and lots experiencing a decline in customer trust due to the growing skepticism arising from FTX's implosion. Crypto product development company, Nestcoin which held funds in the sinking ship had to make the tough decision of laying off a significant proportion of its staff. The company had held a significant portion of its stablecoin investments on FTX for day-to-day operations. Prior, the crypto company with investment in crypto education, gaming, and digital arts had raised $6.45 pre-seed funding from investors including FTX’s trading shop Alameda Research. The fallout from the implosion made it difficult for crypto entrepreneurs, especially those in frontier markets, to raise funding for their startups.

In this article, we will look at the biggest crypto stories that dominated the headlines in 2023, with the hopes that it will help founders, operators, and investors plan for 2024.

Shutdowns

In 2023, multiple crypto startups closed shop amidst a global slowdown in tech funding and a crypto winter with heightened skepticism on crypto technology. Crypto payment startup Lazerpay founded in 2021 folded after it ran out of cash and failed to secure the funding necessary for its survival. Crypto exchange Bundle Africa shut down operations this year after its founding by Yele Bademosi in 2020 to focus on its peer-to-peer payment network Cashlink. A year after expanding its services to Nigeria and Ghana, crypto startup Pillow which enabled users to save and invest crypto assets ceased operations, citing regulatory climate as the reason.

Layoffs

2023 was a difficult year to be an employee in a crypto company as job security became hard to come by. The year saw crypto exchange Mara funded by Coinbase and FTX’s Alameda laid off 85% of its workforce. The layoffs at Nestcoin also took effect earlier in the year. These are generally seen as an after-effect of FTX implosion on the continent.

Funding

It wasn’t all gloom. Kenyan crypto remittance company Kotani Pay raised $2 million in a pre-seed funding round to enable underbanked individuals on the continent to make cross-border payments without an internet connection. Nestcoin’s product Onboard raised $1.9 million from Coinbase and Adaverse to build a slew of products including a self-custodial wallet, a virtual card, a P2P service, and a web app that lets users cash out stablecoins directing to their native currencies.

Investors were also at work. EchoVC, a pan-African VC firm with a global presence, announced a fresh $8 million fund dedicated to blockchain startups in Africa. Crypto Valley VC expressed interest in investing $20 million in early-stage African crypto startups through its Africa Fund.

Patricia’s scandal

On May 26, 2023, Patricia, a Nigeria-focused crypto exchange, made a public announcement stating that it had fallen victim to a breach that resulted in the loss of users' BTC and Ether assets. Just a day later, TechCabal, a prominent Pan African tech publication, reported that Patricia's losses amounted to a staggering $2 million and that the breach had occurred as early as January 2021, a shocking revelation that came 17 months before Patricia's official disclosure. In an attempt to bounce back, Patricia proposed converting all affected customers' assets into a native token, but this controversial move faced strong opposition from many. Since then, efforts have been made to refund customers' funds, and the Nigerian police have arrested individuals to bring the perpetrators to justice.

Acquisitions and sell-offs

There was more good news. After raising a $2 million pre-seed Kenyan crypto remittance startup acquired Nigeria’s Fuhlstack for an undisclosed amount. Similarly, ₿trust a non-profit organization funded by former Twitter boss and bitcoin advocate Jack Dorsey bought Nigerian Bitcoin organization Qala. As part of the acquisition, Qala was rebranded into the ₿trust Builders Programme aimed at driving Bitcoin development and education across the Global South. This represents a win for Bitcoin development and adoption in Africa.

After failing to raise cash, Nigerian Fluidcoins was sold off in a fire sale to UAE-based Blockfinex for an undisclosed amount.

A piece of Africa

The year saw giant blockchain companies showing interest in Africa’s growing crypto community. The second edition of EthSafari in August, the largest gathering of Ethereum stakeholders on the continent held in Nairobi Kenya, was sponsored and enjoyed the presence of Celo, Metamask, Coinbase, Avalanche, and Polygon. In the same month, leaders from Arbitrum Scroll ETHGlobal and Optimism held a Layer 2 meet-up in Lagos.

In October, Africa was one of the first places Base, Coinbase’s Layer 2 protocol launched, Coinbase’s team then proceeded to do a tour across major African cities and countries to onboard African developers and projects. By the end of the year, Coinbase was supporting multiple communities and products including Web3Bridge, Buidlers Connect, and NODO.

Regulators in Town

During the embers of the year, Nigerian regulators lifted a two-year-old ban on cryptocurrencies in the country. Traditional banks in Nigeria are now allowed to operate accounts for digital asset providers as against the previous ruling. Although banks are still prohibited from trading crypto themselves, this move is seen as a sign of goodwill from the new government to the crypto industry.

Kenyan authorities responded to the country’s growing digital asset market with a tax bill but after receiving pushback from crypto stakeholders in the country it moved to create a robust digital asset regulation with the help of a body of private individuals called Blockchain Association of Kenya. South African authorities announced that they received applications for operational licenses from crypto companies domiciled in the country. The results of these applications are set to be out in 2024.

The island nation of Seychelles took a stand against unregistered crypto companies operating within its borders. The island, a renowned haven for global crypto companies, identified 50 companies operating in the country without proper authorization and warned customers from interacting with these businesses.

Worldcoin’s regulatory run-ins

Kenya was one of the first shops Worldcoin a digital identification project by OpenAI’s CEO Sam Altman opened globally in August. Although the project was off to a rough start when shortly after its launch Kenyan regulators shut off its activities in a raid, it is set to resume activities in the East African country in 2024.