Africa is a continent of contrasts, with diverse cultures, languages, and economies. It is also a continent of challenges, with many people facing poverty, inequality, corruption, and instability. But it is also a continent of opportunities, with a young, dynamic, and entrepreneurial population, eager to embrace innovation and change.

One of the most promising innovations that Africa has embraced is cryptocurrency, or digital money that is secured by cryptography. Cryptocurrency offers a new way of storing, transferring, and using money, without the need for intermediaries, such as banks, governments, or corporations. It also offers a new way of accessing financial services, such as payments, remittances, savings, lending, investing, and trading, that are otherwise unavailable, costly, or inefficient in the traditional system.

According to a report by Chainalysis, a blockchain analysis company, Africa is one of the fastest-growing crypto markets in the world, with a 1,200% increase in crypto value received between July 2020 and June 2021. The report also found that retail-sized transfers (under $10,000) make up a larger share of Africa’s crypto activity than any other region, indicating a high level of grassroots adoption.

But why are Africans using crypto? And what are the benefits and challenges that they face in this emerging sector?

Why Africans use crypto

There are several reasons why Africans have turned to crypto as an alternative or complement to the official currencies and the traditional financial system.

One of them is the volatility and devaluation of the local currencies, which have eroded the purchasing power and savings of many Africans. For example, the Nigerian naira lost 24% of its value against the US dollar in 2020, and the South African rand lost 15%. This has led many Africans to look for ways to preserve their wealth and hedge against inflation, which reached 17.33% in Nigeria and 4.9% in South Africa in February 2021. Crypto, especially stablecoins, which are pegged to fiat currencies or other assets, offer a refuge from currency fluctuations and inflation.

Another reason is the high cost and difficulty of sending and receiving money across borders using the traditional financial system. According to the World Bank, the average cost of sending remittances to sub-Saharan Africa was 8.47% in the fourth quarter of 2020, well above the global average of 6.51%. Moreover, many Africans face barriers to accessing formal financial services, such as lack of identification, documentation, or collateral. According to the Enhancing Financial Innovation and Access (EFInA) survey, 36.8% of Nigerian adults were financially excluded in 2018.

Crypto offers a solution to these problems, as it allows Africans to send and receive money across borders with low fees, fast speed, and minimal intermediaries. It also enables them to access a range of financial products and services, without the need for a bank account or a third-party provider.

A third reason is the political and social unrest that has plagued some African countries in recent years, such as the End SARS anti-police brutality protests in Nigeria, the civil war in Ethiopia, and the coup d’état in Mali. During these crises, the authorities reportedly froze the bank accounts of some activists and supporters, and blocked or limited the internet access and mobile money services. This prompted many Africans to use crypto, especially Bitcoin, to circumvent the censorship and support the causes. Crypto also offers a way to express dissent and resistance against oppressive regimes and policies.

The benefits and challenges of using crypto in Africa

The use of crypto in Africa has brought many benefits to the users, such as:

Increased financial inclusion and empowerment: Crypto allows Africans to participate in the global economy and access opportunities that are otherwise out of reach. It also gives them more control and autonomy over their money, as they can choose how to store, spend, and invest it, without relying on intermediaries or authorities.

Enhanced innovation and entrepreneurship: Crypto has fostered a vibrant and dynamic ecosystem of startups, developers, traders, educators, and enthusiasts in Africa. Many of them are creating and offering solutions that address the needs and challenges of the local market, such as peer-to-peer platforms, remittance services, payment gateways, and digital wallets. Some examples are BuyCoins, Bundle, Quidax, Yellow Card, and Pesabase.

Improved resilience and adaptability: Crypto has enabled Africans to cope with the volatility and uncertainty of the economic and political environment, and to diversify their sources of income and wealth. It has also helped them to adapt to the changing trends and preferences of the digital age, such as the rise of e-commerce, online gaming, and social media.

However, the use of crypto in Africa also faces some challenges, such as:

Regulatory uncertainty and hostility: Some African governments and central banks have taken a negative stance towards crypto, citing concerns over its legality, security, and impact on the financial system. For example, in February 2021, the Central Bank of Nigeria (CBN) issued a circular that prohibited banks and other financial institutions from facilitating crypto transactions, effectively cutting off the users from the formal sector. This has caused confusion, panic, and frustration among the users, as well as the service providers, who have had to suspend or modify their operations.

Lack of awareness and education: Despite the growing popularity of crypto, many Africans still lack the basic knowledge and understanding of what it is, how it works, and how to use it safely and responsibly. This makes them vulnerable to scams, frauds, hacks, and losses, as well as misinformation and propaganda. There is also a need for more awareness and education on the legal, tax, and ethical implications of using crypto in Africa.

Technical and infrastructural limitations: The use of crypto in Africa depends on the availability and affordability of internet access, electricity, and devices, which are often unreliable or scarce in some parts of the country. This limits the accessibility and usability of crypto for many Africans, especially those in rural and remote areas. There is also a need for more technical and infrastructural support and innovation to improve the performance, security, and scalability of the crypto platforms and networks.

The future of crypto in Africa

Despite the challenges, the future of crypto in Africa looks bright and promising, as the users and the ecosystem continue to grow and evolve. Some of the trends and developments that could shape the future are:

Increased adoption and integration: Crypto could become more mainstream and widely accepted in Africa, as more individuals, businesses, and organizations adopt and integrate it into their daily activities and operations. This could be driven by the increasing demand and supply of crypto products and services, as well as the emergence of new use cases and applications, such as e-commerce, gaming, social media, and charity.

Enhanced collaboration and dialogue: Crypto could foster more collaboration and dialogue among the various stakeholders in Africa, such as the users, the service providers, the regulators, the policymakers, the academia, and the civil society. This could lead to the development of a more conducive and supportive environment for crypto, as well as the resolution of some of the issues and conflicts that hinder its growth and potential.

Improved regulation and governance: Crypto could benefit from a more clear and consistent regulation and governance framework in Africa, that balances the interests and objectives of the different parties, and that protects the rights and responsibilities of the users. This could be achieved by adopting a more consultative and participatory approach, that involves the input and feedback of the crypto community, and that follows the best practices and standards of the global industry.

Crypto is more than just a technology or a currency. It is a movement and a culture that reflects the aspirations and values of many Africans, who are seeking for a better and more inclusive way of living and working in the 21st century. As such, crypto is not only here to stay, but also to thrive and transform the future of Africa.