The continent has shown a willingness to embrace new financial services technologies, and crypto addresses a pressing need in every country.
What continent is home to the second-largest bitcoin (BTC) market, a government-introduced central bank digital currency (CBDC) and crypto market growth of more than $100 billion in the past year?
Maybe you would say North America, with its bevvy of crypto companies. Or in Latin America, with adoption of bitcoin as legal tender in countries like El Salvador. Or perhaps Asia comes to mind, where crypto markets continue to grow at a fast pace.
But the answer is Africa.
Elizabeth Rossiello is the CEO and founder of global fintech AZA Finance (previously BitPesa).
According to the “Africa Report,” in September 2021 the continent’s crypto market reached a significant milestone when sub-Saharan users achieved more than $80 million in cryptocurrency holdings – more than the total of U.S. users. Morocco, a North African country with a gross domestic product ranking well outside the world’s top 50 (the U.S. is first), has one of the highest crypto-holding populations, with 2.5% of people owning some form of digital currency.
From 2020 to 2021, the continent saw an astounding 1,200% increase in crypto payments. This growth is no surprise to the AZA finance team. In the past nine years operating on the continent, we have seen massive increases in adoption of the new technology, thanks largely to a young and mobile population ready to plug into the digital world.
Early embrace of mobile money
Before crypto, African countries were embracing mobile money. In 2007, the first mobile money company, M-Pesa, created a tsunami of change in the way people on the continent spent and stored money. The launch of mobile money in Kenya was a runaway success with M-Pesa dominating over 99% of the market share.
This success led to widespread adoption of mobile money. Now, more than 60% of all global mobile money transactions flow through Africa. The continent’s population has proven that it is excited to adopt new technology.
Africa has historically been excluded during times of global transformation due to the long-lasting impacts of colonization and stereotypical thinking in the rest of the world. During past industrial revolutions, African nations were often exploited for labor or natural resources, helping Western countries develop at the expense of their own progress.
Many sociologists now consider the world to be undergoing a fourth industrial revolution, led by the widespread adoption of the internet and movement to renewable energy sources. Blockchain, cryptocurrencies and other distributed ledger technologies will undoubtedly play a role in this revolution.
Africa will not only participate in such a transformational period but also help lead it. The latest evolutionary step in crypto, Web 3, needs Africa with its willingness to adopt new technologies and huge populations needing better financial services, to succeed – not the reverse.
A need for crypto
Crypto’s popularity in Africa is not surprising when you consider the financial infrastructure and currency stability issues. Even the continent’s strongest currencies, like the South African rand, are among the world’s most undervalued. Crypto offers a more stable way to store and send money.
This story is similar to that of African financial infrastructure. When global banks in the SWIFT network – the global messaging platform that banks use to send and receive information securely – began to reassess and sometimes end their relationships with regional banks in emerging markets, a process known as de-risking, the cost and friction of accessing international financial services skyrocketed across Africa.
Due to Africa’s underdeveloped financial transaction and settlement infrastructure (keeping in mind that it is the negative Western stereotypes about the continent and its currencies that are partially to blame), sending money is difficult, time-consuming and expensive. Crypto, which can be sent almost instantly using a mobile phone, helps overcome these obstacles and offers a way for Africans to send money to their families, participate in e-commerce and grow their business opportunities.
A 2020 Chainalysis report noted crypto’s usefulness for remittances on the continent, something reflected in the high percentage of “retail-sized” (less than $10,000 in value) transfers made in crypto in Africa. The same report noted a high flow of crypto transactions between Africa and East Asia, likely due to a more efficient way to conduct business payments for African businesses operating in the region as well as the large number of Asian workers in Africa that send funds to their families.
Africa is ready to embrace the decentralized, cross-border potential of crypto. But is the crypto world ready to acknowledge and support Africa’s potential power?
Africa becoming a powerhouse of Web 3 and crypto adoption going forward is a logical progression. Part of the reason Africa hasn’t yet been able to benefit fully from crypto technologies is due to antiquated, counterproductive mindsets from the heads of international corporations, financial institutions and other global organizations.
Unfortunately, these leaders overlook Africa’s enormous capacity to adopt new technologies, grow its economy and overcome historically rooted obstacles. Instead, the world, including the crypto industry, should look confidently at Africa as a source for innovation and success.