By Simon Mwebaze
Editor’s note: The opinions expressed here are those of the authors. View more opinion on ScoonTV.
When you think of blockchain, one of the first names that comes to mind is Bitcoin. Bitcoin is the top cryptocurrency in the world. As of the writing of this piece, it was valued at $22,651, a market cap of $436,483,557.943, and a volume of $29,888,640,775.
Another interesting thing about blockchain is when people think about it in terms of location, they think mostly of the western world. But there is a new sheriff in town, steadily creeping up in Bitcoin use. That is the African continent.
So, what is happening in Africa regarding Bitcoin, and why is it on the rise?
To understand what is driving Bitcoin’s rise, you need to understand the factors unique to Africa presently. Africa faces a couple of challenges regarding the financial system. One of the big ones is, unfortunately, that several currencies are unstable. Zimbabwe is a prime example of an unstable currency. Its annual inflation hit 192% in June 2019. In June 2022, Nigeria’s inflation hit 18.6%, a 65-month high.
Additionally, inter- and intra-country transactions are bureaucratic, slow, and expensive. Using banks to transact comes with a lot of paperwork and fees. Africa has one of the highest remittance volumes in the world. In 2019, remittances to Africa amounted to $48 billion. Over half of it went to Nigeria, but fees are a challenge. The average cost of sending remittances is 9%, which is above the UN sustainable goal for remittances of 3%.
With the help of Bitcoin, challenges including currency instability, paperwork, high fees, middlemen, and speed of transactions can be solved. Several nations’ citizens including Nigeria, Kenya, and South Africa have adopted Bitcoin in a bid to make transactions simpler and cheaper.
Africa also boasts a budding young population. In 2020, Western countries like the US had a median age of 38 years and the UK, 40 years. Africa has a median age of 20 years old. It gets better in some African countries where the median age is even lower such as Nigeria with 18.1 years in 2022.
The value of youthful populations is their openness to innovation like Bitcoin. This helps with the adoption of Bitcoin and investment in education and the creation of platforms that create awareness and foster transactions using Bitcoin.
Some African governments have made it difficult for crypto exchanges to work with banks. These include Nigeria and Kenya. In Nigeria, it was after the “End SARS” protest against police brutality in the country. The government instructed banks not to conduct any cryptocurrency transactions or work with exchanges. This was because Bitcoin was one of the major ways protestors received funding. Kenya did the same in 2018.
Due to these prohibitions, people were pushed toward P2P platforms for crypto which have seen an increased popularity on the continent. More so, exchanges have also become popular. The platforms include Binance Africa, Paxful, Crypto.com, BitNob, Patricia, and Machunkura. The availability of these platforms makes it easier to access and make transactions in different African countries and across international borders.
Regulation has an impact on the adoption of Bitcoin across Africa. Some of the countries that have favorable regulation for Bitcoin include Nigeria, South Africa, Botswana, and Kenya. The prohibitions on cryptocurrency in banks in Kenya and Nigeria have encouraged the rise of different platforms. Similarly, the ban on cryptocurrency in Morocco in 2017 has promoted it to the highest peer-to-peer trading volume in North Africa. In a way, it seems that the more regulation against crypto, the more we see a rise in its use in Africa.
Despite the conducive conditions for the rise of Bitcoin in Africa, there are still a couple of challenges for more adoption. Unfortunately, Africa lags behind in terms of supportive infrastructure for mining and trading Bitcoin. 48% of the African population has no access to electricity which is core to operating and using Bitcoin services. Internet connectivity strongly follows as a challenge, with 75% lacking sufficient access to the internet. The internet penetration of Africa is only 36% while the global figure is 62.5%.
But there are African entrepreneurs creating innovative solutions to the challenge of internet access. Feature phones are more popular than smartphones. A company called Machankura has created an innovation around the popularity of feature phones to provide access to Africans. The company created a lightning wallet to allow purchases and selling services of Bitcoin.
Finally, there are insufficient developers in the space. But with a significant number of youths, there is an opportunity to train and equip them with the skills to create more applications, software, and companies that would add value to the Bitcoin adoption in Africa.
Africa has a unique opportunity to adopt Bitcoin. Despite the challenges, there are already solutions on the horizon. For electricity, alternative power sources like solar, hydroelectricity, and wind are in the works with the help of Public Private Partnerships. With increased investment in education for developers among the youth and favorable regulation, Africa can become a Bitcoin powerhouse.
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