If 2021 was the year in which Africa made its mark on the digital asset and blockchain world, 2022 was the year Bitcoin and the underlying technology came of age. Digital asset adoption continued to soar despite the ‘crypto winter,’ but unlike in previous years, regulators were well up to the task, with several new laws coming into effect that sought to police the nascent sector.
African countries continued to rank highly for adoption, with Nigeria, Morocco, and Kenya leading the pack. The region also saw a surge in central bank digital currency (CBDC) activities at national and regional levels. The Central African Republic made history by becoming the first country to recognize BTC as a legal tender, but its deep dive into digital currencies didn’t end well.
The highs: BSV adoption, CBDCs, Regulations
In a year that saw one of the biggest drops in digital asset prices, Africa was unwavering in Bitcoin adoption. Chainalysis ranked three African countries in the top 20 for adoption globally—Nigeria, Morocco, and Kenya, respectively. Kenya lost its position as the world’s largest peer-to-peer (P2P) market, a position it held for the previous two years.
Morocco saw the biggest uptick in adoption, ranking 14th globally. This is even more impressive when you recall that Bitcoin has been illegal in the North African country since 2017.
This surge in adoption forced the government’s hand, and in 2022, the Bank Al-Maghrib revealed it was working with the International Monetary Fund (IMF) and the World Bank on a Bitcoin regulation framework as it sought to lift the ban.
As Morocco worked to lift the ban, Nigeria was working to legally recognize Bitcoin. In December, the West African country’s parliament passed a draft bill that legalized digital assets for the first time.
While Nigeria is Africa’s biggest Bitcoin market, digital assets didn’t have any legal protection. The country’s central bank has cracked down on the sector, including by denying its banking services. This new bill will, for the first time, give legal assurance to the sector and make it easier for companies to work with other sectors.
Over in East Africa, Kenya also joined the regulation bandwagon. In November, legislators tabled a bill that seeks to tax the over four million digital asset owners in the country. While it focuses on taxation, the bill is the first to legally recognize digital assets in a country that ranks in the top five globally for P2P trading.
South Africa wasn’t left behind, and in October, the Financial Sector Conduct Authority declared digital assets to be financial products, the first step towards bringing the sector under the country’s laws. Just a few months earlier, the South African financial regulators had moved to bring VASPs under the Travel Rule – BSV startups like Centbee had been prepared for years.
On the CBDC front, African nations made major leaps in 2022. Nigeria is the only African country with a CBDC, and in 2022, it engaged in several initiatives to spur eNaira adoption, including slashing merchant service charges, availing USSD codes, and more. Adoption is still low, with the eNaira only hitting $10 million in transaction value in August.
Kenya published a discussion paper on CBDCs for public feedback; Zambia revealed that it was conducting feasibility tests; Ghana is exploring CBDCs as the solution to financial inclusion; while South Africa completed the second phase of its wholesale CBDC tests.
There were also regional CBDC efforts, most aimed at laying the groundwork for a wholesale cross-border CBDC. Over a dozen central banks convened in Nairobi in November to discuss these efforts.
Bitcoin SV adoption in the region continued in 2022. Centbee continued to set the pace, with new players like Domineum being just as active on the enterprise blockchain side of things.
Domineum organized two events in 2022 in Abuja, both of which shined a spotlight on BSV adoption in the private and public sectors. The first, the Blockchain Developers Summit, was held in July and saw over 1,000 attendees interact and network with blockchain thought leaders from around the world. Domineum later hosted the Blockchain Day during the Digital Nigeria International Conference, with Jimmy Nguyen, Centbee’s Lorien Gamaroff, and Ahmed Yousif among the speakers.
What lies ahead for Africa in 2023?
2023 may be an even bigger year for Bitcoin and the blockchain for Africa.
One of the key developments will be on the regulatory front. In the past year, regulators have stepped up their game, with the likes of Kenya, Nigeria, and South Africa all passing landmark laws to govern the sector.
This momentum will only surge in 2023. While the trailblazers will likely take the lead, other countries are showing an interest in policing the industry, and the likes of Ghana, Uganda, Zambia, Egypt, and Tanzania are likely to pass laws for the sector.
On the regulatory front, it’s still unclear what direction the rollercoaster ride that is the Central African Republic’s digital currency journal is set to take this year. CAR made BTC a legal tender and started selling its Sango Coin digital currency in 2022, but there have been several hurdles, not the least of which is the country’s Constitutional Court ruling against the citizenship-by-Sango initiative.
CBDCs will continue to take precedence for most central banks, and in 2023, we just might see another African country announce its digital currency. Ghana is the most advanced on the retail side, with South Africa leading on the wholesale side.
Speculative trading will likely take a hit, especially due to continued tougher regulations. However, applications that give users more choice and freedom to spend their Bitcoin, like Centbee, will continue to see increasing adoption as most countries face increasing currency devaluation.
All in all, 2023 will be an exciting year for Bitcoin and blockchain in Africa.
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