“Africa is one of, if not the most promising region for the adoption of cryptocurrencies.”
That was the introduction of a new report on the digital currency industry in the continent. The report, titled ‘The State of Crypto: Africa’, looks at the vast potential the region has, while also acknowledging the challenges that lie ahead.
The report was compiled by Oslo, Norway-based firm Arcane Research, partnering with African digital currency exchange, Luno. Africa has shown early signs that it’s ready to use digital currencies. Recent surveys have showed that among Internet users who own digital currencies, South Africa ranks third globally at 13%. Nigeria is at 11%, way above the global average at 7%.
This high interest in Africa stems from a number of factors. One is the high inflation in most African countries which has led citizens to seek better alternative currencies. And while the extremity in Zimbabwe receives all the attention, other ‘more stable’ economies haven’t fared well either. The South African rand, for instance, has lost 50% of its value against the U.S. dollar in the past decade.
Africa is also grossly underbanked. A World Bank survey revealed that availability of banking services is 61% lower in Sub-Saharan Africa compared to the global average. Even when they can access the banks, the charges are incredibly high. And while remittances from abroad are costly, payments between African countries are even higher, averaging over 18% of the transactional value.
Digital currencies offer reprieve for Africans from many of these challenges. Already, services that enable funds transfer across borders using digital currencies are becoming hugely popular. Nairobi-born Bitpesa, now part of AZA Group, has processed over $500 million in cross-border transfers through digital currencies. South Africa’s Centbee has also attracted high interest, with even lower fees and faster transaction times using Bitcoin SV.
There are several challenges, however, the report acknowledges. One is the lack of infrastructure to support digital currency usage. Africa’s 1.3 billion people are only served by a handful of exchanges. Luno is the largest one with just over 4 million users. To overcome this, Africans rely on P2P platforms such as Paxful and LocalBitcoins.
The number of merchants accepting digital currency payments is also quite low in Africa, as is the number of digital currency ATMs. Technical adoption is even lower, with Africa accounting for less than 0.3% of nodes for popular digital currencies. Africa’s contribution to digital currency mining is also almost non-existent.
The low internet and smartphone penetration are other challenges, as is competition from mobile service providers such as Kenya’s M-Pesa. Regulators haven’t made it easier, with some like Morocco and Algeria banning digital currencies altogether.
The report concluded, “This underdevelopment presents a large opportunity for projects and companies to take advantage of, building out the necessary infrastructure and adopting go-to-market strategies similar to the projects discussed in this report. We already see a lot of growth related to cryptocurrency in Africa and expect this development to accelerate in the years ahead.”
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