The emergence of cryptocurrencies in Africa is mainly due to the absence of traditional financial institutions and a predominantly unbanked population. Blockchain technology, the foundation of cryptocurrencies, has gained traction in countries like Kenya, Nigeria, Ghana, and South Africa. Although experts recognize its disruptive potential, they express concerns about its rapid integration into African economies due to its decentralized nature.
**Blockchain and Trade **
Blockchain technology is sometimes called the trust machine, as it allows individuals who lack trust in each other to interact without a central authority. It could resolve the long-standing issue of a unified currency in Africa. The African Continental Free Trade Area (AfCTA) aims to unite 1.3 billion people and boost the continent's GDP to $3.4 trillion, making blockchain technology increasingly important.
Despite challenges like underdevelopment, unemployment, and poverty, blockchain technology has the potential to redefine Africa's growth in the 21st century. It could substitute traditional administrative processes and facilitate intracontinental trade among African nations. Although adoption is gradual, the increasing popularity of blockchain technology and cryptocurrencies could lead to significant change across the continent in the coming decades.
Blockchain technology is gaining traction in Africa, with countries like Kenya and Nigeria leading the way. In Kenya, BitPesa is a popular money remittance network converting digital currencies to local currencies. The country is also using blockchain technology in the health sector through AfyaRekod's Universal Patient Portal and the National Transport Safety Authority's operations in the transport industry. Furthermore, BlockchainRaise, a Bahamas-Kenyan business, has created the first security token platform for asset tokenization.
**Fintech and digital services **
Nigeria has partnered with Bitt Inc for its digital currency, eNaira, and embraced blockchain technology in education through the Cryptography Development Initiative of Nigeria (CDIN). Nigerian Exchange Ltd. plans to launch a blockchain-enabled exchange platform to expand trading and attract new investors. Africa is currently one of the fastest-growing cryptocurrency markets, with high adoption rates in Kenya, South Africa, Nigeria, and Ghana.
Fintech startups in Africa raised $1.45 billion in 2022, with Nigeria being the best-funded nation on the continent. Although there are currently no crypto or blockchain unicorns in Africa, companies like Nigerian Interswitch and Senegalese Wave have adopted blockchain technology. Adanian Labs, a Pan-African incubator, aims to create one million jobs for young Africans by establishing 300 impact-driven technology firms using blockchain and AI by 2025.
With over 450 million unbanked Africans, financial inclusion is a primary area blockchain can immediately impact. Cryptocurrency peer-to-peer marketplaces like Paxful and LocalBitcoins provide millions with vital financial services. Africa's growing mobile tech adoption rates make it a strong contender for blockchain and cryptocurrency adoption. It offers alternatives to address day-to-day issues like turbulent financial markets, expensive remittance costs, and limited banking access.
**Blockchain Africa Conference **
The Blockchain Africa Conference 2023 in Johannesburg highlighted the importance of blockchain technology and stablecoins for financial inclusion in Africa. Key figures from the industry discussed the instability of USDC, a popular stablecoin, following the Silicon Valley Bank collapse, which emphasized the critical role of custodianship in issuing stablecoins.
With approximately 57% of Africans unbanked, blockchain technology offers alternative financial services without intermediaries or high fees. Cryptocurrencies, digital wallets, smart contracts, and decentralized applications (DApps) provide essential financial services to the unbanked population.
The current regulations was another major topic at the conference, with experts emphasizing the need to protect consumers from fraud and other risks while fostering innovation. As offshore banking incorporating cryptocurrencies gains popularity, secure wallet services like Cobo and banks like Xapo are in high demand to protect digital assets. The challenge lies in ensuring customer safety while providing convenience.
The conference concluded that blockchain technology has the potential to revolutionize the African economy and offer alternative financial services to the unbanked population, urging policymakers to clear the way for further innovation in the industry.
**Afropolitan network state and community **
Afropolitan, previously an event and media company, is transitioning to a blockchain-based state for Africans on the continent and in the diaspora. Inspired by articles like Balaji Srinivasan's "How To Start a New Country" and Alexander Hamilton's first Federalist paper, Afropolitan aims to create a new, community-driven model for governance.
Co-founder Eche Emole argues that the nation-state experiment has failed Africa, resulting in poverty, corruption, and underdevelopment. The development of Afropolitan will occur in four phases:
- Building a community
- Offering governance as a service
- Becoming a minimum viable state
- Securing land for a real-life version of the state
Emole highlights the lack of opportunities and decision-making power for Africans as key drivers behind the project. By addressing cross-industry communication barriers, Afropolitan aims to foster collaboration between Africans and tackle pressing problems.
Bitcoin, US Dollar and the Lightning Network
A recent CNBC report reveals that Bitcoin is becoming the preferred currency for cross-border transactions in Africa. The report highlights that Africa is well-suited for a decentralized currency like Bitcoin, given the challenges faced by countries on the continent, such as unbanked populations, unstable national currencies, and international sanctions. Twitter founder Jack Dorsey's company, Block, Inc., is a key player in the African Bitcoin market, promoting the decentralized currency to empower people who lack access to traditional financial services. Mike Brock, CEO of TBD (a business unit under Block), says that Bitcoin can be used almost anywhere in the world for an instant, borderless transactions without the need for intermediaries or facing regulatory challenges.
The ongoing US dollar crisis in Africa has increased interest in adopting Bitcoin as an alternative currency. At the first-ever Africa Bitcoin Conference in Accra, industry leaders discussed how Bitcoin could transform Africa's $86 billion banking sector and provide crucial tools for unbanked populations. Kenyan President William Ruto unveiled a proposal for Kenya to purchase oil using its local currency to alleviate fuel shortages caused by oil cartels hoarding US dollars.
Mobile money has grown rapidly in Africa, but users still need some benefits from traditional banking. Bitcoin could enable direct digital payments without intermediaries or multiple fees. The Lightning Network, a second layer built on Bitcoin, reduces transaction costs and speeds up payments, making Bitcoin more practical for everyday use. Companies like Yellow Card and innovative projects like Bernard Parah's partnership with Strike are exploring the Lightning Network to enable seamless international payments between Lightning-enabled Bitcoin wallets.
Despite potential regulatory challenges, these innovative projects could drive the mass adoption of Bitcoin in Africa, gradually reducing dependence on the US dollar and providing financial independence for millions of Africans.
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Resources
- https://theexchange.africa/tech-business/role-of-blockchain-technology-in-africa/
- https://ventureburn.com/2023/03/african-blockchain-revolution-empowers-unbanked/
- https://cointelegraph.com/news/how-blockchain-can-help-reimagine-a-new-state-in-africa
- https://cryptonews.com/news/bitcoin-set-disrupt-africas-85-billion-financial-system-heres-what-you-need-know.htm
- https://www.youtube.com/watch
- https://beincrypto.com/africa-ditch-us-dollar-for-bitcoin/
- https://medium.com/coinmonks/bitcoin-and-stablecoins-will-bring-crypto-mass-adoption-to-africa-40ad5c09b3c9
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