If you read up on Bitcoin news , you will know Africa is swiftly experiencing a rapid economic revolution without the role of traditional centralized banks and finance policies. This silent crypto booming started shortly when most of the African country's started to accept mobile money, Mpesa. Its monthly cryptocurrency transfers are about 55% over the past year, hitting a peak of $316 million in June of 2021.
While in the other parts of the world, cryptocurrencies are commonly used by financial traders but in terms of Africa, it is used in commerce mainly and Nigeria is leading the way in the adoption as it has the youngest population in the world which makes it a hotspot for digital finance. It comes at the second rank after the US in bitcoin trading, and this also predicts its future adaptability and potential investments by the people of this country. However, Africa also has its wanna-be bitcoin called Afro which is a Pan-African cryptocurrency project.
African countries like Zambia and Ghana and many others faced inflation and currency devaluation. To combat this dreadful economic condition, many Africans started to adopt crypto as it presented itself as a perfect tool to hedge against the value erosion of their fiat, leading to countries like Nigeria became one of the biggest crypto economies of 2021. These people see crypto as a safer alternative and an alternate to a devaluated national currency. With Bitcoin price again on the rise, this seems ever more pleasing.
Transferring Remittances, a Major Motivator for Crypto
The expense of transferring cash home from overseas is an important catalyst for development and social upliftment yet it has also emerged as a top key motivator for the growing adoption of digital currencies in the continent. In many African nations, cross border transfers, especially incoming remittance, is costly with hefty banking charges. Cryptocurrencies, on the other hand, have no such requirement, the small transaction fee universal to any volume or location of the receiver. This has led to an explosion in adoption of cryptocurrencies over fiat, especially for expats who need to send money back home and can't affort the regular expenses.
The second and most problematic reason people drifted towards crypto was the continent lacks banking infrastructure. Most nations have a sizable underdeveloped population that lacks basic neccissites such as education, power and access to traditional financial structure. Even if they do, the on-boarding barriers such as minimum deposits, lack of banking branches etc. mean that many still can't access it.
Require nothing more than access to a cheap mobile internet and a wallet, these unbanked have for the first time in centuries, the option to joint not a national, but a globe spanning network of finance that is not subject to inflation, is cheap and can be accessed with as less as $10. The more fortunate Africans have been able to understand the gap and taken an initiative to help others through different crypto startups that offer mobile crypto banking specifically aimed to the region.
Potential Ground for Scammers
With vast adaptability comes the threat of poor check and balance and a lot of room for scams. Africans are lured by scammers through fake offers of high returns on lucrative investments. The region is afflicted with notorious fake trading websites, moreover, crypto has been also used as a medium for money laundering.
What Crypto Can Mean for the Unbanked on This Continent
Some African countries are hustling to introduce new policies to normalize crypto. The nature of cryptocurrencies enables the people of Africa to transfer and receive their money without paying hefty fees but on the other hand exposed them to many illegal activities for example the Africrypt scam.
However, it is still too early to predict how things will turn out in Africa but it current trends show that African youth is quite interested in cryptos and finds it a better alternative to traditional paper money. With startups launching to introducing new crypto-based companies, the African population is showing its wide adaptability to crypto.
People without any experience in blockchain technology or understanding of the crypto world are at a higher risk of getting scammed or investing through unreliable channels. A vast majority of African crypto traders are attracted to lucrative returns rather than underlying technology. There is no safe route or money back claims if the virtual currency crashes.
To counter this, there should be a pan African effort from the public and the private sector, to teach about the technology, cryptos and ways to protect against the darker elements. The African content has potential to become one of the largest hotspot for cryptocurrencies that includes not only use, but development and startups. The only hurdle is the lack of government policy and a private sector jump.
