A financial seismic shift is quietly but rapidly sweeping the coasts of Africa, with Bitcoin and other cryptocurrencies championing the movement. The volume of crypto-related activities in Africa have continued to surge. Between May 2015 and December 2020, Nigeria traded a total of $566,668,692 worth of bitcoin on Paxful, making it the second largest bitcoin market on Paxful, globally. However, Nigeria is not the only African nation with a strong interest in cryptocurrencies. Other African nations such as Kenya, South Africa and Uganda experience similarly high engagements in the crypto space, coupled with investments of millions of dollars in crypto assets.
Traditional financial systems in Africa are plagued with inefficiencies and detrimental centralized structures, making Africa a very fertile ground for the integration of cryptocurrencies in its financial systems. The number of unbanked Africans still lies in the realm of hundreds of millions of Africans, all of whom lack access to wealth-building financial services that can uplift them from poverty. This presents a huge opportunity for cryptocurrencies to penetrate the African market since cryptocurrencies can drastically increase financial inclusion in Africa by increasing the mobility of money, lowering transaction costs and reducing the requirements for accessing financial services to the barest minimum.
The success of digital fintech innovations in Africa like M-Pesa in Kenya shows how much is possible if cryptocurrencies are effectively utilized to transform the face of finance in Africa.
Besides Africa’s low level of financial inclusion, the issue of inflation and weak local currencies is another serious cause for concern in Africa. Between 2016 and 2020, the Naira has dropped by about fifty percent, from around #200 per USD to slightly over #400 per USD, thereby, reducing the networth of individuals by 50%. Zimbabwe’s inflation is even more alarming. In 2015, 100 trillion Zimbabwe Dollar notes were printed in notes, with each note having a mere worth of just 40 US Dollars. To prevent worse financial catastrophe, Zimbabweans turned to bitcoin, leading to an increase in the nation’s bitcoin activities.
South Sudan, like Zimbabwe, also battles with inflation. In 2016, it experienced an inflation rate of 295%. Storing assets in stablecoins like Tether (USDT) would easily provide protection against the drastic devaluations of local currencies in Africa. With Africans now beginning to see cryptocurrencies as a means to safeguard their wealth against drastic devaluation, cryptocurrencies are already threading a path to becoming the primary means of financial transactions and wealth storage in Africa.
In addition to safeguarding Africans from the effects of devaluation, cryptocurrencies also open up new paths to wealth creation for the numerous unemployed and financially weak Africans who are exploring new ways to improve their standards of living and make more money.
Crypto-powered financial transformations, however, are already happening in Africa. Crypto exchanges are already making financial transactions in Africa more seamless and even lowering the staggering cost of cross-border remittances in Africa. Africans are already venturing into bitcoin trading to make more money. Financial systems are already witnessing a quiet but prominent revolution and decentralization.
The gaps that exist in Africa’s financial system present an opportunity for cryptocurrencies to stir financial transformations. Although investing in and utilizing cryptocurrencies could be risky, not utilizing cryptocurrencies could even be more risky. With Africa’s surging crypto-related activities, it is gradually becoming evident that Africans are placing a huge bet on cryptocurrencies and a crypto-driven financial revolution in Africa is already underway.