Crypto Adoption in Africa


As per Chainalysis, Africa is experiencing a rapid growth rate in the crypto market, making it one of the fastest-growing regions in the world. However, it still remains the smallest, with a peak of $20 billion in crypto transactions per month in mid-2021. Nigeria, South Africa, and Kenya have the highest number of users in the region. While many people are using crypto assets for commercial payments, their high volatility makes them unsuitable as a store of value.

Concerns among policymakers are rising due to the potential for cryptocurrencies to be used for illegal fund transfers out of the region, and to circumvent local rules for preventing capital outflows.

If crypto becomes more widespread, it could also undermine the effectiveness of monetary policies and pose risks to financial and macroeconomic stability.

The risks become even greater if crypto is adopted as legal tender, as recently done by the Central African Republic. If crypto assets are held or accepted by the government as a means of payment, it could put public finances at risk.

The Central African Republic has become the first African country and the second country in the world, after El Salvador, to designate Bitcoin as a legal tender. However, this measure has put the country at odds with the regional central bank that serves the Economic and Monetary Community of Central Africa (CEMAC), of which the Central African Republic is a member, and violates the CEMAC Treaty.

The Central Africa’s Banking Commission, the banking sector supervisory body of BEAC, has banned the use of crypto for financial transactions in the CEMAC region.

Here is a map showing which countries have adopted or banned crypto.

Crypto adoption Africa stats

Source: IMF internal survey, and staff calculations. • Note: The boundaries, colors, denominations, and any other information shown on the map do not imply, on the part of the IMF, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries.

Why does cryptocurrency keep growing in Africa despite the challenges?

The African continent has been struggling with economic instability for many years. Consequently, many Africans are turning to cryptocurrencies as a means of protecting their earnings from a volatile economy. Unlike traditional currency, cryptocurrency such as Bitcoin is not limited to a single jurisdiction. This means that it is not subject to the inflation rates of a single country, making it an attractive option for citizens of African countries.

In addition, cross-border payments are simplified with cryptocurrencies like Bitcoin. The ease of use and lack of intermediaries in the transaction process allows for faster and cheaper transactions. People can also buy various digital assets such as game subscriptions or even playing at bitcoin-exclusive casinos online.

The blockchain technology, which underpins cryptocurrencies, is decentralized, meaning that records are stored across a network of computers rather than in one central location. This makes it impossible to ban a transaction from a single country, unlike the case with Paypal, which was once banned in Nigeria due to fraudulent and money laundering activities.

Zimbabwe and Cryptocurrencies

Over the past decade, Zimbabwe’s economy has been plagued by inflation, leading to a depletion of savings and pensions. Additionally, the introduction of a confusing array of new currencies has further eroded confidence in the banking sector. Consequently, cryptocurrencies have emerged as a particularly appealing option for Zimbabweans, even though many of them may not fully comprehend the associated risks.

According to Prosper Mwedzi, a Zimbabwean financial lawyer based in the UK, “Cryptocurrency represents a way for Zimbabweans to protect their assets from government interference. It is an opportunity for them, considering how the system has operated previously, where people have woken up to discover their bank balances have been converted into local currency.”

Mwedzi’s statement is in reference to the 2018 Reserve Bank of Zimbabwe directive that converted US-dollar bank balances into ZWL balances. Prior to that, Zimbabwe had maintained a pegged exchange rate of 1-to-1 between the US dollar and the local Zimbabwean dollar.

What is the Future of Cryptocurrencies in Africa

By the time 2050 (or some other future date) rolls around, several experts foresee a proliferation of stablecoins pegged to multiple fiat currencies or even hybrids of stablecoins and central bank digital currencies (CBDCs). These assets and the protocols governing them will likely run in the background with most users oblivious to their presence.

Crypto mass adoption wouldn’t be the first time Africa experienced a digital payments revolution. In 2007, a couple of Kenyan mobile network providers created M-Pesa, a service that provides payments, credit and savings with no bank account or Internet connection – just a basic old school feature phone.

Services like M-Pesa are called “mobile money,” and about a third of adults in sub-Saharan Africa now have a mobile money account.But mobile money doesn’t have the global interoperability inherent to assets like stablecoins and bitcoin.

“You’ve got a lot of nuances in the African financial stack,” Caddell explained. “Not just between the West and Africa, but also between African markets. In Nigeria, people use bank transfers a lot. In Kenya, M-Pesa is king and dominates. In Ghana, it’s MTN’s Momo, which is MTN’s mobile money.”

Such fragmentation makes solutions like stablecoins and bitcoin extremely attractive, at least in theory. As speakers gave their final predictions on the future of stablecoins, Ovadia’s remarks were conspicuously bullish: “Stablecoins will likely be the biggest disruption to the banking system,” Ovadia said. “And potentially replace it all together.”

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