Let’s start by defining cryptocurrency, a cryptocurrency or “crypto” is a digital or virtual currency that can be used to buy goods and services, but cryptocurrencies are mostly traded for profit. Cryptocurrency uses an online ledger with strong cryptography to secure online transactions which makes it nearly impossible to counterfeit or double-spend.
Since Cryptocurrency is internet based, it is not bound by geography. Many cryptocurrencies are decentralized networks based on blockchain technology, which is a specific type of database where transactions are stored. Decentralized blockchains are immutable, which means that the data entered is irreversible.
The 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap include Bitcoin, Ethereum, Tether, Binance Coin, Cardano, XRP, USD Coin, Dogecoin, Polkadot and Uniswap. Bitcoin was leading with a market capitalization of 740 billion dollars as of 4th August 2021. Bitcoin also leads the pack in Africa.
Cryptocurrency in Africa.
According to DW, Africa is rarely listed among the top cryptocurrency markets, but it may be on the verge of overtaking others. In a continent where mobile money is already widely used, virtual currency provides benefits to a young and tech-savvy population.
Part of the problem facing digital currency ratings in Africa, apart from the lack of reliable and affordable internet, especially away from urban areas, is the different levels of financial literacy. Most people do not know the types of investments other than basic issues such as castles and land or shares.
Inflation and Cryptocurrency.
As written by Africa Renewal ’s Mr. Rakesh Sharma, a business and technology journalist, says that citizens of countries battling high inflation are likely to opt for cryptocurrency, because “with their paradigm of decentralization, cryptocurrencies offer an alternative to disastrous central bank policies.”
When Zimbabwe’s inflation skyrocketed in 2015, forcing authorities to print $100 trillion notes (each worth just $40), some Zimbabweans turned to Bitcoin. It is no surprise that some of the countries with high inflation are among the main Bitcoin economies in Africa. The main Bitcoin countries are Botswana, Ghana, Kenya, Nigeria, South Africa and Zimbabwe. The BBC adds that cryptocurrency is gaining ground in Uganda.
Africa’s burgeoning diaspora has also gotten on the bitcoin bandwagon in order to transfer remittances more cheaply across borders. That’s a logical decision. Bank transfers are too expensive for Africans in the diaspora transferring money home. It can be as high as 20%, but there are several cryptocurrencies that enable sending of money back to Africa basically for free.
BitPesa, a remittance provider established in Nairobi, accepts Bitcoin as a payment method for international transactions. This saves money by avoiding bank fees and avoiding the expense of currency conversion. BitPesa, a Kenyan company founded in 2013, permits virtual remittances transfers to and from people’s mobile wallets, where cryptocurrency is held, to both African and international destinations.
There are other cryptocurrency-based remittance businesses, Abra, which operates in Malawi and Morocco, GeoPay in South Africa, BitMari in Zimbabwe, and London-based Kobocoin, founded by Nigerian entrepreneur Felix Onyemechi Ugoji, are among these businesses.
Governments and cryptocurrency.
Not to be left out, some governments are moving into the virtual currency terrain. Tunisia’s eDinar is a government-issued digital currency. Following in Tunisia’s footsteps, Senegal in 2016 also launched a blockchain-based national digital currency. Known as eCFA, the digital currency is legal tender with the same value as the current currency, the CFA Franc, which, if successful, could be emulated by other Francophone countries in Africa.
“There will be government-issued cryptocurrencies in Africa in the near future”, predicts Shireen Ramjoo, CEO of Liquid Crypto-Money, a South Africa-based cryptocurrency consulting firm.
A number of African countries are looking to launch their own virtual money, backed and issued by central banks, as appetite for digital currency grows exponentially across the continent. According to Quartz Africa, the “mushrooming of private cryptocurrencies” has also sparked interest in a regulated digital ecosystem in Kenya, with the country’s central bank saying it has initiated discussions with global players about central bank digital currencies.
African governments are accelerating efforts to build a secure ecosystem for digital currencies, an example is Tanzania, which has set up a team to work on a directive from President Samia Suluhu that called on the country’s central bank to ‘prepare for cryptocurrencies’. The team is to ‘advise government on policy, legislation, and guidelines for effective use of technology’.
Clearly Africa has embraced Cryptocurrency, the U.K.-based crypto company Luno, for instance, reports that 4.7 million of its 7 million global customers are in Africa , an amount that has doubled in just one year, from the 2.3 million in 2020.
DW wrote that it’s still too early to say how widely adopted cryptocurrency will become in Africa, Ghanaian cryptocurrency marketer Elisha Owusu Akyaw believes it’s something young Africans should consider looking into.
“It’s a no brainer in the sense that that’s where finance is going,” he said.
“A lot of big brands initially dismissed the potential of cryptocurrency, saying it was just going to vanish. It’s been over ten years and cryptocurrency is still growing, it’s still getting stronger.”