Since the downfall of Sam Bankman-Fried, and the SEC’s prosecutions against Binance and Coinbase; the crypto market has been laying low on the global market. Bitcoin, the world’s most prominent crypto, is currently down almost 60% from its peak, while Ethereum has declined nearly 65% from its all-time high. But in African financial markets, the crypto market is gaining ground as more people started to use it for transactional purposes.
Research conducted by global crypto consultancy firm Chainalaysis has shown that “although Sub-Saharan Africa has consistently been one of the smallest cryptocurrency markets, a closer analysis reveals that crypto has penetrated key markets and become an important part of many residents’ day-to-day lives.” According to Chainalaysis, Nigeria is the second-largest market for digital assets and the first in Africa. And this is due to a number of factors.
First, the desire for a high level of financial inclusion. Many Nigerians do not have access to traditional banking services, making cryptocurrencies a more attractive option. Second, the remittances. Indeed, cryptocurrencies can be used to send and receive money quickly and cheaply, which is important for many Nigerians who have family members living abroad. And third, investment opportunities. Cryptocurrencies are certainly seen as a risky but potentially lucrative investment opportunity by many Nigerians and Africans overall.
In addition to these specific benefits, cryptocurrency also has the potential to address some of the broader challenges facing Africa, such as poverty, corruption, and inequality. For example, cryptocurrency can help to reduce poverty by providing people with a way to store their wealth in a secure and inflation-resistant manner. It can also help to reduce corruption by making it more difficult for corrupt officials to launder money. And it can help to reduce inequality by providing everyone with access to the same financial system.
Nevertheless, the use of cryptocurrencies on the continent presents some serious challenges. First, it is the volatility. Cryptocurrencies are known for their volatility, which can make them a risky investment. Second, it is the limited infrastructure around the crypto market. Access to the internet and smartphones is still limited in many parts of Africa, which can make it difficult to use cryptocurrencies. Third, it is the risk of scams and fraud. Those in favor of regulations have argued that the lack of regulations in the crypto market encourages such inconvenience to potentially occur. The question of whether the crypto market should be regulated or not remains a debated issue.
In Kenya, the cryptocurrency startup BitPesa is already being used to send and receive remittances. In Nigeria, the cryptocurrency startup Luno is helping people to buy and sell cryptocurrencies, and in South Africa, the cryptocurrency startup Paxful is allowing people to use cryptocurrencies to purchase goods and services. These are just a few examples of how cryptocurrency is being used in Africa today. As the technology continues to develop and become more widely adopted, we can expect to see even more innovative and impactful use cases emerge.
Overall, the future of cryptocurrencies in Africa is uncertain. However, the growing popularity of cryptocurrencies suggests that they are likely to play a significant role in the financial landscape of the continent in the years to come.