Africa as a Bitcoin continent – an underestimated crypto haven?
Africa has so far played a minor role on the big crypto stage. Yet the continent holds huge potential, not least thanks to the rapidly growing crypto adoption among the population.
Nigeria is arguably the economic powerhouse of the African continent. In 2019, its gross domestic product (GDP) was almost 450 billion US dollars. This is roughly equivalent to Austria’s GDP (398 billion euros). Furthermore, a phenomenon can be observed in Nigeria that is exemplary for large parts of Africa. Crypto-adoption is more advanced in the West African republic than anywhere else in the world. This is confirmed by a Etherreum Code survey conducted by the data portal „Statista“ in 2020, according to which 32 percent of respondents stated that they had already owned or used cryptocurrencies. For comparison: in Germany, this figure was 5 percent, according to the survey.
Nigeria is not an isolated case. However, in order to determine the reason for this high crypto acceptance, one must first understand how payments are processed in large parts of Africa. The continent lacks a solid financial infrastructure. There is often a lack of ATMs, cash registers or bank branches. Also, hardly any Africans have a credit card. The payment networks are therefore very different from those in industrialised countries. In addition, the fees that banks charge for transfers are often exorbitantly high.
The solution to these infrastructural problems is in the pockets of many Africans: the smartphone is becoming the most important tool when it comes to everyday transactions. Be it grocery shopping or paying electricity and water bills, all the way to paying school fees. A large part of the transactions is done via mobile devices, such as „EcoCash“, a payment provider of the telecommunication company „Econet“ from Zimbabwe. However, the market leaders are Vodafone, Orange and MTN. African authorities sign contracts with mobile payment providers, giving them national or even international monopolies. This is attracting critics, who mainly criticise the level of the transaction fees.
Cryptocurrency as an alternative?
In addition, many African countries suffer from strong currency devaluations and instability. Citizens‘ savings are becoming smaller as a result. For example, the South African Rand (ZAR) lost over 50 per cent of its value against the US dollar in the last decade and is consistently one of the most volatile fiat currencies in the region. Nigeria, Egypt, Algeria, Ethiopia and Ghana have similar problems with their own currencies
These are the problems many Africans face with cryptocurrencies. By transferring digital currencies via crypto exchanges, they can circumvent the deficits of fiat volatility. A report from analytics firm Chainalysis, noted last September that crypto activity has increased across much of the continent. Monthly crypto transactions under US$10,000, for example, increased by 55 per cent. In June 2020 alone, crypto values of US$360 million were thus transferred. Ray Youssef, CEO and founder of the crypto platform Paxful, even observed new business branches where users set up entire remittance businesses on his exchange. In the process, entrepreneurs collect money, exchange it for bitcoin, for example, and send it to a wallet abroad, where the BTC is then converted into the domestic currency.
Young, tech-savvy generation in Africa
Africa’s crypto boom is also fuelled by high unemployment. Young, tech-savvy people are shunning traditional job sectors and looking at new ways to make money. Donaldson Sackey is a case in point. Born in Togo, the former professional footballer founded Timeless Capital after graduating from Harvard University. In a conversation with BTC-ECHO, he named the goals of his crypto project. With the help of his token, the Timeless Capital Coin (TCC), Sackey is trying to solve the inflation problems of the national African currencies. In the long term, he wants to establish TCC as an international means of payment. To achieve this goal, Timeless Capital is already cooperating with industries in sports and gastronomy and is currently in talks with large mobile phone companies, including MTN and Orange, to integrate TCC into their payment networks.