Cryptocurrency Use In Africa

For centuries, Africa has been in the shadows of the world and economic growth. As a continent, Africa is home to more than one billion people who are still largely living without basic needs like access to health care, education, and sanitation. As a consequence, the region is in dire need of an economic revolution.

To date, major breakthroughs have been reported in several parts of Africa in the advancement of digital financial services as a means to propel the continent's growth. In fact, these developments are poised to transform this sector through overall digital financial service growth, creating more than 2 million jobs by 2025 and contributing more than $400 billion to the GDP by 2030.

This is because both businesses and individuals need banking services (like mobile banking) to make payments and access credit with convenience using their mobile devices, all backed by strong security for their funds.

In this post we will dive into the use of crypto in Africa. There are currently many projects that offer solutions for many of these issues using blockchain technology and cryptocurrency. We’ll take a deeper dive into what these projects are trying to accomplish and how they plan on accomplishing it over time.

While blockchain technology opens up a world of opportunity, there are still challenges ahead with regards to adoption. If blockchain technology only allows people to transfer currency faster than governments can print it out of thin air, there will not be enough value added for African citizens. This means that blockchain technology has to do more than just make the money transfer process faster. Many Africans would love to pay for their online games and not just play free slots. 

While blockchain technology is used for monetary transfers, it is not well suited as a store of value due to its volatility. Some projects in Africa are attempting to solve this problem by creating stablecoins which are cryptocurrencies which are pegged to a fiat currency such as the USD. The most notable stablecoin is Tether (USDT) which was recently hacked and lost a large sum of USDT tokens from their circulating supply.

There are also projects within Africa that are attempting to create cryptocurrencies that can function both as a currency and store of value, and one of the most well known in this area is ICON (ICX). ICON is a public blockchain platform that allows decentralized applications to be built upon it.

One of the major challenges with a decentralized platform like ICON is speed. For people living in Africa, speed of transaction processing is vital for ease of payment and access to basic needs. There are multiple projects in Africa that aim to improve blockchain performance by adding lightning network technology on top of their systems, which significantly increases transaction speeds.

As the demand for solutions to bring African nations up to speed with the rest of the world grows, digital financial service companies will have not only an opportunity, but an obligation to help, which will create jobs and economic growth in Africa. Already 1 out 3 Africans are using mobile money instead of cash due to its convenience.

Some of the most notable countries that have embraced cryptocurrency in Africa include:

-Ethiopia-

Ethio Telecom (ETL) is the country's largest telecommunications company, and are among the first to have a blockchain based telecommunication platform. The company helped the government of Ethiopia and local blockchain group Hamlech establish a public blockchain network in order to simplify communication between private sector firms and local authorities. Etlico , an Ethiopian mobile carrier has also partnered with Abaixa Networks , a domestic private blockchain development company.

-Kenya-

Kenya's geothermal sector has been utilizing cryptocurrency for international transactions through mobile money since 2014. The telecommunications company Safaricom recently announced that they will be utilizing blockchain based platform called Bitbillions to record international transactions and support cross-border remittance services.

-Morocco-

The Moroccan government is preparing Moroccan banks to start banking in cryptocurrencies by the end of 2017. In January 2016, the Ministry of the Economy and Finance adopted a ministerial decree on cryptocurrencies. In September 2017, Morocco's largest bank, Banque Centrale Populaire, launched its own cryptocurrency exchange platform. Among its clients are major multinational companies such as Air France and IBM.

-Nigeria-

In 2015, the Nigerian Economic Summit presented a plan for a $500 million "e-money" project in the country. The Nigerian central bank is also working with blockchain institutions to launch its own crypto exchange platform. According to Reuters, "Nigeria has been notably relaxed about cryptocurrencies over the past year."

-South Africa-

On October 10, 2017, South Africa's central bank announced that it had developed their very own cryptocurrency called Bitcoin (XBR). The Reserve Bank of South Africa released a statement that they are creating the coin with no intention of actually issuing it. Ripple and Ethereum may also be used by banks in the country for cross-border payments. The Reserve Bank of South Africa helped establish the African Blockchain Partnership. The partnership consists of 18 African central banks, 5 financial regulators, and 19 commercial banks.

-Tanzania-

Recently, the president of Tanzania used his Twitter account to announce that the Central Bank of Tanzania is working on an innovative blockchain system that will be able to hold 100 times more than bitcoin. This includes private and public sectors making payments to each other in real time using mobile phones. Many internet users have been waiting for a mobile app like this to be released in order to make their lives easier and access banking services using their mobile devices from anywhere with no internet connection.

-Uganda-

The Ugandan Finance ministry recently announced that the government is in the process of drafting regulations on cryptocurrency. According to an official statement, "The Ministry [of Finance] recognizes that virtual currencies have grown in popularity and usage especially among youth." They continued by stating that "the increased use of digital currencies will bring financial innovation but also risks. The [Ugandan] government is therefore developing regulatory framework to promote safe and proper use of virtual currencies."

-Zambia-

Zambia's Financial Sector Regulatory Authority (FSRA) stated that it will soon be regulating the country's cryptocurrency exchanges. The FSRA plans on creating a new regulation based on the Foreign Exchange Management Act (FEMA). This regulation will act as a legal framework for the country's cryptocurrency industry.

These are just some of the countries that have actively embraced crypto.  The blockchain industry is growing and countries are starting to take notice of how beneficial this can be for them. Over time, most countries will have found a way to work it into their systems.