Here’s why Africa could be next frontier for cryptocurrencies

Countries leading in crypto markets in Africa currently are South Africa, Nigeria, Zimbabwe, Kenya, Ghana, and Botswana, which means some of the countries with double-digit inflation in the region -- Egypt, Ghana (9.8) Malawi, Mozambique, Nigeria, Zambia, and Zimbabwe -- are already hot markets for crypto currently.

Crypto, especially Bitcoin, is popular as a speculative investment tool and trading is common in places such as, although the infrastructure to facilitate spending crypto in day to day operations is largely non-existent. Just a few but notable companies/startups are also involved in local coins to facilitate digital payments and remittances locally and globally mainly in non-retail markets, and a few others are already using blockchain technology. The massive potential for blockchain and crypto is also manifesting through the entry of global crypto exchanges and crypto startups/companies/groups in the region.    

Most of the countries in Africa struggle with poor financial inclusion and where mobile money banking is helping alleviate that, transactions are still very costly, mobile money economies are mainly locked to geographical localities without actual opening of individual/group/company economies to global economies, and mobile money platforms in some cases do not turn out ideal for many situations due to one or two factors we shall see.

The first among the things to talk about would be the immense opportunities presented for blockchain and crypto, by the need to overhaul or make better financial services and make better financial inclusion in these areas, but hard economic times in countries such as Zimbabwe, including resulting inflation, have and will continue to push people the crypto way. Biting inflation, for instance, which forced the printing of $100 trillion notes (each worth just $40) by the Zimbabwe governments some years ago forcing many people to turn to bitcoin, and this market has been thriving since then.

Apart from inflation, though the mobile phone is never new in Africa, the subscriber base has only risen steadily in the recent past and not yet to global averages; it is expected to be 725 million subscribers by number by 2020, and this factor will make crypto apps much more accessible to many more Africans. For miners and stakers, currently, the desktop may still be the main way of accessing the internet, accessing computer services and doing their work, but internet and power costs are still way above global averages, with changes and further opportunities of growth probably expected with the incoming more renewable energy and 4G technologies, etc. 

Besides, the regulatory environment in Africa favors crypto not just because it is a borderless currency in its nature but because the regulatory environment where it would be needful for organizations such as crypto companies and banks, is largely friendly, or that any regulation is in-existent or the fact that crypto is by nature not a currency with geographical boundary and is not meant to be regulated by any government due to its nature.

These and other factors are likely to continue favoring crypto growth in Africa.

Need for financial inclusion

Africa and the Middle East record the lowest rates of financial inclusion and this makes worse poverty levels but also opens an opportunity for fintechs. For instance, Sub-Saharan Africa has the second-highest number of unbanked adults in the world with two-thirds of the about 350 million people, or 17% of the global total having no bank account at all.

As it may already be known, poor financial inclusion affects an individual's capability to access or tap into more and better financial services to better their future and their lives, including access to saving opportunities, credit and loans, and investments opportunities, locally or internationally. Participation in the larger financial services economy is hard under these situations, especially in this century. Both of these regions have word's most underbanked populations with cash cultures prevailing, but this present great opportunity for fintech and for expanding financial services.

Mobile money platforms have so far been great in increasing financial inclusion with statistics suggesting that the number of people using mobile platforms to send and receive or pay money has more than doubled than those using bank accounts for the same things. However, a lot of challenges remain such as high cost of transactions, high cost of access like in many cases one is required to have and to retain a mobile phone for a given period of time in months to access some mobile financial services and these devices are not cheap for everyone to buy anyway, and there are requirements such as credit scores to access loans and identification to own.

In addition, the mobile phone is used more than just a tool of communication and transacting today, and in cases of political and economic situation and instability like in Somali where there is high unpredictability, studies find that people may prefer even traditional forms such as cash, and gold or personal networks for lack of an option. In some cases, individuals may feel more secure and private to use other options that do not encourage tracking and other forms of manipulation and victimization -- remember political institutions, governance, and politics as a whole are not per with the world standards either.

In some cases such as Somalia where the political situation is only beginning to be re-established to normal, financial inclusion may not necessarily apply because of the question: inclusion to what if there is no universal government?

In places like Kenya where Mpesa has gained lots of popularity for financial inclusion, many still prefer using cash because it can be used to pay very small amount of money for goods and services compared to Mpesa, in many areas and for many people, cash is a deep entrenched culture or is easier to do with, and in areas where it is not possible to use mobile phones for transactions it means Mpesa and mobile money is not that common.

In many places in Africa, informal international money transfers are also very popular and many. Foreign remittances, for instance, is common for migrant working both within and between African countries. In fact, it remains a primary source of income for many African communities and households, with countries such as Lesotho purportedly attributing almost a third of their GDP to remittances from abroad. Yet, these may lack sufficient ways of remitting money directly, with speed and easily to their families and colleagues. Overall, these and other factors are creating a need for new ways of moving value such as the use of digital ledgers.

In comparisons, cryptocurrencies are very suitable for micro-transactions of any amount in any situation. They can suit donations, micro-payment for goods and services, peer-to-peer payments of low-value products and services, etc. Cryptocurrencies also do not require a lot of lengthy onboarding procedures to qualify for an account in order to transact or trade or invest -- no SIM cards and mobile money account to open and maintain for a given duration, and no complicated manual opening procedures such as visiting a bank or an agent; just to download and install a wallet from your computer; and hence the ease of access is also another factor that could favor cryptocurrencies. The low cost of access is also present because someone can still securely utilize a public computer at an affordable cost and still manage.

Besides, it is easier to access other services such as credit and loans, etc with cryptocurrencies, on a global scale. Soon, through tokenization, it will be possible for individuals in these localities to unlock markets of their local assets and open them to a global community, thanks to cryptos.

Inflation and financial problems in African economies

Crypto markets are not necessarily being driven by inflation in Africa. That is important to the state. However, as noted, countries with economic difficulties will be expected to be influential in the adoption of cryptocurrencies to a large extent. Inflation, ideally, is affected by factors such as monetary policies, political decisions, corruption, and debts. It arises due to wrong moves or attempts to fix these problems through inappropriately increasing and decreasing the money supply by using bonds, adjusting discount rates and reserve requirements, reserve banking/lending by commercial banks, etc. It also has an international aspect where the U.S. dollar is used to serve as a primary world-reserve currency.

While a small amount of inflation is not necessarily a bad thing when excess inflation with traditional currencies or fiat begin to occur, increase of prices of goods like food and medical supplies is witnessed and citizens might tend to switch to using more stable foreign currencies such as U.S. dollar in order to hedge against inflation. For instance, biting inflation in Zimbabwe caused citizens to not only turn to foreign currencies such as the South African Rand, Malawian and Zambian Kwacha. Cryptocurrencies can thrive in these economies because the value of anybody's earnings/savings decrease if there is long term inflation.

Hyperinflation can be very hard to solve once it manifests, sometimes lasting decades. A good example is in Zimbabwe. Just last month, the Zimbabwean Congress of Trade Unions threatened mass protests against a government's decision to ban the use of U.S. dollar and other currencies as a remedy to an ongoing inflation crisis. The government is insisting on the introduction of the Zimbabwean dollar to allow it greater control over the nation's economy. This is even as a large portion of the people favor economic stability over government control. While in many cases government control over monetary policy is favored, because people in most cases trust the government, it is unlikely that they will trust it more than the U.S.D or digital currencies with a global reach.

Zambia's National Economic Advisory Council Oswald Mungule has also recently urged the government to adopt a digital currency to solve its economic problems such as foreign currency shortages, stunted industrial production and a failure to sustain its own currency value. He said the country should learn from World Bank which invested in Tether (USDT). He said the country could create a stable coin for bigger companies to make international payments and can peg this on gold or diamond which have a stable value.

Cryptocurrencies can fix some of the issues of or related to inflation and inflation itself or other economic problems because they have global appeal and value. Better still when we have stable coins today. Citizens, governments, and companies can be able to peg value to them or use them as a store of value and also for buying goods and services online and offline, making investments, getting access to credit at predictable rates compared to local currencies when faced with excess inflation, and for financial inclusion.

Without forgetting the fact that if cryptocurrencies can be used alongside blockchain for public sectors, then countries can be able to get rid of corruption because transactions are not only easily verifiable but also trackable in addition to cryptographically securing systems against hacking. Blockchain and smart contracts can also help improve the efficiency and cost of transacting.

Using "technology as an answer" to public, social, organizational and individual issues

The push to use blockchain for enhancing private and public sectors of the economy is not happening just in developed worlds but also in developing worlds. In fact, African economies are bound to be the largest beneficiaries of implementation of blockchain because they have a greater need to improve efficiencies of and efficacy to their processes than developed worlds. The fact that they have more to fix and the fact they have knowledge of these technologies already means they can "leapfrog."

Public sectors in many African countries, for instance, can use blockchain to solve issues such as corruption, fraud and tax evasion by using digital currencies that ensure verifiability of transactions and more transparency; digitizing identities and remove need for duplications across government and private sectors; and for enhancing international trade through international settlement and payments. Blockchain can be used in almost any sector of the economy including agriculture, trade, education, tourism, voting, etc.

At the same time, just like in any other parts of the world, crypto is likely going to be used more as more individuals and companies seek alternative investment avenues, seek investment diversification avenues, and open up to global markets in areas such as credit, investment, and trading; and as individual organizations and persons learn to use the technology to do transfer of value and to do remittances at lower costs.

Increase of adoption of other technologies such as the mobile phone will also encourage the use and increase access to cryptocurrencies as digital forms of transacting, trading, investment, and spending.

Regulation of crypto

Like in most countries around the world, crypto is dealt just like it is supposed to; a form of digital currency that cannot be regulated or that requires no regulation by any government. It does not have any borders in its use and application. Even in countries like Zambia that have tried to frustrate efforts of its penetration, trading, investment and other things crypto is still on-going.

It is expected that the mass adoption of crypto will continue to grow in Africa. In certain situations where crypto companies may require dealing with regulated banks and financial institutions, the issues are expected to be similar for crypto companies elsewhere because banks and financial institutions may require to adhere to some type of defined regulation to stay adhering. Hence in a way, regulation in these situations would help. Nevertheless, there are many companies already using crypto and blockchain in Africa and even some digital coins already providing good examples of how crypto can succeed in Africa.

That said, where clear regulation may be key for crypto operations such as in and with banks, most of the African countries do not have a clear regulation specific to cryptocurrencies and very few or none have regulation barring crypto trading, investment and transactions. Most have adopted a wait-and-see approach with regard to regulation, and while countries such as Zambia, Zimbabwe, and Namibia have a hard stance, others such as Mauritius are regional front-runners. Mauritius, for instance, has a regulatory sandbox which demonstrates a progressive take on general economic benefits that could make them adopt a friendly regulation for cryptocurrencies.

No country in Africa appears to have a distinct regulation specifically banning use of crypto although a number of their regulatory bodies and central banks have issued statements that crypto investments and transactions are not protected in law for those engaging in them and that those doing so do them at their own risk since there can be related fraud and other problems. Of course, in most cases, laws in most of these places have clauses that traditionally protect anything under an individual's ownership as ownership rights and bar any form of fraud, money laundering, theft, and other forms of crime. Maybe just not yet those directly addressing cryptocurrencies.

A number of central banks such as in Kenya and Nigeria have issued their advisories and recommendations to the public to warn against getting involved in cryptocurrencies but no regulation yet forbids trading, investing and transacting in crypto. South African regulators are working with fintech and banking industries to find the most effective and appropriate way of regulating crypto in the country. Kenya's recently appointed task force recommended the creation of a country's digital currency and also posted a number of recommendations that would help the government in adopting and using blockchain and digital currency.

In South Africa, The National Treasury’s Taxation Laws Amendment Bill 2018 recommended tax legislation including changing classification in South Africa and The South African Reserve Bank published its review of the National Payment Systems Act, 78 of 1998for public comment. The act regulates payment settlement systems. The bank reportedly intends to completely overhaul the present regulation by 2020. The South African Revenue Services (SARS) said last year it will continue applying normal income tax to cryptocurrencies and expects taxpayers to declare crypto-asset gains.

In 2017, the Lesotho Central Bank barred the operation of individuals and entities that promote investment in cryptocurrency because any and all investment advisors must be licensed but there are still no laws that bar the activities. In Nigeria, use of crypto is prohibited by The 2018 Financial Law of Algeria. In Bahrain, the governor has previously said using Bitcoin in the country is illegal but citizens can invest in crypto outside the country. Other countries prohibiting the use of crypto include Iraq.

David Kariuki

David Kariuki likes to regard himself as a freelance tech journalist who has written and writes widely about a variety of tech issues that affect our society daily, including cryptocurrencies (see and; climate change (, OpenSim and virtual reality (see He is currently pursuing a MSc in Environmental Management at Open University. He does write here not to offer any investment advise but with the intention of informing audience, and articles in here are of his own opinion. Anyone willing to use any opinion here as advise to invest in crypto should obviously take own responsibility and accountability of their losses (or benefits) thereof. You can reach me at [email protected] or [email protected]

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