What Is Behind The Cryptocurrency Rise In Africa?

Brief Overview of Crypto’s Global Rise

Cryptocurrency is rapidly changing the world of technology as we know it. Andreas M. Antonopoulos, a Bitcoin Advocate and Author, defines cryptocurrency as “a decentralized digital currency, without a central issuing authority, that allows peer-to-peer transactions over the internet, without the need for a trusted third party.” This digital currency uses encryption (cryptography) for secure transactions and is based on decentralized blockchain technology.

The idea of digital currencies has existed for a while, but Bitcoin, created in 2008 by an anonymous person or group called Satoshi Nakamoto, was the first successful cryptocurrency. It combined blockchain, cryptography, and decentralization into one system, making it the first modern cryptocurrency. After Bitcoin, many other digital currencies, known as altcoins, emerged, offering improvements like faster transactions or better anonymity.

Ethereum introduced smart contracts, when it launched in 2015, allowing blockchain to support more complex applications beyond simple payments. Bitcoin’s value has grown over the years, with its price reaching $1,000 in 2013 and $20,000 in 2017 before crashing in 2018. The market, however, has grown since then, with cryptocurrencies becoming more integrated into various industries like finance, gaming, and identity management.

As of today, the global cryptocurrency market cap is recorded at $3.41 Trillion, a 2.2% change in the last 24 hours and 133.51% change one year ago. The market cap of Bitcoin (BTC) is at $1.87 Trillion, representing a Bitcoin dominance of 54.78%. Meanwhile, Stablecoins’ market cap is at $200 Billion and has a 5.86% share of the total crypto market cap.

The Increasing Adoption of Cryptocurrency in Africa

Since the inception of cryptocurrency, different African countries have responded differently to its adoption. According to BitcoinAfrica, the top five African Countries whose communities are adopting crypto currency and are blockchain-friendly markets include South Africa, Kenya, Zimbabwe, Ghana and most importantly, Nigeria.

Nigeria, with almost 13 million Bitcoin users as of the year 2021, is highlighted as the bitcoin paradise of Africa. Nigeria ranks 3rd after India and the USA for trading volumes of the most popular cryptocurrency in the world.

This year, saw a large number of people in Nigeria get onboarded into the crypto space with the tap-to-earn games, like Notcoin, Dogs and Hamster Kombat. With zero financial commitment, these games made it easy for people who were new to crypto to earn tokens, further heightening their curiosity about the opportunities in the space.

In a Bloomberg Podcast interview titled “How Africa is Riding the Crypto Wave,” two African reporters in Lagos, Nigeria and Nairobi, Kenya, shared the challenges crypto enthusiasts face in their respective countries and how they have been able to manage them.

For instance, in 2021, the Central Bank of Nigeria (CBN), ordered for the closure of all accounts operating cryptocurrency, as a result of its volatility. This year as well, the government blocked access to crypto exchange, Binance, and sued them for manipulating the national currency.

Despite these challenges, Africa continues to boast of a growing crypto economy.

What is the reason for the high rise of adoption in Africa?

There are so many reasons, this could be attributed to:

1. Age: According to the United Nations, Africa has the youngest population in the world with 70% of Sub-saharan Africa under the age of 30. The high number of young people is a great opportunity for the continent’s growth because they are inquisitive and tech-savvy, they are more likely to take huge risks. The efficiency and speed of Cryptocurrency is also a strong contender for why young people use it, as they don’t have to leave their houses to perform transactions.
2. Economic Conditions: In the last decade, Nigeria has suffered major recessions, with the collapse of oil prices that led to the high rise of petrol. Naira devaluation that led to inflation at over 30%. This economic condition has influenced the search for alternative ways to store money so it is worth the value, create investment plans, maintain purchasing power and undertake financial transactions with ease.
3. Job Creation: Asides, the fact that Cryptocurrency acts as a store of value, it also offers different ways to generate income which is very important in African countries with high unemployment rates. Rewards from proof of stake consensus mechanisms, building in the Ecosystem with transferable skills like web development, marketing, etc and even seeking out airdrops and giveaways, are a great source of potential income.
4. Financial Inclusion: Cryptocurrencies, right now, are viewed as a tool for improving financial inclusion. Cryptocurrencies operate on decentralized technology, providing fast, secure transactions without the need for banks or third parties. Through a basic smartphone and an internet connection, money can be sent, received and stored securely to anybody anywhere in the world bypassing traditional financial barriers like fees, rules and regulations. With smart contracts, private-key encryption, and strict collateralization requirements, crypto is arguably more secure than traditional banking systems.

The Future Of Cryptocurrency in Africa

The future of Cryptocurrency in Africa is a long and wide conversation but can be valued presently by statistics. Between July 2023 and June 2024, Sub-Saharan Africa represented 2.7% of transaction volume world-wide. As compared to last year, Sub-Saharan Africa has also seen growth in On-Chain value with an estimated $125 billion currently and a $7.5 billion increase from last year.

In Nigeria, for example, the December 2023 lift of the central bank’s ban on banks serving crypto companies in Nigeria has renewed momentum and further encouraged public participation in the space, opening up a lot of possibilities for partnerships and seamless transactions. The Securities and Exchange Commission (SEC) of Nigeria also introduced its Accelerated Regulation Incubation Program (ARIP) in June 2024 which requires all virtual asset service providers (VASPs) to register and undergo an assessment before full approval.

This is a welcome development as globally Cryptocurrency has seen the commencement of Exchange Trust Funds(ETFs). ETFs are investment companies that issue shares and must be regulated by the SEC. Like mutual funds, ETFs have stated investment objectives and use professional money managers to meet those objectives. The intent behind ETFs is to give retail and other investors exposure to cryptocurrencies without needing to own them. They are designed to allow more people to invest in crypto without the necessary expenses and hassles of buying them directly, eliminating the need for security procedures and excessive funds while providing a familiar investment type.These sorts of regulations create inclusion in the space.

Despite previous hindrances and restrictions, like banks still waiting for clear signals before fully entering the market, Nigeria’s crypto market continues to thrive. Speaking with a Crypto Coach and Tutor in Nigeria, he argued that a lot of young Nigerians and Africans currently lack knowledge of money management and that has seen people going to ground zero further confirming the government’s fear of volatility and lack of trust in the market. “After the market has given you profit, what do you use your profit for?”

Most Africans bank on luck more than feasible investments and this can be really difficult for sustainable growth. In his words,”You cannot go and splunge all the profit you have made back into the market. I personally feel that after profitability in the crypto market, diversification should come next”.

Cryptocurrency is the future of digital currency globally and Crypto Enthusiasts in Nigeria and Africa at large are bullish on the future opportunities the regulations will create in the space.