Countries in the African continent are still notorious for an immature and fragmented financial ecosystem. That’s probably the reason for a quick upsurge in the use of Bitcoin and cryptocurrencies in African countries. According to the 2022 report of UNCTAD, 8.5% of Kenya residents, 7%+ South Africa’s residents, and over 6% of Nigerians frequently use digital currencies for domestic and international payments. Besides, the Central African Republic adopted BTC as an official currency in 2022, signaling a larger adoption of crypto in African finance.
Why Is Bitcoin So Attractive in Africa?
The overwhelming portion of Africa’s population represents low-income households and individuals with scarce access to traditional finance. People need to travel long distances and prepare extensive documentation packages to meet the banks’ requirements for opening an account. That’s why large populations remain underbanked or completely unbanked in Africa.
Additional risk factors for conventional finance use are the high degree of political instability in many African states, aggravated by economic stagnation and inflation risks. That’s why Africans are often reluctant to engage with their states’ national banking systems.
Amid all those troubles and complexities facing the economic system of Africa, cryptocurrencies have emerged as a relatively flexible and accessible payment method. In particular, BTC and stablecoins (like USDT or gold-backed coins) are perceived as more stable currencies compared to weak, fluctuating domestic currencies. An additional adoption contributor is the availability of peer-to-peer transactions, which removes extra fees for intermediary oversight. That’s why cryptocurrencies are increasingly used in all parts of the African continent for payments, remittances, and investments.
Business Opportunities Associated with BTC Use in Africa
BTC adoption is massive in Africa, with many crypto-remittance services launched in the past few years. The most popular projects are the Morocco-based Abra, GeoPay used in South Africa, and BitMari in Zimbabwe. The Kenyan BitPesa project has been functioning since 2013, enjoying over a decade of user trust in virtual remittance transfers.
With such a massive adoption of BTC and other cryptocurrencies in Africa, the continent can offer a goldmine of business expansion opportunities for Web 3.0 businesses dealing with decentralized payments. Crypto transactions are quickly gaining traction in African countries, and safe, reliable payment projects entering Africa have bright prospects in terms of user acquisition and payment volume processing.
Risks to Consider
Obviously, the excessive reliance of African users on cryptocurrencies should be approached with a certain degree of caution because of the inherent risks of crypto payments. First, the crypto market is largely unregulated to date, which weakens user protection and prevents central regulatory bodies’ oversight of local crypto projects. Second, many cryptocurrencies are highly volatile and unpredictable in value, so users should exercise caution and do their due diligence before buying cryptocurrency for various uses.
A sound solution to these problems is to deal only with reliable and secure stablecoins in the crypto market – those with a small degree of volatility because of unique tokenomics and pegging. For instance, USDT is pegged to USD and doesn’t pose volatility risks, along with many other stablecoins pegged to stable national currencies. The same goes for gold-backed tokens like Clinq.Gold’s CGT – a token with its value pegged to a gram of physical gold. Such pegging protects the users’ belongings and gives a double benefit of using gold-backed tokens as a medium of financial exchange and an investment object.
CEO & Founder at Clinq.Gold, Bank of Bullion | Keynote Speaker