The rhythm of technological advancement that the financial industry has been experiencing in the past decades is making headlines worldwide. Among the extensive list of tech-related enhancements, mobile banking, blockchain technology, and cryptocurrencies are hitting the financial industry hard, deeply impacting how people handle their assets and bringing more convenience, safety, and flexibility to their financial lives. The popularity of cryptocurrencies as an alternative to traditional money spread quickly among many international hubs, including the African continent. As the second most populous continent in the world and the third largest growing market, Africa is a promising land for new industries, ideas, and technologies, and it has welcomed crypto coins with open doors. As this field keeps taking steps in the right direction, we understand more how it is connected to other matters and what to consider to follow up with how it unfolds. Here are a few points to keep in mind.
Interest in the field and access to education
We have been working closely with projects that can reach different populational groups in Africa, including those that are still overcoming the challenges that lack of education might have posed in their personal and professional journeys so we for sure know a lot about this scenario. Currently, more than 60% of the African population is young, which means that a massive parcel of the continent is still looking for opportunities to guarantee their future and financial stability. Africa has the highest crypto adoption flow worldwide, and this positive uptake is linked to the percentage of youth growth in the territory that has already surpassed 90% in the past year. With so many African citizens below the age of 25 searching for the most modern and reliable fields to invest in, it is impossible to separate the success of cryptocurrencies in Africa from this group’s set of interests and necessities. This correlation becomes even more evident if we consider that these youngsters probably witnessed many past generations suffering the consequences and struggling to overcome the heritage left by a history of civil wars and colonialism, which made their countries stuck with a myriad of social issues caused by extreme poverty, economic volatility, and financial crises. These are the ones that are likely to navigate every new possibility to improve their quality of life and acquire more knowledge, and these are the ones that have the power to transform the crypto market with fresh skills and willpower.
The fast adoption of cryptocurrencies in Africa may also be related to the volatility of traditional currencies, which has everything to do with the instability many African nations have to deal with in their economic and political scenarios. This combination of facts, in turn, affects how the market works, causing prices to surge all of a sudden or crash land unexpectedly. In developing economies, traditional fiat currencies are strongly susceptible to devaluation when a wave of hyperinflation happens. In Africa, some inflation rates are particularly concerning compared to other territories around the world. In Zimbabwe, for instance, the inflation rate reached as high as 97% last year. The consequences of hyperinflation go beyond the financial scope and can affect the political arrangements of a nation and bring severe consequences to citizens’ quality of life. Cryptocurrencies have a more stable store of value, which is why it has been gathering attention as a solution and viable possibility to overcome the struggles in high inflation African territories. However, something else is to be considered here, which may explain why cryptocurrencies are still not the go-to solution in every emerging African economy. When it comes to fiat currencies, governments can create initiatives to intervene and diminish the impact of market fluctuations, so there might be a way out of hyperinflation traps. However, when it comes to cryptocurrencies, due to the current lack of official regulations (in most cases), the ups and downs of the market are still uncontrollable and dependable on the actions of big stakeholders.
International market and trading
The fact that cryptocurrencies are becoming widely accepted in many countries and contexts means they have also become an essential part of international trade. Before cryptocurrencies, the bureaucracy behind cross-border payments is for sure a factory that hampers exchanges and negotiations that can bring considerable benefits to developing countries. On top of that, there is also the challenge of closing international negotiations using different currencies, an issue particularly present in the African continent since many countries have to handle the consequences of having fragile currencies compared to other major, stable economies worldwide. In this case, crypto coins might be a great solution to take the devalued fiat currencies out of the spotlight and create a more reliable ecosystem for investors and new businesses. Moreover, cryptocurrencies simplify receiving and sending money abroad, which can be a groundbreaking solution for nations with inefficient banking systems. In this case, safety issues are also improved, as crypto-based transactions make international trade less risky.
Access to mobile technology and banking services
It is estimated that more than 60% of the African population remains without access to a stable banking system and an individual bank account. This percentage has been reduced in the past years, and the continent registered more than 300 million citizens with new bank accounts in the past five years, which represents a promising scenario for crypto development as it is directly associated with financial education and freedom. With more citizens able to control their financial assets, novel technologies like blockchain have become even more feasible and worthy of attention. Another critical number that must be considered when discussing crypto uptake in Africa is mobile phone penetration, as crypto-technology is highly dependable on access to the Internet and convenient technologies like a smartphone, for instance. Since 2017, Africa has been experiencing a boom in mobile subscribers, but due to financial constraints, not all are smartphone users. However, with the smartphone market becoming more accessible, this scenario will likely keep improving. Many economies in Africa have been positively impacted by the rising number of smartphone owners, which also affects and widens the financial possibilities of this group of users. With more opportunities to access knowledge, systems, and solutions with a couple of clicks, it won’t be long until even more African citizens become leading actors in the crypto industry.
Infrastructure and electricity
The costs of generating and efficiently distributing energy are high everywhere and, in Africa, financial constraints have long been negatively affecting the quality of life of a good percentage of the population when it comes to basic daily resources like electricity. The energy consumption rate to keep the crypto market functional is astonishing, which means that in developing economies where access to electricity might still be a luxury, making progress in this particular industry can be pretty challenging. A quick comparison to illustrate the concern: crypto mining currently uses seven times as much electricity used by Google to keep its operations worldwide each year. As computers in the bitcoin area are required to handle much more complex algorithms and functions, thinking about the infrastructure behind the use of such high-tech machines is part of the process. As we discussed in this article, there are a few steps that need to be taken care of before we look into the details of massive crypto adoption in Africa. Making sure that electricity is no longer a common missing item in many African households is definitely one of them.
Raymond Sze is the managing director of Solocas, a global gaming company. He is a serial entrepreneur with an eye for strategic marketing and a passion for e-gaming. Raymond brings over a decade of business experience from the e-gaming industry to KamPay, some of which includes his time as CEO to a global gaming company.