Cryptocurrency transactions are growing rapidly in African nations. For a young, money-savvy population the speed, ease and cost-effectiveness of cryptocurrencies are helping it become a booming industry. Find out why this has happened, why Africa is a cryptocurrency hotspot and what the future holds for crypto use in Africa.
Africa is undergoing an economic revolution. This revolution isn’t led by banks, but by buyers and sellers of Bitcoin and other cryptocurrencies. Compare this to the Western experience of cryptocurrency where it’s mostly traded by financial speculators to turn a profit. In Africa, it’s more to do with commerce – the buying and selling of goods.
Individuals and small businesses in South Africa, Kenya and Nigeria account for most of this activity.
Africa and virtual money
Cryptocurrency is similar to mobile money which is an easier concept for African nations to adjust to in comparison to Western nations. In the West, banking systems are well established and institutions have a long, societal embedded history.
Africa is well poised to take advantage of cryptocurrency as the population of these countries are highly adaptable and have an entrepreneurial outlook.
Additionally, a high level of unemployment means that a large number of young people are adept at working on the fringes of traditional financial structures.
Cryptocurrency helps users avoid fiat instability
If you haven’t come across this cryptocurrency-related word, ‘fiat’ money is a currency (a medium of exchange) established as money, often by government regulation.
Unreliable local currencies and hyperinflation have played a role in fuelling the crypto boom.
For example, we can have seen this in action in Zimbabwe. When the Zimbabwean dollar skyrocketed in 2015, people turned to using Bitcoin.
African countries use cryptocurrencies for remittances
Overseas remittances are a crucial part of the economy for many parts of Africa. When compared to all other regions in the world, sending remittances to Africa is more expensive and by a significantly large margin. This can be as high as 20%.
Cryptocurrency is allowing the sending of remittances across borders much more cheaply. This is a key reason why Africa is a cryptocurrency hotspot.
One popular service is the remittance company BitPesa, based in Kenya’s capital Nairobi. BitPesa uses Bitcoin as a medium for international money transfers. This avoids bank fees and also skips the cost of converting money into different currencies.
What does the future hold for cryptocurrency use in Africa?
Like the whole of the cryptocurrency space across the globe, African countries are scrambling to create regulatory frameworks where increasing crypto use can be safe and compliant to local and national laws. Africa’s biggest economy Nigeria is leading the way having recently made cryptocurrency legal and issuing regulatory guidelines for digital currencies and crypto-based companies. The cryptocurrency space in Africa is certainly set for an exciting and vibrant future.
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