Africa is among the most crypto-friendly areas in the world, with many Africans seeing digital assets as an attractive long-term investment. The increasing popularity of cryptocurrencies has resulted in many merchants accepting them as a form of payment. And the COVID-19 pandemic seems to have played a significant role in adopting digital currencies, as the economy faced turbulent times, and people started looking for alternative ways to diversify their portfolios.
Although their price has dramatically reduced in recent years, there is still high demand for digital currencies, with many holding onto them, hoping for future opportunities.
Cryptocurrency Adoption in Africa
Crypto is evolving at a fast pace in Africa, as the continent has many tech-savvy individuals who see the potential of this technology to improve financial inclusion and allow them to have more control over their money. Bitcoin has the highest adoption rate in the country, with 50% of individuals in the crypto community owning BTC, followed by BNB, with 33% adoption, and Ethereum, with 21%. Most crypto investors in Africa are millennials, with 54% of men owning digital coins compared to 46% of women.
In Africa, crypto is mainly used for remittances, as traditional methods are both costly and time-consuming, which is an issue in African countries where the levels of international immigration are high. However, cryptocurrencies provide a solution because they are fast and cost-effective, enabling individuals to complete cross-border transactions cheaply and quickly. Moreover, Africans use digital assets for investing purposes, seeing them as a great way to create a well-balanced portfolio and protect their wealth in uncertain economic times.
The regulatory environment for traders in Africa differs depending on the country. For instance, in Nigeria, there are clear guidelines regarding digital assets, with the government providing educational resources for the population on how the crypto sector works. On the other hand, other countries like Tanzania and Uganda have a much more restrictive approach to cryptocurrency regulation. In Tanzania, crypto trading was even banned in 2019.
How Bitcoin Has Fueled the Adoption of Digital Assets in Africa
Since its introduction, Bitcoin has become a leading cryptocurrency globally, and its growing popularity has played a huge role in adopting digital assets in Africa. Besides Bitcoin, other alternative currencies have been developed over time – at the moment, around 22,932 digital assets are available on the market.
Many countries have hesitated to adopt crypto due to its volatility, as no institution can control the mining process on personal computers. For this reason, it has been seen as too risky, with many being skeptical about its potential to revolutionize finance and provide the freedom it promises.
However, many reputable companies have gradually embraced cryptocurrencies like Bitcoin, including Microsoft. This has resulted in young Africans becoming more open to this new technology and realizing its value and benefits. Bitcoin provides a source of development for African countries, which can decrease the corruption rate to a certain level. This currency is young, but as it has already proven over the years, its potential is huge. So, unsurprisingly, crypto experts believe that in the future, Bitcoin – and other popular cryptocurrencies- will lead to impressive trading volumes, allowing Africans to transfer virtual remittances internationally.
Challenges That Limit the Adoption of Cryptocurrency in African Countries
While the conditions for crypto trading in Africa are still developing, some challenges can impede the adoption of digital assets, such as the lack of proper infrastructure. Only 20 Bitcoin nodes are available in the continent, with an even lower figure for Ethereum. These figures show that Africa has an unequal distribution of cryptocurrency infrastructure, which can pose problems in terms of its adoption. Another issue is the underdevelopment of the Bitcoin Mining Network, with Africa accounting for 0.24 percent of the total BTC Lightning nodes available worldwide. According to a crypto expert’s report, it seems that Bitcoin mining activity does not actually exist in Africa.
Moreover, crypto mining requires high-speed internet; however, in most countries, it lacks. Therefore, it’s challenging for crypto to be highly adopted in the continent unless each country has a good Internet connection. Luckily, this issue is already being tackled, with ISP companies like Telekom taking steps to expand Internet access in the continent. As a result, crypto adoption can rise exponentially.
What Is the Future of Crypto in Africa?
Cryptocurrencies are unpredictable, and it’s hard to tell for sure how they will perform in the future. However, there is a growing population of tech-savvy individuals open to this new technology, so the market may grow significantly in the years to come. There are, however, a few challenges impacting cryptocurrencies’ success in Africa, such as legislative frameworks and limited infrastructure. These issues must be addressed so that digital assets can help Africa overcome economic development and financial inclusion struggles. Crypto can significantly impact remittances, which would considerably benefit families working in other countries to provide for their loved ones. Unfortunately, traditional remittance services are associated with high fees, which can be a true burden. This is where crypto comes to the rescue, allowing people to send money timely and cost-effectively. But remittances aren’t the only area where digital assets can make an improvement. Cryptocurrencies can also boost the economy in Africa by creating new job opportunities. Besides, blockchain – the technology behind these assets- has value in many industries, including healthcare and agriculture, so embracing it would make a tremendous difference in how businesses operate.
While tighter regulations are clearly needed to protect citizens’ financial assets, cryptocurrencies indeed have the potential to revolutionize investment in Africa and lift individuals out of poverty. There are risks associated with digital currencies, but if Africans get educated on how the market works, the continent could become a frontier for this technology. Crypto should be treated like any other type of investment in the market, as it comes down to identifying the right opportunities and developing an efficient strategy while mitigating possible risks. Overall, the future of crypto in Africa looks bright – even though many coins have fallen away, some of the technologies will clearly become mainstream, whether through financial services built on the blockchain or digital identity. And that, alone, provides great value.