African countries have always been acquainted with the brisk implementation of digital solutions and technologies. From the use of mobile phones to e-payment platforms, they have always been up-to-date. However, the extent to which blockchain and cryptocurrency have been embraced in African countries is varied.
While several African countries are taking full advantage of the cryptocurrency space, there are also countries whose governments remain unreceptive. There is the issue of regulation, the need for it, and the lack of proper crypto infrastructure that will enable fast-paced access.
Studies have shown that the main pioneers of cryptocurrency in Africa are countries such as Botswana, Ghana, Kenya, and Nigeria. This article will outline the latest developments taking place in the above-mentioned African countries, and what it means for their future in cryptocurrency.
Primitively, the adoption of cryptocurrency in Botswana was welcomed with indifference and a lack of official stance. This indifference was followed by a decision by the Bank of Botswana (the central bank of Botswana), to not regulate cryptocurrencies. Meetings conducted by firms in the country with the government officials to discuss the potential use of blockchain technology showed that the officials were skeptical about what advantage lies in their adoption of the technology.
Despite the lack of regulation, there was the development of several blockchain start-ups in Botswana:
- Kgoboko: This start-up was founded to attend to the needs of those who do not have access to the services of banks or financial organizations.
- The SatoshiCentre and Plaas: This was established by Alakalani Itireleng in 2014. The SatoshiCentre was initiated to create awareness and spread the word about Bitcoin across Botswana and Africa. Since its inception, it has successfully introduced bitcoin to entrepreneurs across the country thereby creating room for a community of individuals who are interested in blockchain technology. Plaas is a start-up launched under SatoshiCentre to enable farmers to manage their daily productions on the blockchain spectrum.
On the future of crypto in Botswana, the founder of SatoshiCentre simply said she wants to build and keep educating people about the bitcoin ecosystem without wavering. In her words, compared to 2013, a lot of people are now involved in bitcoin, and this means Bitcoin’s future in Botswana is hopeful.
On the 22nd of January, 2018, the Bank of Ghana released a statement stating that the use of digital currencies is not licensed under the payments system acts and as such, the public is to do business with only licensed institutions to ensure that such transactions fall under the country’s regulatory scope.
Since then, the Bank of Ghana drafted a Payments Systems and Services Bill that they believed would enable the regulation of cryptocurrency in the future. However, the use of cryptocurrencies is still being discouraged because of the perceived risks that come with them and how individuals have lost money to crypto-related transactions.
The Deputy Director-General of the Security and Exchanges Commission SEC, Paul Ababio, in an interview, said that Ghanaians should desist from blockchain technology. He eventually added that a framework for the regulation is being devised and that a final decision will be passed across.
This does not change the fact that Ghana is one of the top African countries with high cryptocurrency trading volumes.
The enactment of cryptocurrency in Kenya, like many other African countries, was met with indifference by the government. In the case of Kenya, its central bank was worried about the degree of uncertainty in the future price, as well as the unpredictability of the technology.
Over time, the estimated number of bitcoin transactions in Kenya grew to over $1.5m as business owners began making use of the technology to accept payments. The business owners stated that they enjoyed the convenience and how it has helped to reduce the cost of transactions.
Kenya’s Land Commission welcomed the technology with open arms, with hopes that it would help put an end to the fraudulent acts involved in the purchase of lands. The Blockchain Association of Kenya is working to educate individuals on the benefits of using bitcoin and cryptocurrencies.
On the issue of regulation, Kenyans believe that the regulation of digital currencies by the Central Bank of Kenya will speed up the adoption of cryptocurrencies, but this has been slowed down by endless discourse. Methods have been suggested as to how the sector can be regulated to ensure benefits to the individuals and the government.
A task force was set up in April by the Kenyan government to enable a better understanding of why blockchain technology should be regulated.
In 2017, the Central Bank of Nigeria warned institutions and individuals to desist from crypto-related trades as they are not the legal tender in Nigeria. They went further to state that whosoever gets involved in it does so at their own risk. The Nigerian government had major concerns that the rise of blockchain technology would bring about fraudulent activities.
Despite these warnings, Nigeria went on to have the world’s third-largest bitcoin holdings as a percentage of gross domestic product.
Fast forward to the 5th of February, 2021, the Central Bank of Nigeria issued a statement that saw the termination of all crypto-related activities. Financial Institutions were ordered to close the accounts of any individual that has conducted cryptocurrency transactions.
However, the ban was unsuccessful in eradicating blockchain technology in Nigeria, instead, it made room for peer-to-peer exchange (p2p). Research shows that the trading volume in Nigeria has grown significantly despite the ban. In May, Nigeria received $2.4 billion worth of crypto.
Conclusively, it is quite evident that Africa will, someday, spearhead blockchain technology and the adoption of cryptocurrencies. The ability to thrive in spite of bans, lack of regulations, and a dearth of infrastructure is a crucial pointer as to the wealth of opportunities that exist on the continent.
Image Credit: Kabiru Yusuf
The rise of CBDC in African economies
Many nations have taken cues from the world of crypto and its resounding successes over the last decade. In order to avoid getting left behind, governments worldwide are increasingly turning their attention towards implementing some form of digital currency, a CBDC which in full is Central Bank Digital Currency. Although inspired by cryptocurrencies, CBDC’s are quite different from traditional crypto platforms. The main differences are that CBDC’s are unlikely to be decentralized, the supply of this currency regulated by the host’s country’s central bank as the CBDC is designed to operate as a sovereign legal tender, the digitized form of the host country’s fiat currency. Thus, a central bank may issue digitized tokens of its currency of which their value is pegged to the fiat currency of the nation in question, making CBDC’s stablecoins.
Africa has seen a rise in the use of cryptocurrencies and it’s still pushing frontiers in this sector. Although the use of crypto in many African nations is becoming more and more pervasive by the day, the tone of governments in many of these countries toward the sector is cautious at best and threatening at worst. However, a few nations have voiced interests in creating digitized versions of their legal tender to function as a CBDC. Amongst these are Ghana, Nigeria, Morocco, Kenya and Tunisia.
Many of these projects are still in the research phase or developmental phase however. A good example is Ghana’s proposed CBDC, the E-cedi being developed in partnership with German company, Giesecke + Devrient. Nigeria’s CBDC project, the eNaira has been announced and according to Nigeria’s central bank, this CBDC will be launched sometime in 2021. To that end, the CBN has partnered with fintech company, Bitt Inc. to serve as the technical partner in the eNaira’s development. Reportedly, the CBN had made the decision to digitize the Nigerian Naira in 2017.
While the pursuance of digital currencies in African nations is a welcome development, implementation of these schemes isn’t without challenges. Chief among the issues countries in Africa face would be the already existing financial service inequality and poor penetration of internet access in the continent. These challenges must be tackled in order to allow for mainstream adoption of CBDCs and the subsequent provision of financial inclusion. The benefits largely depend on the peculiarities of the nation deploying them. For instance, a digital currency is thought to help Nigeria increase foreign remittances, it’s second largest source of forex after oil. Whatever the outcome of these projects, it is becoming apparent that CBDC’s have come to stay.
Why the Nigerian Government is Panicking About Bitcoin
Fear, social media clamour, open outrage amongst citizens and vivid apprehension of the outcome of what the ban on crypto means for traders and investors as well as fintech companies. To some, it was a welcome development aimed at driving the ship of the country towards a better shore. To others, it was another rule by the Nigerian government to clamp down on technology. On February 5, 2021, the Central Bank of Nigeria issued a circular directing all commercial banks to close the accounts that are connected to cryptocurrency platforms. This was later given further clarification in a 5-paged article stating a plethora of reasons why it is not advisable to trade cryptocurrency. The article explained that the ban does not mean that Nigerians can no longer trade cryptocurrency. However, it is a measure to dissociate commercial banks from all forms of crypto trading which are considered wrong.
CBN’s reasons for banning cryptocurrency
The 5-paged article was released 2 days after the crypto ban. It explains why it is inadvisable to trade cryptocurrency and the justification behind the orders of the CBN. Rather than give a fair definition of cryptocurrency, CBN focused on the partial lapses of the currency in explaining its meaning. In the explanatory article, cryptocurrency was defined as “digital or virtual currencies issued by largely anonymous entities and secured by cryptography. Cryptography is a method of encrypting and hiding codes that prevent oversight, accountability, and regulation.”
While explaining the rationale behind the ban, the circular reiterates that Nigeria is not the first country to place restrictions on cryptocurrency. Countries like China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal and Cambodia have placed certain restrictions on the trading of cryptocurrency. Quoting various instances where cryptocurrencies have been derided by various persons and institutions without reference to cases where Bitcoin has been praised by reputable investors and institutions. In the latter instance, Bitcoin was referred to as the new gold.
One of the reasons behind the ban is that the cryptocurrencies are issued by unregulated or unlicensed persons which contravenes the CBN Act of 2007. Also, its anonymity and decentralization quality show that “its patrons and users value anonymity, obscurity, and concealment”. The CBN explained that there would be no need for such concealment if the activities of users were legal. Nevertheless, the CBN forgot that apart from using crypto for transactions, it can also be used as a store of value.
Lack of centralization and the accompanying issues of anonymity are the predominant reasons stated by the CBN before its ban on cryptocurrency.
You may wonder why the CBN waited till 2021 to place a ban on crypto despite its popularity since 2010. This reason is not far-fetched as it explains the true reason behind February directives on cryptocurrency.
Hidden reasons behind the ban on cryptocurrency
Few months after the directives were issued to commercial banks in Nigeria, Chainalysis, a blockchain research firm, issued a report that the volume of a dollar received from crypto users in Nigeria has grown between 2020-2021. In May, Nigeria received $2.4 billion worth of crypto compared to $684 million received in December 2020. The increase occurred after the clampdown on crypto by the central bank. This shows that CBN orders have little or no effect on cryptocurrency trading.
Last October marked an important turning point in the history of Nigeria. It marked a month of consciousness amongst the youths, protest rocks every state in Nigeria against police brutality and an end to the Sars police unit under the hashtag #Endsars. The protest was the first of its kind after more than a decade. During the EndSars protest, various groups sprang up to receive donations for demonstrators to provide them with first aid, food and security. The accounts of these groups were suspended which led one of such groups, Feminist Coalition to start receiving Bitcoin for donations due to its decentralization. About $150,000 worth of Bitcoin was received which was used to support EndSars protesters.
Jack Dorsey, Founder/CEO of Twitter reshared the FemCo Bitcoin donation page with the caption “donate via bitcoin to help EndSars”. His actions might have explained the ban on Twitter by the Nigerian government. The use of cryptocurrency to fuel such protests is the main unstated reason behind the recent ban.
In conclusion, the Nigerian government may pretend that the clampdown on cryptocurrency is a result of its lapses usually quoted by various countries as reasons behind restrictions. However, the activities of the Nigerian government is the fear of the inability to control the currency. It is gradually becoming the action of the current government to restrict whatever it can not control.
How Demographic Trends are Pushing Cryptocurrencies Adoption in Africa
The African crypto market has seen a tremendous boom in the last few years. Driving this growth are a myriad of factors among which are economic inequality, volatile fiat currencies, low financial inclusion as well as high unemployment rates. These drivers of market growth are also greatly intertwined with Africa’s unique demographics which entail the distribution and categorization of the population.
The goal or aim of many cryptocurrency projects and the movement of the community in general is to get to a point where they’re widely used and accepted by individuals, corporations and governments. This implies mainstream adoption, much like the pervasive nature of mobile banking today. Africa presents unique opportunities owing not just to the socioeconomic clime but it’s demographics as well.
For cryptocurrencies to achieve mainstream adoption, they would have to in a sense become the norm and be widely accepted and recognized by virtually all corners of society, much like Facebook is in the social media world. In Africa, despite the size of the crypto market, cryptocurrencies are still a good distance away from what one would describe as popular acceptance. The sector is growing no doubt, however, that growth is reflective of Africa’s unique demographics and population scene.
It is without question that the African continent is the youngest, in terms of median age at 19.7 years. There are about 600 million people aged between 15 and 45 in Africa, representing nearly half of Africa’s population. Many nations, especially in Sub-Saharan Africa are in stage 2 of the demographic transition (high birth rates and high death rates – relatively low life expectancy) which is representative of the economic climes of these nations. A report found that around 13 million young Africans enter the labour market each year against 3.7 million jobs, most created by the informal sector. Therefore many African youth are laden with economic difficulties at that important time in their lives.
However, Africa’s young population, generally speaking, has a greater proclivity for being more open minded to technology adoption. Education and literacy has played a role in this with Africa’s literacy rate at around 70%. While not comparable to that of other continents, this rate is driven greatly by the large young population Africa boasts of. In any case, seeing the economic conditions of many African countries, and a tendency for young people to adopt and/or trust new technologies better and faster than other age groups gives some explanation to how quickly the crypto market is growing on the continent. As the years go by, the level of adoption would inevitably continue to increase as the current youth population expands till it gets to the point where blockchain becomes so pervasive that it achieves the necessary trust and acceptance to become mainstream.
Right now, in some African nations, that line is being crossed already with central digital currencies in development.
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