Africa is where crypto meets the real world

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Hey, welcome to this week’s edition of Tech Safari!

Last week we explored Crypto in Africa for Tech Safari Takes. We learnt a lot, but we also had so many more questions.

So, this week, I decided to team up again with Sheriff from Next Capital to do a deeper dive into the use of crypto in Africa.

I hope you enjoy it!

If you’re following tech news, you know the crypto bull run is back.

The last time crypto was this hot was in 2021 before everything blew up in the FTX scandal.

But we’re officially out of the ‘crypto winter’.

After Blackrock’s Bitcoin ETF launch, crypto is being taken seriously and institutional investors are piling in.

And now, coins are reaching new highs.

This was always the promise of crypto: a valuable asset to hold - and one that could make you money.

But in Africa, it’s much more than that.

The African crypto market grew by $100 billion last year, and not because people are just investing.

In Nigeria alone, $26 billion worth of crypto was transacted in Nigeria through Binance (the world’s largest crypto exchange).

Nigeria is the second-fastest adopter of crypto in the world.

And while it might sound like Africans are just looking for a quick 10x, that’s not the case.

See - Africa is the place where crypto meets the real world.

Here, it’s not just an exciting asset, but a necessity - solving some of Africa’s real currency and financial problems.

For one, it’s actual money

Roughly 80% of global crypto transactions under $1,000 happen in Sub-Saharan Africa.

Traditional finance can have big issues with payments — frequent outages, slow transaction times, and high transfer fees.

Many young Africans are now adopting crypto because it’s easy to use, and transactions happen outside banks.

In Nigeria’s biggest smartphone and PC market, Computer Village, Bitcoin is a widely accepted form of payment by traders.

This trend is quickly spreading to online shops, as social commerce explodes on the continent.

Crypto is a growing payment method used by consumers.

It’s not just an asset. That’s durable, portable money.

It’s a haven from currency troubles

African countries aren’t exactly known to have the most stable economies.

Currencies are losing value — and fast. At the same time, inflation is on the rise.

The Ghanaian cedi lost 40% of its value in 2022, and its inflation rate is currently above 30%.

Also, the Egyptian pound is worth 38% less than just a few months ago, and the Nigerian naira is down 230% over the past year after the government floated the currency.

People want to protect themselves from this, and crypto is one way people access more stable currencies like the dollar, through so-called stablecoins.

These coins are like regular currencies but on the blockchain — and they are easier to get than dealing with a bank.

Many young Africans are starting to save in stablecoins like USDC as a hedge against inflation.

It’s a fast way to move money across borders

Most of the money coming into Africa happens through remittances: diaspora working abroad and trying to send money home.

But this has always been a pain.

In the past, you had to use systems like Western Union and MoneyGram to send and receive money from abroad.

This could take days, with high fees - up to 8.5% of the amount sent.

But with crypto, transactions are instant.

This makes it well-suited not just for remittance but also for cross-border trade — inside and outside Africa.

In Nigeria, Africa’s biggest crypto market, the government’s restrictive forex laws have made it super difficult for importers to make payments.

Crypto works to help these business owners make payments instantly.

For an African electronics trader who gets his supplies from China, it’s a hassle to pay his business partner on the other side of the world.

He has to:

• Convert his local currency to Yuan via a bank.

• Then, make the transfer via the bank to the supplier’s international account.

• Then, wait a few days to confirm the transaction.

That’s a lot of work — both in lost time and delayed business transactions.

But using crypto, he only needs to send an equivalent amount of Bitcoin or USDC (a stablecoin) and the supplier receives it instantly.

These trends aren’t lost on builders on the continent.

And as you’d expect, there’s a lot of startup activity in African crypto.

Startups like Luno, Bundle, Bitsika, and Buycoins are helping Africans buy and sell crypto easily — sometimes through platforms like mobile money.

Bitnob, a Nigerian crypto startup is building a super-simplified P2P payment system on the Bitcoin Lightning Network.

Others like Qore and Boom are powering business-to-business payments using crypto.

And venture capital activity is heating up too.

Between 2022 and 2023, African crypto startups raised $474m — up 429% since 2021.

Clearly, Africa is an interesting place for founders, investors, and crypto startups.

But they face a problem that threatens their survival on the continent.

Regulation — the bane of crypto’s existence in Africa

Crypto regulation in Africa is incredibly fragmented.

It’s 54 countries, with 54 different perspectives on how it should work — and none of them seem to align.

Some governments accept it, others restrict it, and some say it’s illegal.

Over two weeks ago, the Nigerian government arrested and detained two Binance executives for operating illegally in the country.

But last week, South Africa approved 59 licenses for crypto startups, while Kenya just introduced a digital asset tax.

Seychelles has such favourable crypto regulation that two global crypto unicorns — Kucoin and Scroll — are headquartered within the country.

Africa’s regulatory landscape is shattered into a million pieces.

This makes the crypto experience widely different across borders for users in Africa.

But one thing stays true everywhere — crypto usage is on the rise in Africa.

Even with bans and restrictions in places like Nigeria, demand for crypto stays strong.

People have found ways around regulation, by trading via WhatsApp and Telegram or phoning a friend offline for crypto deals.

At the market level — it’s hard to kill.

But for crypto startups, it’s an uncertain future.

They need to contend with different laws across different markets, and these laws change all the time.

This uncertainty hurts their growth and expansion.

For the foreseeable future, crypto usage will keep rising in Africa amidst the growing pains with regulation.

Will Africa’s crypto space ever achieve its potential? And what challenges do you think are up ahead for the industry?

Let us know here.

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