Crypto in Africa: All hype or here to stay?

Welcome to Tech Safari!

Your tour guide on African Tech 🧭

Hello to the 81 new folks who have joined the Safari since Saturday!

If you haven't subscribed, join 7,371 smart folks curious about Tech in Africa.

Morning! This week we’re taking a school break from writing about ed-tech, and diving into something a little juicier - crypto in Africa.

This one is a lot longer than usual, and I had way too much fun writing it. Strap in!

I want to shout out Daniel Akpobare before we dive in.

Daniel is a reader of Tech Safari with his own newsletter called The Crypto Explorer.

I've been reading it to keep up with the world of crypto and love how funny and easy it is to read. I'm also jealous of his great branding 😅 Check it out below.

Tech Safari is brought to you by.. Sorted Wallet

By the time you finish reading this article, you will know that crypto adoption is on the rise in Africa.

With over 22 million people in Africa holding crypto, the adoption is only starting.

And Sorted Wallet is here to accelerate that adoption.

Sorted Wallet is the first crypto wallet for KaiOS-enabled feature phones allowing African users to store, send and receive digital assets without owning a high-end smartphone.

• The first and only crypto wallet for KaiOS-enabled feature phones

• Simply register with any valid phone number or email address

• Already providing crypto access to 30+ African countries and growing

Download Sorted Wallet to seamlessly send and receive digital assets across borders and use it for remittances (and so much more).

Get started sending digital assets across Africa with confidence and ease.

PS - Sorted Wallet is building in public, and has great updates on their weekly progress. I’ve followed them on Twitter, check them out here.

Crypto in Africa: All hype or here to stay? 

What is Crypto’s real use case? Surely it can’t just be meme coins, Sam Bankman-Fried and Twitter’s new logo.

Emerging markets are seen as the ‘battleground’ for the true crypto use case. And no continent has eyes tuned to it like Africa does.

As it turns out, there is a growing cohort of would-be consumers who are shut out of financial services, and whose local currencies are decreasing in value - and the features of crypto should be a great fit for their challenges.

No Bank? No ID? No worries 😎

People bullish on Africa’s tech scene usually mention these two problems on the continent the most.

Whether or not they are Africa’s most exciting opportunities is for another article. But they are massive issues, so let’s dive in.

1) Africa’s Unidentified Population

Around 500 million people in Africa have no identification. In Nigeria, Tech Cabal found that only 38% of Nigerians have any form of identification, and that it can take up to four years to get a valid ID.

2) Africa’s Unbanked Population.

57% of Africa’s adult population is estimated to be unbanked.

This cuts them out of saving and storing money, sending money to other people and getting loans and other financial services.

And crypto can solve these problems quite well.

Let’s say that you want to send some money to your friend who lives in a different city to you.

Usually, you would send money from your bank account to their bank account.

But these options require a) Identification and b) A bank account.

What if you’re in the majority of the African population, and don’t have either of these?

That’s where crypto can come in. No Bank Account? No ID? No worries.

Instead, you can find local vendors who accept a cash payment and transfer you Bitcoin or USDC.

Or you can even find a Bitcoin ATM to buy crypto with cash.

All you need - a smartphone and internet.

And now with startups like Sorted Wallet, you can send and receive crypto with a KaiOS phone - which is the operating system for feature phones like Nokias.

So, cryptocurrency is more accessible than traditional banking in Africa.

And when you mix in Africa’s growing mobile and internet penetration on top of a young, tech-savvy population, crypto usage is exploding. So it's only fair to ask..

Crypto the moon?

Between July 2020 and June 2021, cryptocurrency value increased by 1200% - hitting $105.6 billion in value.

UNCTAD, the United Nations Conference on Trade and Development, found that significant sections of the population in African countries hold cryptocurrency:

Kenya - (8.5%), 4.5 million people

Nigeria’s (6.3%) or 13 million people

South Africa (7.1%), 4.2 million people

And crypto adoption isn’t just a phase. Users in Africa aren’t pumping and dumping. They’re storing their money in crypto for the long haul.

Why? Because economic institutions in Africa are weakening.

In September last year, my startup EntryLevel had a sharp drop in revenue. 60% of our users from Nigeria were suddenly unable to pay for our programs.

The Nigerian Central Bank stopped allowing payments in foreign currency to support the Naira (local currency) and ease pressure on the limited supply of US Dollars.

Inflation in Nigeria hit an 11 month high of 17.7% in July. And it’s worse in other countries with political instability - like Sudan at 258% inflation in February 2022.

In Africa, we’re seeing double and even triple-digit inflation. This means that if you earn and store money in local currency, it will lose value.

Now, if you’re worried about your money devaluing in the West, you can stash your funds into other assets - like gold, a house or in public markets.

In Africa, this is a bit out of reach.

What is easier is hedging your money in a stablecoin, like DIA or USDC. And hedging is one of the biggest use cases for retail crypto investors.

In April 2022, 52% of Nigerian crypto investors had allocated over half of their assets to cryptocurrencies.

But how does the government feel about this? Well, we’re seeing mixed reactions.

A Love/Hate Relationship

A core crypto use case on the continent is remittances - diaspora sending money back to friends and family on the continent.

Remember that $105.6 billion in value sent between July 2020 and June 2021? Well, a lot of that was remittances.

In Nigeria, remittances account for 4% of GDP, and the banks take a nice clip of that money flow.

And while remittances in crypto have spiked up, diaspora remittances in fiat currency (non-crypto currencies) have taken a hit.

This means that crypto-remittances are eating the Bank’s lunch.

It turns out the bank didn’t like that.

In February 2021, the Nigerian Central Bank banned banks from enabling crypto transactions, calling it a ‘direct contravention of existing law.’

This stopped Nigerians from buying and selling crypto from their bank accounts.

The impact?

After the ban, Google ranked Nigeria in first place for Bitcoin searches. Crypto exchanges reported that more Nigerians had started using crypto.

Users found other ways to transact without Naira - through peer-to-peer trades and vouchers.

Owenize Odia, Country Manager of crypto exchange Luno, summarises the Nigerian Government’s move accurately:

It’s like trying to control the internet. It cannot be done.

On the supporting side, the Central African Republic (CAR) passed a bill legalising Bitcoin as legal tender (the second country to do this globally).

CAR’s president, Touadéra, is bullish.

While this is nice, it’s a bit questionable given that nine out of ten people in the Central African Republic don't have internet connection.

Maybe an internet connectivity strategy should come before a crypto strategy? 🤷🏾‍♂️

Still, seeing tech and government team up to solve problems in Africa is always exciting for outcomes on the continent. 

And where there are problems..

There are startups.

Startups are using crypto to solve dollar shortages and send money back and forth between loved ones. And one of my favourites to watch is Bitmama.

Meet Ruth Iselema. Ruth graduated as a pharmacist, but found that entrepreneurship was more her style.

In 2015, she started learning about cryptocurrency in Telegram and WhatsApp groups.

In those groups, crypto was being traded and people were learning about the ecosystem.

Ruth described the scene back then as ‘99% men,’ as one of the only women in the group.

As a result, she got the nickname ‘Bitmama.’

And after being in the space for a few years, she started her company - called Bitmama - in 2019.

Noticing that crypto trading platforms in Africa weren’t safe for users and were run from WhatsApp and Telegram groups, she decided to build a safer platform to make trades.

She moved to the bustling Lagos, determined to start her company. And she’s been on a roll.

Today, Bitmama’s main use cases are hedging against inflation and solving the dollar shortage issue for users.

With limits on US dollar cards issued by banks (like a $20 USD monthly spend limit), Bitmama lets users transfer their funds to crypto and make international purchases anywhere in the world.

Ruth believes that to onboard the next billion users to crypto, you need to make the experience as seamless as possible.

One of Bitmama’s brands, Changera, is an Africa-travel-focused card that lets you book flights, accommodation and make global payments.

It’s powered by crypto, but you couldn't tell by their website.

At the start of 2022, Bitmama had 20,000 users.

Fast forward to December last year, and I’m sitting in a cafe with Ruth, who is explaining her $2 million pre-seed round.

Today Bitmama has shot past 100,000 users, growing rapidly.

'Crypto is being used to solve real problems in Africa and allows online purchases that couldn’t be made before with stablecoins. That's why I'm bullish on the future of crypto and its impact in Africa.’

Ruth thinks crypto is the future of finance in Africa, and is building it with Bitmama.

Yesterday Ruth was featured in The Flip's crypto@scale show with Chris Maurice, CEO of Yellowcard, where they discuss centralised exchanges and the role of regulation.

Another take - Crypto’s fall from grace

On the flip side, Abraham Augustine, Reporter at TechCabal (and one of my favourite voices in African tech) dropped a great article yesterday called Crypto’s fall from grace in Africa.

The take-home point?

While all of these use-case discussions are nice, the unspoken case for crypto in Africa, was to get rich, quick.

After I grilled him for writing an article that has the opposite message of mine, we chatted about crypto’s true use case and crypto’s current state.

A quote from Abraham paints the picture of crypto’s current state:

Riddled with blundering regulation, an abundance of grift, scams and condescension from larger global crypto exchanges and figureheads who talk fondly, almost paternally about the “global south” need of crypto while routinely offering poor service to African crypto users or outright denying them service.

Case in point:

But on the phone, Abraham explained that even he struggled to open a US Dollar account in Nigeria. He had to get two people with US Dollar accounts to be his references to open his own.

Abraham thinks there is a strong case for stablecoins - actually letting consumers hedge their money, send money and spend in stablecoins rather than have it devalue.

Do you think crypto has found a true use case in Africa? Let me know here.

And that's a wrap! If you're missing our Tech Round Up today hold on tight for Saturday for all the news in African tech this week.

Did we miss anything? Or just want to say hey?  Hit reply - I'd love to hear from you! You can

• 🐦 Find me on Twitter

• 💬 Holler on Linkedin

• 💌 Email (Reply to this email)

• 🚀 Sponsor Tech Safari

And if you don't already, make sure to sign up to get this in your inbox next week

And if you like this, share it with a few friends!

You can join our WhatsApp community, Safari Club, for more news and discussions on African Tech by referring your friends.

Catch you soon!

👋🏾 Caleb