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The shift towards the adoption of bitcoins and other cryptocurrencies in Africa did not take off until 2014. It was then that Bitcoin exchanges and transactions began, with adoption led by Nigeria. Since then, the number of Bitcoin users and transactions made in bitcoin and other cryptocurrencies has exploded.
At no time in history has the use of Bitcoin in Africa been as prevalent as it is today. Bitcoin has thrived in Africa and 2020 has been a breakout year for Bitcoin on the continent. But where exactly was Africa coming from prior to this surge, and where is it headed in 2021 and beyond when it comes to Bitcoin use and adoption?
The response of African governments to Bitcoin
When it comes to technology, Africa has not been the global center of innovation. Africa has generally tended to be slow to adapt to change and the adoption of new technologies. However, once adoption sets in, it tends to explode and outpace the use of the same technologies in other climates.
However, African governments have traditionally been apathetic towards new technologies. They tend to be slow to harness their potential and generally leave ecosystem development for these emerging technologies to the public.
This has been the history of Bitcoin and cryptocurrencies in Africa, as governments on the continent have been slow to understand or harness the potential of distributed ledger technology. In fact, some African governments tend to view emerging technologies with suspicion. Such has been the case with Bitcoin.
We can also see a similar pattern used by African governments in currency trading cases, which is basically regulated only in South Africa by the Financial Sector Conduct Authority (FSCA) and recently in Kenya by the Capital Markets Authority (CMA). ). No other African country has shown significant interest in regulating this field of business, despite its continued growth in all African countries.
Many central banks have issued warnings about the use of bitcoins and other cryptocurrencies, even when there are no express laws or regulations prohibiting their use in those countries. Perhaps it is appropriate that this is the case; Without a centralized direction, the African population is now pushing the decentralized use of bitcoin and other blockchain-based products.
What is driving the adoption and use of Bitcoin in Africa?
Perhaps the main reason for the heavy use of Bitcoin on the continent is the need to push transactions outside of the traditional banking system. Banking laws in Africa tend to be elitist, restrictive and do not favor the effective participation of the general population. That is why many African countries have large unbanked populations, which has made mobile payment systems and many fintech applications that aim to drive financial inclusion a runaway success.
Access to foreign exchange for international trading and transactions is another factor that has driven the use of Bitcoin through the roof. In countries like Nigeria and South Africa, where there are strict controls on currency movement throughout the banking system, those involved in international trade now turn to Bitcoin to facilitate their cross-border deals.
In 2020, Nigeria faced a severe shortage of foreign exchange and was forced to limit international transactions made at point of sale terminals and ATMs outside the country using local ATM cards with a monthly limit of $ 100. Small-scale importers who typically shop on Alibaba and other trading sites had no choice but to seek alternative means of doing business. Bitcoin was a smart alternative, accepted by both the buyer and the provider.
It can also be said that Africa is on the fringes of the global financial system. Full access to international online payment systems like PayPal is restricted. South Africa is the only African country where users can pay and receive payments on PayPal. This situation has prompted the need to develop alternative payment systems. Due to a design error, a globally accepted means of payment like Bitcoin that can be converted to fiat in many countries has stepped in to fill this gap.
Use and adoption of Bitcoin in Africa in 2020
Ownership, use, and transaction volume in bitcoins and other cryptocurrencies saw a massive increase in Africa in 2020. Nigeria, South Africa and Kenya led the charge in this regard and are among the top ten countries where Google searches for cryptocurrencies are higher.
In Nigeria, most of the previous use of Bitcoin was dominated by small-scale, peer-to-peer (P2P) merchants, seeking to buy and sell bitcoins for other cryptocurrencies and fiat currencies using escrow-based or expensive exchanges. to face. transactional modes. 2020 brought an evolution of the situation. International traders, importers and exporters looking to bypass the currency controls of the Central Bank of Nigeria have found Bitcoin as a suitable alternative.
Kenya’s advancements in mobile payment systems have given it an edge over other African countries in terms of using alternative payment systems for e-commerce transactions. The arrival of Bitcoin has made Kenya increase that advantage. A BBC report indicated that the acceptance of cryptocurrencies for business payments in Kenya has increased. According to Paxful data, cryptocurrency transaction volumes on its exchange from Kenya grew 400 percent compared to the same period last year. Recognizing the potential of the Kenyan cryptocurrency market, the tax authorities have introduced a digital tax to improve government revenue.
What does this mean for Bitcoin in Africa in 2021 and beyond?
Major players in the distributed ledger technology space have noticed the growth of the ecosystem in Africa. Various cryptocurrency exchanges are either setting up shop in various African countries or merging with smaller national players to increase their footprint.
Binance has established a significant presence in Nigeria, and the South African exchange ChainEx attracted funding interest from the Malta-based exchange OKEx. M-Pesa, which was very successful in the Kenyan mobile money market, is located in Ghana with its BitPesa exchange. These are just a few of several emerging partnerships in the crypto space in Africa.
The United Nations has also identified Africa as the next frontier for the adoption and use of cryptocurrencies. P2P transactions are expected to grow in 2021. A June 1, 2020 research paper released by Bitcoin KE identified the African P2P market as worth more than $ 54.8 million, with Nigeria dominating the space with $ 35.5 million in transaction value as of June 2020. Nigeria will maintain its dominance in the P2P space.
Kenya is expected to lead the charge for using cryptocurrencies for the purchase of goods and services. South Africa remains the top destination for trading cryptocurrencies as derivative assets on exchanges.
Meanwhile, Seychelles is an African island in the Indian Ocean that will build on its previous reputation as one of Africa’s financial trading centers. It is positioning itself as a hub for developing blockchain projects, just like Malta and Switzerland.
Africa appears poised to witness even more explosive growth in the use and adoption of bitcoin and other cryptocurrencies in 2021 and beyond.
This is a guest post from Michael. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
