From June 2020 and June 2021, US$105.6 billion was sent to Africa in cryptocurrency payments, according to Chainalysis, this was a 1200% growth rate compared to the previous year. What makes it notable was that this was arguably the period marked by the highest economic uncertainty in recent decades. Amid job losses and disruption of trade dynamics, people explored viable ways to keep their income and livelihoods afloat.
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The 1200% growth, in spite of government bans and restrictions on cryptocurrency use, indeed tells a story that needs to be heard. The story is that as long as an alternative tool or platform serves the need of the people in the time that they seek it, it will be valuable to them in spite of the uncertainty around it. The top three countries on the continent receiving these payments and remittances are Nigeria, Kenya and South Africa, notably also among the top ten crypto-using nations globally.
Crypto Growing Forex Remittance In Africa.
The remittances landscape in Africa is fast-growing and of the US$48 billion sent to Sub-Saharan Africa in 2019, US$582 million is estimated by Chainalysis to have been remitted as cryptocurrency, particularly Ripple. Remittances primarily go into three main uses: healthcare, education and household expenses for many recipients. Cryptocurrencies will continue to be in use for remittances, particularly because of their lower transaction costs and reduced transaction time. Various platforms such as Kotani Pay and Pesabase lower cross-border transaction costs from as high as 15% to as low as 1% to 3%, which means that more money can get to the recipients. Instead of taking days, the transactions are completed in minutes, which means more needs can be met conveniently, especially those that could be potentially life-saving.
The use of crypto will boost cross-border transactions thanks to the lower fees attached to the crypto payments. But what’s more important is that cryptocurrencies can expand the opportunities for financing underserved markets since the blockchain-based solutions are independent of the control of third parties. For example, cryptocurrencies can become the basis for affordable mortgages in some communities.
South Africa, home to one of the region’s most developed financial sectors, has been a regulatory pioneer for the African blockchain ecosystem. It has managed to establish legal certainty and transparency around cryptocurrencies while designing not one but two central bank digital currency (CBDC) proof-of-concepts.
Already a global financial hub, Mauritius was one of the first countries to adopt comprehensive legislation on virtual assets and initial token offerings (ITOs). Seychelles has taken a light-touch approach to regulate crypto and has housed some of the world’s largest exchanges and successful initial coin offerings (ICOs) to date.
Meanwhile, Kenya already tops the world rankings for P2P exchange volumes and is fifth globally in terms of crypto adoption. The Kenyan government does not currently prohibit cryptocurrencies, and while they are not regulated, the CBK exercises broad discretion when examining specific cases involving crypto.
In countries like Nigeria, the crypto market is thriving despite a ban (that has effectively done little to discourage citizens and institutions from using and trading crypto), where volatility of the Naira, coupled with high international remittance flows, have made digital currencies a sought-after alternative. Nigeria also became the first African country to launch its own CBDC, the eNaira, last October.
Despite regulatory uncertainty, companies have continued to establish themselves and offer blockchain solutions to customers. CV VC identified 41 firms that received funding between January 2021 and March 2022 that have integrated blockchain into various industries.
“Frontrunner countries like South Africa and Mauritius have demonstrated how a progressive stance toward cryptocurrency can be beneficial. This is the type of regulatory approach that inspires others to follow suit,” Greaves stated.
“As a regulatory consensus is achieved, the possibilities are even more exciting