The adoption of cryptocurrencies in Africa is in full force despite negative regulatory sentiments. Several states have issued warnings through the central bank actively discouraging people from using cryptocurrencies. In Nigeria, the Central Bank of Nigeria asked all institutions licensed under it to desist from working with crypto firms. Nonetheless, the adoption of crypto in the country keeps on growing, with users finding new ways to buy and sell digital currencies.
Another example of relentless adoption is Morocco. Research published by crypto data provider Triple A shows that the country has the highest crypto population in North Africa at nearly 2.5%. This growth level is happening despite Bitcoin and crypto’s illegal status. African nations have been tapped by many as fertile grounds for Bitcoin adoption. A new report by KuCoin crypto exchange indicates that the number of crypto transactions increased by 2,670% in 2021 in some African countries. This bullish adoption rate has been tied to several factors. In this article, we explore the reasons why Bitcoin can be good for economies in Africa.
Inflation Must Be Hedged
African economies have witnessed a downturn due to several factors. Age-old issues like instability in the region and economies built around imports have set the foundation for weaker fundamentals. In recent times, the pandemic and general fall of the global economy has put most countries in between a hard place and a rock.
Relatively better economies like Ghana have been caught in the mess, with the West African country experiencing high inflation levels at a rate of 15.7% in February 2022.
The constant deprecation of local currencies is a huge problem for all stakeholders of the economy. With the majority of savings happening in local currencies, most people are losing their value kept over time. This goes a long way to reduce purchasing power, the acceleration of growth, and the improvement of living standards.
Average citizens can hedge against inflation by saving in Bitcoin instead of local currencies. However, saving in the US dollar through traditional financial institutions is also not a great alternative since it comes at a higher cost and may not be an option for some. Bitcoin is accessible to everyone who has a smartphone, making it a better alternative for storing value.
Financial Inclusion For Economic Growth
Bitcoin can help serve the unbanked and underbanked in Africa. Another important way to develop the economy of a country is to connect the population to the economy. In the past, this could only be done through connecting people to traditional financial services like banks and microfinance companies. These service providers make it possible for customers to send and receive money, save money and obtain loans.
The traditional system has largely failed to connect people to their local economies since many can’t access the banking system. What’s more, some who have access to banks cannot access all the services due to various reasons.
According to the World Bank, there were 1.7 billion people in the world without any form of financial account in 2018. Additional data from the International Finance Corporation (IFC) shows that the level of financial inclusion was around 43% in 2017.
A Bitcoin wallet gives everyone a global financial account that allows them to send and receive money, save their wealth, access loans, and more. The ability to connect the masses to the economy opens several doors that contribute to the economy’s growth. For instance, the ability to save, especially in a currency like Bitcoin, allows individuals to improve their living standards.
The continent has seen several businesses spring up as people attempt to solve everyday problems and find ways to navigate a job market that has very limited slots. These efforts have run into some issues that make it difficult for African businesses to actualize fully. For instance, businesses in Ghana and Nigeria cannot receive payments through PayPal. Several international financial applications are not providing their services to parts of the continent.
These roadblocks make it impossible for many local companies to evolve into international brands and compete on the larger global market. Bitcoin fixes this by giving all businesses a financial tool to easily accept payments from foreigners and make payments to international partners. Creating an environment where African businesses can operate at the highest level could go a long way to help various economies on the continent.
A bigger market could lead to higher revenue which helps with expansion in areas such as production and employment. With a lot of states struggling with job availability and job insecurity, leveraging Bitcoin to give businesses a boost can go a long way.
No One Can Overlook Africa
Considering the various ways that Bitcoin could contribute to African economies, it is almost impossible to see a world where crypto adoption does not happen. Due to this, many cryptocurrency brands are entering the African continent. Exchanges, wallet providers, DApps are striving to gain exposure within the region through bold moves like sponsoring major events. For instance, Binance sponsored the African Cup of Nations in Cameroon and the Nigerian Idol reality show in the first quarter of 2022. Other brands like YellowCard, FTX, and Quidax have also engaged major celebrities to help promote their projects.
Analysts expect more brands to enter the space with more innovative ways to push Bitcoin adoption. At this point, it is evident that Africa cannot be ignored. It will be interesting to see how things shape out from here on out.