In a landmark regulatory shake-up, Nigeria’s central bank has shown it can balance innovation and maturity with prudential regulation of financial services.
The ‘Nigeria Payments System Vision 2025’ marks a major shift in the country’s approach to virtual asset service providers (VASPs), enabling them to operate accounts with banks and other financial institutions. Africa’s first comprehensive crypto regulator will refine its approach as it learns from the market, and other regulators across the continent will follow suit.
This article is designed to be a useful cryptocurrency retrospective for entrepreneurs, creators and dreamers curious to enter the space.
Cryptographic Principles
Since its inception in 2009, cryptocurrency has captured the global imagination and Africa has emerged as fertile ground for its adoption, regulation and innovation. Between 2012 and 2023, the African continent experienced a remarkable transformation in its financial sector with the adoption and integration of cryptocurrencies.
This period is not just a story of technological adoption, but a narrative of financial resilience, innovation and a paradigm shift in financial practices. In this comprehensive analysis, we explore the journey through quantifiable data, important case studies and important milestones that have marked the continent’s foray into the digital currency space.
The initial phase of cryptocurrency in Africa was characterized by curiosity and careful exploration. By 2014, the pioneering Kenyan venture, BitPesa, demonstrated the practical utility of Bitcoin in facilitating cheaper and faster cross-border transactions. BitPesa’s success was a beacon, shining a light on the potential of cryptocurrencies to revolutionize remittances – a vital sector for many African economies. In these formative years, although Africa’s contribution to the global cryptocurrency market was less than 1%, the seeds of a digital revolution were being sown.
In particular, South Africa has emerged as a cryptocurrency hub, with data from 2017 showing over 100,000 Bitcoin wallet holders.
Research done in the same year revealed that 47% of South Africans were cryptocurrency investors or intended to invest, reflecting growing interest. In addition, Nigeria has seen a notable increase in cryptocurrency adoption, driven by economic factors and a young, tech-savvy population. Reports indicated a 100% increase in Bitcoin wallet downloads in South Africa and a 1,200% increase in Nigeria. This period also saw diversification in cryptocurrency usage, with Ethereum and Litecoin gaining traction alongside Bitcoin.
In 2018, the World Bank mentionted that only 42.6% of people over the age of 15 have an account with a financial institution, making this region home to the highest unbanked population in the world. Recent updates from statistician still supports this claim.
Despite having the highest unbanked population globally, Africa is seeing a surge in blockchain industry funding. According to a 2022 report with CVVC, African blockchain ventures saw a staggering 429% increase in funding compared to a mere 34% increase in general venture funding. Specifically, African countries secured 1.8% of global blockchain funding, a significant jump from the previous 0.3%.
Crypto Surge
As the global cryptocurrency market cap soared, reaching around $800 billion by the end of 2017, African governments and regulators began to pay closer attention. The period between 2018 and 2020 was pivotal in shaping Africa’s cryptocurrency landscape. Peer-to-peer (P2P) transactions have become a cornerstone of the crypto economy in Africa, particularly Nigeria. By 2020, the continent accounted for 14% of global P2P transaction volume, a clear sign of growing appetite for digital currencies amid a diverse regulatory landscape. Nigeria’s weekly P2P Bitcoin transaction volume has consistently exceeded $10 million.
This rise was partly attributed to foreign exchange restrictions imposed by the Nigerian government, which led individuals and businesses to seek alternative means of accessing foreign currencies. The total value of monthly cryptocurrency transfers to and from Africa under $10,000 increased by 55% in a year, reaching over $316 million by the end of 2021. The number of monthly transfers also recorded a 50% increase.
Encryption and Regulation
However, the growing popularity of cryptocurrencies has also caught the attention of regulators. In several African countries, regulatory positions varied, ranging between cautious approval and strict restrictions. For example, the Central Bank of Nigeria, in 2021, issued a directive to banks to stop facilitating cryptocurrency transactions, citing concerns about volatility and financial security. Despite these challenges, the cryptocurrency ecosystem has shown resilience, with the market adapting through informal channels and decentralized platforms.
Until 2023, the narrative around cryptocurrencies in Africa had shifted from skepticism to integration. The total market value of cryptocurrencies on the continent had skyrocketed, showing a staggering annual growth of 1200% from 2020 to 2021. This astonishing growth was not only about trading volumes but also the adoption of cryptocurrencies for everyday transactions and innovative projects.
A notable example is the Akoin project in Senegal, envisioned by musician Akon. This ambitious project aimed to create a futuristic city powered by the cryptocurrency Akoin, demonstrating the potential of digital currencies in urban development and community empowerment. Such initiatives signaled a broader trend where cryptocurrencies were no longer fringe assets, but integral components of financial strategies.
What’s Next for Cryptocurrencies in Africa?
Over the past decade, Africa has not only seen the adoption of cryptocurrencies. has become a melting pot of innovation, demonstrating the potential of digital currencies in promoting financial inclusion and economic growth.
The journey from 2012 to 2023, rich in data and diverse case studies, reflects a continent dynamically engaged with the digital currency revolution. As cryptocurrency continues to evolve, its role in Africa’s economic landscape is set to expand, promising new avenues for growth, innovation and empowerment.
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