Cryptocurrencies are garnering interest across the globe, and have been for the last decade, but it is in Africa in which many are starting to think that these new digital currencies will take off with vigour. The reason for this could well be that Africa finds itself in a rather unique monetary situation, along with an equally unique technological one, writes Jenna Delport.
Mobile and crypto, the perfect combination
Whereas in Europe and North America Internet connectivity took off mainly through fixed-line broadband, Africa has been at the forefront of truly mobile-first Internet infrastructure.
While cities are indeed rolling out fixed-line broadband, the vast majority of Africans get online through their data connection solely on their mobile phone. This has led to a situation where 5G is expected to have the highest growth rate in Africa, rather than the West where perhaps many would have expected the growth to happen.
This mobile-first attitude runs through business as well as socially in Africa. Because of this, app usage and in particular apps that let you buy or exchange currency are big business on the African continent. This is why cryptocurrencies could find themselves having a rather important role in the continent if they play their cards right.
The main boom, when it comes to using mobile apps to buy Bitcoin or trading in Ripple derivatives, for example, is that it’s easier than it has ever been before, opening up a new avenue for those who wish to introduce themselves to the world of crypto.
No expensive middle-men, no complicated workflows to follow, simply sign up, enter your details, and you are ready to trade. With familiarity, comes trust, and as African users become more and more used to seeing, trading, and generally interacting with cryptocurrencies, the more likely they are to use it in their day to day lives.
A more stable option for users
This is especially tempting for African nations that have notoriously volatile national currencies. If your currency is anything like South Sudan’s between September 2016 and September 2017, an inflation rate of 102% could very well push you towards using a modern currency that is decentralized, global, instant, and in some of these cases, a safer bet than the national currency.
Egypt, Malawi, Mozambique, Zimbabwe and Nigeria have all had issues with huge rates of inflation, and as such have seen the interest in cryptocurrency rise at a rapid rate.
For a cryptocurrency to fully realize its potential, however, we will need to see the volatility within these cryptocurrencies settle down soon. For now, they are outperforming some national currencies, but the end-goal will have to be an international cryptocurrency that is stable enough that the average worker would happily be paid in it.
As trust is built, and some of the scaling issues associated with the likes of Bitcoin are ironed out, this should hopefully prove to be the case. When it does get to that point, it looks as if Africa may be the fertile grounds in which this new way of doing business begins to flourish.
Crypto familiarity is the key
Some may point to the fact that Bitcoin, in particular, has seen a huge loss in valuation since its peak in 2017 (standing at an eyewatering $19,783), as something of a warning sign in regards to whether it would be viable to have a cryptocurrency engrained into local economies, but this is actually not the case.
It is far better to have a currency that is stable at a lower price, than one that reaches the heights Bitcoin did in 2017, and then plummet rapidly.
This new stability seen in Bitcoin is down to many factors, notably increased liquidity, regulatory developments, and institutional involvement. With a further steady increase in use, Bitcoin could find itself becoming a de facto currency in many African nations, and perhaps other continents will take note.
Until then, Africa will lead the way when it comes to mobile money transactions (already a huge player in the mobile money game) and should be high up the list when it comes to crypto trading too.
We can expect that education and further expansion of mobile internet across the continent will be the driving factors behind the rise, and the length of time it takes before we see crypto emerge as a dominant force in monetary exchange relies heavily on this.
Make no mistake, however, Africa will play its part in the world of crypto trading, and the evidence for this is already manifesting as we speak.