Yesterday, the price of one bitcoin hit $10,000 for the first time, which was big news in the West. However two weeks earlier, while the coin was trading at around $8,000 at most exchanges, it had actually reached $14,000 in Zimbabwe as political crisis and economic turmoil caused people to turn to Bitcoin as a safe haven asset lest their savings be wiped out by hyperinflation.
This news was certainly headline worthy, but not typical. What is the general state of cryptocurrency in the African continent?
Cryptocurrency has become very popular across Africa, although its legality is a mixed bag. Nigeria does not recognise cryptocurrency as legal tender. In Zimbabwe, the government is sceptical, but it has licensed BitMari, a pan-African cryptocurrency payment service. In South Africa Bitcoin has no legal status, although the government is working towards achieving a ‘balanced approach’ to regulating the market, according to Bitcoin.com. And a year ago, we reported on Senegal planning to launch its own cryptocurrency, the eCFA franc. At the time, it planned to extend it to Cote d’Ivoire, Benin, Burkina Faso, Mali, Niger, Togo and Guinea-Bissau.
It is undeniable that the African continent holds great potential for digital currency. With more than 30 million Africans working abroad and sending money home, an opportunity to circumvent the traditional banking system and monopolistic money transfer companies is a massive opportunity. In addition to this, the continent holds large populations of people without bank accounts, so alternative money transfer systems are very popular – demonstrated by the fact that M-Pesa, a mobile money service, is now the means through which over 25% of the GNP of Kenya is transferred, according to The Economist.
Elizabeth Rossiello, founder of BitPesa, said in an interview with the BBC: “Credit cards are only available to less than 3% of the population in sub-Saharan Africa. PayPal is blocked in many countries or much more expensive in the few it is operating. Bank transfers and remittance corridors are two to three times the price as elsewhere. So in terms of a need for a cheap, fast, functioning alternative form of payment, yes – Bitcoin does have a greater opportunity in sub-Saharan Africa.”
Why Your Enterprise’s Finances Rely on Employee TrainingGo to article >>
A fertile land
The growth of BitPesa tells of the region’s interest in digital currency. Back in 2014, the Nairobi-based startup enabled the purchase of bitcoins via the Kenyan shilling, hoping to enter the massive remittance market dominated by Western Union and Moneygram. In 2015, Rossiello said that the firm’s user base was growing by 60% monthly. It later expanded its service to Nigeria, Uganda and Tanzania, and in March of this year it signed a partnership with Bitbond, a German Bitcoin firm, to improve access to small business financing. The CEO of Bitbond said at the time: “10% of our global user base comes from Sub-Saharan Africa.”
African ground is proving fertile for cryptocurrency startups – they can be found in countries including, but not limited to, South Africa, Botswana, Ghana, and Zimbabwe. Kenya-based Bitsoko, a company offering a cryptocurrency transfer service across Ghana, Zimbabe, Uganda, Rwanda and Sierra Leone, won a $100,000 grant from the Bill and Melinda Gates Foundation in 2015, a vote of confidence if ever we saw one.
On the other hand, there are issues. The Nigerian government recently issued a warning to banks in the country, naming specific cryptocurrencies and reminding banks that they are not considered legal tender. Morocco recently banned their use entirely, designating them an illegal means of payment.
Nor are they a panacea to economic underdevelopment, despite media hype. In an interview with Vice, Bitsoko founder Allen Juma said that the firm had to switch focus due to a shortage of users and the fact that “many of the 12 local businesses they worked with didn’t understand the blockchain.” Said Juma: “I think it’s great that we do have bitcoin, but I think Africa needs to develop its own solutions.”
In the developed world, cryptocurrency has often found itself at odds with the financial establishment, which as a general rule has initially responded with alarm to the increasing popularity of decentralisation before beginning to reluctantly bend to inevitability. In developing regions such as Africa, where people theoretically have more to gain from freedom from intermediaries, the future promises to be very interesting.