Uber explores stablecoins as a solution for cost-effective international transactions.
In the burgeoning world of cryptocurrency, Africa stands out as a top user base for non-custodial wallets, with countries like Nigeria leading the charge. However, a gap persists between high adoption and low usage, a phenomenon that can be attributed to several interrelated factors.
Grassroots crypto adoption in African countries is among the highest globally, yet the enthusiasm has not been matched by structured markets or clear legal frameworks. Only about 25% of Sub-Saharan African countries have enacted dedicated crypto laws, while many others maintain restrictions or outright bans. This patchwork of regulation creates uncertainty, discourages institutional investment, and increases risks for everyday users.
The development of robust digital-asset markets also requires reliable internet connectivity, consistent electricity, and widespread access to capable devices. Many African regions still face deficits in these areas, which limit the practical and consistent use of cryptocurrencies despite high interest and ownership.
In Africa, cryptocurrency use is often driven by necessity—such as remittances, hedging against inflation, and peer-to-peer payments—rather than formal investment or large-scale commercial transactions. This results in high adoption numbers but relatively low volumes of structured or institutionalized usage.
Global players like Binance dominate the market, capturing a large share of regional users. This dominance can limit the development of local crypto ecosystems and services that might drive more extensive and diverse usage.
Recent efforts, such as discussions at the ADDO Symposium in Cape Town, highlight an increasing desire for stronger crypto governance in Africa to combat illicit financial flows and to create a safer environment for users. However, the effect of evolving regulations on the availability and utility of cryptocurrencies is still unfolding.
Stablecoins have seen rapid adoption and usage growth, particularly in Nigeria and other nations, fueled by their utility in faster transactions and access to foreign currency tools. This reflects a growing segment where adoption translates more directly into everyday usage, signaling potential pathways to close the adoption-usage gap.
In summary, the gap arises because while many Africans embrace crypto out of necessity and innovation, infrastructure shortcomings, unclear or restrictive regulations, and dominance by global players hinder the development of mature, widely used crypto markets. Addressing these issues through improved governance, infrastructure investment, and local ecosystem development is key to converting high adoption into sustained, substantial usage.
Meanwhile, global cryptocurrency exchange Blockchain.com plans to expand its services into Africa, targeting countries with established or developing cryptocurrency regulations. The company plans to open a physical office in Nigeria before the end of June, making it the first global exchange to do so. This move is expected to boost the local crypto ecosystem and provide a platform for more Africans to engage in structured and institutionalized cryptocurrency usage.
In addition, the UNICEF Venture Fund is offering $100,000 in equity-free funding for blockchain and frontier technology startups, providing an opportunity for local innovators to drive change in the African crypto landscape. The Network School is also offering a $100,000 fellowship for founders and creators, further supporting the growth of the African tech ecosystem.
As the world of cryptocurrency continues to evolve, it is clear that Africa holds significant potential. By addressing the challenges facing the continent, we can unlock the power of this technology to drive economic growth and financial inclusion for millions of Africans.
References: [1] Blockchain.com (2021) Africa Report. [Online] Available at: https://blockchain.com/africa [2] Chainalysis (2020) Global Crypto Adoption Index. [Online] Available at: https://chainalysis.com/reports/2020-global-crypto-adoption-index [3] ADDO Symposium (2021) Cape Town Declaration on Crypto Assets. [Online] Available at: https://addosymposium.org/wp-content/uploads/2021/02/Cape-Town-Declaration-on-Crypto-Assets.pdf [4] Diar (2021) Africa's Crypto Boom. [Online] Available at: https://diar.co/africas-crypto-boom-2021-02-19
- Unclear or restrictive regulations in African countries have discouraged institutional investment in the cryptocurrency market, creating uncertainty and increasing risks for everyday users.
- The adoption of stablecoins, such as in Nigeria, has been particularly rapid, driven by their utility in faster transactions and access to foreign currency tools.
- Global cryptocurrency exchange Blockchain.com plans to expand its services into Africa, with a physical office planned in Nigeria by the end of June.
- The UNICEF Venture Fund offers equity-free funding for blockchain and frontier technology startups, providing an opportunity for local innovators to drive change in the African crypto landscape.
- The development of local crypto ecosystems in Africa can be limited by the dominance of global players, which might hinder more extensive and diverse usage.
- In Africa, high adoption numbers of cryptocurrencies result from necessity, such as remittances, hedging against inflation, and peer-to-peer payments, rather than formal investment or large-scale commercial transactions.
- Efforts to combat illicit financial flows and create a safer environment for users, such as the Cape Town Declaration on Crypto Assets, highlight the increasing desire for stronger crypto governance in Africa.
- The gap between high adoption and low usage of cryptocurrencies in Africa can be addressed by improving governance, investing in infrastructure, and developing local crypto ecosystems, which is key to converting high adoption into sustained, substantial usage.
