Exploring Crypto Adoption in Africa: Growth and Barriers
Global interest in cryptocurrency has surged recently. Triple-A's "The State of Cryptocurrency Ownership in 2024" report reveals that approximately 562 million people now hold crypto, a 33.8% increase from 2023. Similarly, Statista's data indicates a 43% rise in identity-verified cryptocurrency users from November 2022 to November 2023.
Africa, often referred to as the "Last Frontier" for crypto adoption, presents unique opportunities and challenges. In this article we will explore the current state of crypto adoption in Africa, the barriers it faces, and its future potential to reshape the continent's economic landscape.
The Current State of Crypto Adoption in Africa
Africa remains one of the smallest cryptocurrency markets. According to Chainalysis, Sub-Saharan Africa accounts for only 2.3% of all digital value received between July 2022 and June 2023.
Source: Chainalysis
Despite this, the region is experiencing rapid growth. Key nations like Nigeria, South Africa, and Kenya lead crypto adoption, collectively accounting for over 70% of the region's volume.
Source: Chainalysis
According to Statista, cryptocurrency revenue in Africa will surge to $457 million by 2024, representing a 30.7% year-over-year increase. By 2028, this figure is expected to reach $653 million with a 9.34% compound annual growth rate (CAGR).
Source: Statista
Notable players shaping Africa's crypto landscape include:
VALR: One of the largest crypto exchanges in Africa, is a pioneering digital asset exchange that secured $55 million of funding from investors like Coinbase Ventures, Avon Ventures, and Pantera Capital. It is among the first cryptocurrency exchanges that have been granted both Category I and II crypto asset service provider (CASP) licenses from South Africa's Financial Sector Conduct Authority (FSCA).
H2O Securities: Launched the world's first crypto water token and raised $150 million to address water scarcity and infrastructure funding gaps.
OneWattSolar: A Nigerian cleantech startup using blockchain to provide solar energy access with zero upfront costs.
Tracr: A blockchain solution by De Beers to ensure diamond authenticity and traceability.
Crypto Valley VC: While not an Africa-based startup, Switzerland's Crypto Valley VC has recently introduced a $20 million Africa Fund to invest in the continent's most promising early-stage digital asset projects.
Challenges Facing Crypto Adoption in Africa
Despite the fact that Africa's crypto market is growing, multiple challenges pose barriers to the continent's digital asset adoption.
Economic and Infrastructural Challenges:
Source: Statista
The continent struggles with high inflation, corruption, and governmental instability. Transparency International reports that 75 million people in Sub-Saharan Africa paid a bribe in a year. Additionally, over 35 armed conflicts affect 12 of the region's 46 countries. Infrastructure remains underdeveloped, with nearly half of the population lacking access to electricity and 26% without clean drinking water.
Regulatory Hurdles:
The regulatory environment for crypto businesses in Africa is complex. While South Africa’s financial conduct regulator recently approved licenses for VALR and other crypto businesses, many countries either ban or impose strict rules on crypto activities. For example, Nigeria has blocked access to crypto exchanges, banned P2P trading in naira, and prohibited cryptocurrency providers from withdrawing cash from bank accounts.
Effective regulation is crucial for fostering a healthy crypto market. Comprehensive frameworks can attract foreign service providers, boost local startup activity, and protect consumers. South Africa's new regulations are expected to increase digital asset adoption while raising standards for market players.
Opportunities for Growth
Despite the continents' existing challenges, crypto adoption in Africa has multiple opportunities for growth. Grassroots movements and community involvement are among them, which can boost the rate at which the African population is embracing cryptocurrencies.
In fact, grassroots crypto adoption in Africa has been taking off lately. Chainalysis' 2023 Global Crypto Adoption Index ranks Nigeria second globally, with Kenya, Tanzania, Ghana, South Africa, Ethiopia, Cameroon, and Uganda also featuring in the top 50. P2P exchange trade volume is also particularly high, with Nigeria leading globally.
One of the main reasons for the increased grassroots crypto adoption in Africa is decentralisation's potential to improve citizens' lives. Decentralisation offers a way to bypass centralised financial systems, providing financial services to unbanked populations, mitigating inflation impacts, and offering a hedge against economic and political instability.
Crypto Educational Initiatives in Africa
Education is vital for accelerating crypto adoption. Digital assets have a steep learning curve, and a lack of understanding is a major barrier. According to Gemini's 2022 Global State of Crypto report, 40% of African respondents cited a lack of understanding as a reason for not buying crypto, with 56% stating that more educational resources would make them more comfortable purchasing digital assets.
Addressing the gap in blockchain and cryptocurrency knowledge should be among the top priorities of African digital asset startups and international players seeking to enter the continent's crypto market. More educational initiatives, like the Africa Blockchain Institute (ABI) or the Power Learn Project (PLP), are needed to tackle this challenge. By expanding the population's knowledge and expertise in decentralised technologies, crypto adoption in Africa could be taken to the next level.
The Future Prospect of Crypto in Africa
With cryptocurrencies and blockchain technology, Africans can hedge against inflation and national economies' other challenges. Crypto is also the perfect tool for them to enter digital finance and take charge of their finances without relying on intermediaries.
Despite the ongoing challenges, positive developments in the regulation front has the potential to accelerate crypto adoption in Africa and introduce better safeguards for consumers.
At the same time, the most recent Bitcoin halving has made the mining space even more competitive. As five out of the ten countries with the lowest electricity rates and 60% of the world's best places to generate solar power are located on the continent, Africa can provide a more cost-efficient and greener alternative to North America, which is the current leader in this field. Miners are considering relocating to the region to take advantage of these benefits, which could contribute significantly to the development of local economies and infrastructures.
While the continent's countries are expected to rank high in terms of grassroots crypto adoption, educational initiatives have the potential to accelerate the rate at which Africans are embracing digital assets.
Hear from our CEO, Farzam Ehsani, on the Future of Money Podcast with Henri Arslanian on why Africa is the best use case for crypto.
So, what do you think the future holds for Africa's crypto market? Get involved with VALR and share your insights on Twitter (X), Facebook, or LinkedIn.
Frequently Asked Questions
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Key countries include Nigeria, South Africa, Kenya, Tanzania, Ghana, Ethiopia, Cameroon, and Uganda.
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Nigeria is leading the way, ranking second globally in grassroots crypto adoption.
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It's growing fast, expected to hit $457 million by 2024 and $653 million by 2028.
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While specific rates aren't mentioned, Nigeria has the highest P2P exchange trade volume globally.
Risk Disclosure
Trading or investing in crypto assets is risky and may result in the loss of capital as the value may fluctuate.
VALR (Pty) Ltd is a licensed financial services provider (FSP #53308).
Disclaimer: Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
