Why Africa needs crypto
This post is adapted from a speech by Blake Player, VALR’s head of international expansion, at the Blockchain Summit in Lusaka on Monday November 28, 2022.
5 or 6 years ago, it would have been difficult to imagine that we would be spending a morning talking about blockchain and crypto. There are probably many of you who only heard about crypto and Bitcoin this year and that’s fantastic, because we’re still so early on in this journey, in Zambia and around the world.
VALR is the largest crypto currency exchange domiciled in Africa and offers services to over 330,000 individual customers as well as more than 800 corporate clients. We provide one of the widest ranges of digital assets and crypto currencies in Africa. Our platform presently facilitates about $20M a day in trade. Last week we opened trading against the Zambian Kwacha and about ±K2M traded the first week. We are growing rapidly in Zambia and welcome more people to use our service where we accept bank deposits and mobile money to fund your account.
Why we chose Zambia
You may be asking: why Zambia? Why didn’t we focus on the USA or the UK where there is significantly more trade? Why are we passionate about providing crypto onramp services in Africa?
These are important questions and the answer centres around the reality that in Africa we do not have great access to global capital markets, stable fiat currencies, and the ability to make cross border transactions or remittances without expensive intermediaries. We do not have easy access to savings accounts or other ways to store value outside often unreliable local currencies. Africans generally have very few ways to protect their wealth from the bad decisions of politicians and war. Even physical property is not much help in times of instability and panic. You cannot flee a country with your house and livestock on your back. Crypto changes this, particularly through stablecoins and the potential that tokenization of other investment products can hold.
“Crypto is the undisputed champion of financial inclusion”
Let’s dig into a few of these topics, starting with stablecoin, particularly USD stablecoin. It is no secret that the greenback goes far in Africa. I have travelled around widely in Africa and have yet to find a country where the USD is not gladly accepted in exchange for goods and services. Stablecoins such as USDC, provides the ability to hold a dollar equivalent asset in your crypto currency wallet, similar to how you might hold dollars in a USD denominated bank account. This is achieved by an issuer taking in fiat USD into a central treasury and issuing crypto tokens against each deposit on a 1:1 basis. The issuer also stands ready to redeem these tokens back into banking digital USD deposits. In this way they have created a new private, digital form of money.
Why is that important? Well, only about half the adult population in Africa has an account at a financial institution and the vast majority of those accounts certainly do not provide access to investment products, let alone forex transactions. So we are talking about a small number of people who can actually save and transact in digital USD in Africa. With stablecoins, anyone who can purchase crypto can access digital USD through stablecoins. Furthermore, they are able to participate in the global financial crypto markets using their USD stablecoin and earn yield on that product. This is unprecedented. Crypto is the undisputed champion of financial inclusion. It excludes no one with an internet connection. It is blind to your gender, your race, your nationality or your level of wealth. This is powerful and will improve financial outcomes for Africans at a scale comparable to the advent of mobile money.
I really want to drive this point home. Let me take an example of a Zambian who only has a smartphone and cash. They could purchase USDC from someone in Zambia at a fairly competitive rate against kwacha. They could then take that USDC, place it into a yield earning crypto account or defi protocol and earn upwards of 3% in dollar terms on that balance. In a few years time, they could sell the USDC for Kwacha to pay for school fees. They have achieved the same result from a savings perspective as someone sitting in New York with a private wealth bank account at Bank of America, except they have never opened a bank account, all they had some cash and access to the internet. This is because decentralised ledger technology has allowed for financial transactions to happen without intermediaries, and that is truly an amazing tool for Africa, where financial transactions are heavily intermediated, and expensive. Are these things perfect? No. Are there very real risks in the system? Of course, and we should be extremely cautious, but the potential is incredible.
Building the future in Zambia
Other financial products can be made accessible through the crypto rails. This includes collateralised lending, swaps between assets, tokenized investment products such as debt notes. There are many possibilities, many of which can be built on top of the decentralised ledger and computational infrastructure that already exists today e.g. Ethereum or Polygon. What is needed however, are innovators and entrepreneurs who can do the work to make these products more accessible and easy to use. For that you need more VALR’s in the world and more people building on VALR. I’d love to see more people building this future, here in Zambia.
