Despite a 1,200 percent surge in crypto adoption in Africa, the clampdown on crypto market by the Central Bank of Nigeria (CBN) ensured the country yielded global dominance in peer-to-peer (P2P) transactions to Kenya in 2021.
Kenya’s dominance of the market in the world was one of the major themes of 2021 which was however overshadowed by the negative regulatory stance from Nigeria and the launch of the Central Bank Digital Currency by the CBN, the first of its kind in Africa.
“As we’ve witnessed from China, blanket bans do little in terms of limiting trading activity and protecting consumers but engaging experts who understand the nuances of new and complex technology like cryptocurrencies can provide a huge amount of value on how to protect consumers from its risks,” said Marius Reitz, Luno’s General Manager for Africa.
It is the second consecutive year Kenya is dominating the P2P trading volumes on the continent. Marius Reitz, explains that Kenya’s crypto industry is booming with a rapidly emerging crop of companies building blockchain-based solutions and considering its young population, high levels of mobile connectivity, and familiarity with digital payment solutions like mobile money. The country is projected to emerge as East Africa’s biggest crypto hub in 2022.
Reitz says crypto education would help increase adoption in the country. In a 2021 consumer research survey Luno conducted, 64 percent of Kenyans said they don’t invest in cryptocurrencies because they don’t simply understand them, and given Kenyans were also found to be the most proactive in seeking out financial advice from traditional sources (i.e. financial services companies, publications, and advisors) before making investment decisions. It is vital crypto firms go the extra mile to ensure the right information is readily available.
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But it should be noted that while education is critical, it may not be enough to change the mindset of financial regulators on the continent on the so-called threat cryptocurrencies pose to their economies. Several crypto operators have – and continue to – carried out educational campaigns in Nigeria including directly engaging government officials with the goal of enlightening them about the potential of the market, it still did not stop the sledgehammer from the CBN from falling on the market. Some experts say there is also a need for an increased lobby and the stakeholders have to come together to pull a united front when engaging politicians about cryptocurrency.
The global cryptocurrency market witnessed some wild movements in prices of major coins such as Bitcoin, Ethereum, Binance, Dodge Coin, etc. Bitcoin broke past its all-time price high of $64,000 setting a new record at above $68,000. Importantly, bitcoin drove the cryptocurrency market even closer towards mainstream adoption. Many new institutional investors took positions in the market. However, Reitz notes that attracting institutional investments into Africa’s crypto space is still a major problem due to the unfavorable regulatory environment.
But all hope is not lost for regulations in Africa. Reitz predicts that more mature markets like South Africa could introduce stronger regulatory frameworks to encourage more participation from stakeholders.
“With this in mind, we could see a greater openness amongst regulators to work alongside industry players to establish a more robust and effective framework, which could encourage other African countries to follow suit,” Reitz said.
The adoption of cryptocurrencies would also benefit from more women becoming part of the market. Victor Asemota, Growth Partner AnD Ventures and a crypto investor says many women in Africa trade crypto but are more reserved about it. Several of these women have used the gains they made to build businesses as well as support their families.
“It is women who can best educate women. Most women I know who trade are not on the fence. It is serious stuff for them and they make a killing. They match the guys with mettle and don’t see any gender dichotomy in it. They are usually very good allocators and mostly private people,” Asemota said.
Remittance is another way the market can win in 2022. According to the World Bank, total remittances in Sub-Saharan Africa alone broke past $45 billion in 2021 but with the severe lack of foreign currency reserves across Africa stopping companies from receiving international payments and remitting their profits, many businesses could look towards cryptocurrencies as an alternative means of handling cross-border transactions.
The major advantage of cryptocurrencies in remittances is the open and decentralised blockchain networks that support them, which allow money to be easily transferred between parties without all the lag times and exorbitant fees no matter who or where they are. Asemota believes crypto was meant for Africa not as a means of speculation but for bridging communities across geography and building trust.
“Mobile payments accelerated trust within confined geographies and see the magic that happened? Doing it across magic borders is where the greater magic is,” Asemota said.
It is likely more Nigerians are already discovering the advantage of cryptocurrencies in remittances which partly explains why the country’s total remittance has been dropping in recent times. The impact was especially driven by the COVID pandemic where people discovered more efficient ways to send money home as bank branches were closed.
Reitz, however, notes that progress in remittances will be heavily dependent on a favorable regulatory climate, and should this materialise, cryptocurrencies could emerge as a major asset for companies with extensive operations throughout Africa.
The growing popularity of cryptocurrencies will continue to attract world-class talent, says Reitz, as well as attention from global media houses who will be dedicating more resources to quality reporting.
However, if we have learnt anything from events over the last two years, we should also expect the unexpected and whilst this can often breed uncertainty, a quick look at Africa’s current position and prospects should still provide huge optimism that it remains the most promising region for the adoption of cryptocurrencies,” he said.
