The Good, The Bad, And The Ugly – Africa’s Checkered History With Blockchain And Cryptocurrency
Looking at the “why” and “when,” one would come away with the earliest and most valuable information of all about blockchain and cryptocurrencies. Bitcoin and the underpinning distributed ledger technology was incepted in 2008. In the wake of the global financial crisis, the invention brought hopes that a better system would suffice.
In a period where banks were not entirely in control, the famous Satoshi Nakamoto – whose name has rung too many bells to bare – wrote the eight-page white paper which introduced the world to blockchain and the digital chase. What the person or group of persons best known by the possible pseudonym, Nakamoto, also did was spur a massive libertarian movement.
What’s The Environment Like?
Africa is bedeviled by a variety of problems that only technology has a better chance of solving. If crypto and blockchain were characterized by a financial muddle, it should be a normal process that the digital cash system and its underlying technology would be able to alleviate many a burden faced in the continent.
The problems in Africa have been around, virtually since when it was still under colonization, and where hands have proved unable to make some things work, enter the blockchain technology and almost hallelujah.
Most hurdles faced in different sectors in the continent could be solved using a few fundamental principles that are inherent in the blockchain, name transparency, and decentralization, and leave the rest for the tech geeks to mention. Elections, energy services, international remittances, banking alternatives, identity management, and so on, can all benefit from the blockchain, and one cannot begin to imagine a hitch-free Africa when these solutions indeed avail.
Africa, the world’s second-fastest growing region and home to the fastest-growing economies in the world, has been said to be poised to receive blockchain as “its personal lord and savior”. With the way Bitcoin and other cryptocurrencies have gained a footing in many countries herein, innovative startups are on the rise, looking to attract reasonable venture capital.
The continent, however, seems to be on a slow track as cryptocurrency is experiencing many hurdles trying to stabilize in the region. Despite the hamstrung funding in the space, more and happenings all go in the way to show that the continent is ripe for total blockchain adoption.
Whether some of these developments appear to be negative, they do not fail to imply that blockchain and the birthed digital currencies are not to be joked with. In the past two years alone, we have seen many crypto startups – mostly from South Africa – raise significant funding to champion their ideas and impact the continent, looking to finally liberate Africa from the storied economic and infrastructural quagmire in which it “presently” crawls.
Dominating Bitcoin Search Interests
Per info obtainable from Google Trends, the most significant search interest for Bitcoin in the world is gotten from potential investors in Nigeria, South Africa, and Kenya, three countries which seem to be among the largest crypto markets in Africa. This dominance, nonetheless, has pain put to its promising move of trading activities on exchanges.
In most of the few occasions in which Bitcoin has been used, it is as a means of payment, especially to people in other regions of the world. Well, it is agreeable that Africa has garnered some world-leading interest in the blockchain space, even as it rapidly develops.
Despite this, the continent still seems to be trailing behind in the Bitcoin use and adoption race, with no signs of beating any other region to the digital liberation finish line. Crypto apparently finds it Herculean to break the stranglehold of convenience, simplicity, and efficiency.
Africa is home to no less than 1.2 billion people and boasts more than 50 percent of the world’s mobile money services. Yet, Bitcoin and other digital currencies find it harder to penetrate, compared to the relative ease associated with other countries in the world. With a simple telephone handset, Africans – in fact, just about anyone – can send or receive money using USSD anywhere within the continent, without having to depend on internet connection.
Crypto literally lives and breathes on the internet, so one would have to access a secure connection to complete any digital transaction on the blockchain network. There has been a development in internet penetration in some African countries, with Kenya leading the pack. Still, users from Africa account for only 10 percent of the global total, which naturally makes a case for crypto use and progression even more lukewarm.
Factoring in unstable power supply in different countries, you would find that there are many reasons digital assets are not mounted like pillars on the four angles of the continent’s financial sector. As provisions are not fully in place, cryptocurrencies will likely have to go tooth and nail in order to take control of considerable market share in a payment systems space that is dominated by mobile money.
Touted as the next frontier for virtual currencies even, what is available now is just not enough, especially with the cumbersome registration processes involved in simply setting up a crypto wallet. In the Southern African country of Zimbabwe, the publicly-listed Econet Wireless controls 96 percent of the mobile money market share via its Ecocash platform. The seven-year-old platform has seen significant success to the extent that a larger proportion of government departments rely on it for electronic payments.
The Unchallenged Force Called Bitcoin ATMs
There are more than 8 million users of mobile money in Zimbabwe, and that is the basis upon which Ecocash has processed well over USD 23 Bn worth of transactions since its inception in September of 2011. Boasting more than 32,000 agents throughout the country, Ecocash is still but one of the many just-as-solid mobile money services that cryptocurrencies will have to have rounds in the ring with.
According to the GSM Association, there will be 725 million mobile phone subscribers in Africa by 2020, who could either plug into crypto or mobile money. Entrenched to the list, virtual currencies would have to pull off one hell of an Armageddon to penetrate the country’s financials.
But, all hope is not lost. Even as many crypto startups are in various countries, Bitcoin ATMs are on the rise. In crypto’s core market, these Automated Teller Machines for virtual currencies are a makeshift kiosk with an internet connection, where people can buy Bitcoin and the likes using hard cash.
They comprise QR code scanners, cash dispensaries, and transaction-managing computers. There are also transaction fees that vary from one provider to the other, depending on the local regulations in some countries. It should be common knowledge by now that the first of its kind was installed in 2013 in Canada, and since then a variety of firms have been trying to join the race.
Today, there are 683 Bitcoin ATMs in Canada alone, 2910 in the United States, 274 in Austria and 233 in the United Kingdom. According to Coinatmradar, there are 3,754 of this facility in the world, while Bitcoin Africa says there are over 4,000 of them. In Africa, the report is that there are nine of them, spread throughout different locations.
South Africa takes the cake and leads in Bitcoin adoption, playing host to five crypto ATMs located in Johannesburg, Pretoria, Nelspruit, and Cape Town. These ATMs can, on the average dispense from SAR 100 to SAR 1 Mn, and most of them require identity verification should you want to buy more than SAR 500. Are you still wondering why South Africa is the hotspot for crypto activities in the continent?
Last year, Kenya was gifted its first Bitcoin ATM in its capital, Nairobi. Under the auspices of the BitClub Network, the facility is a fiat-to-crypto only ATMs, just like its Southern African counterparts. The minimum for this ATM is Ksh 500 worth of Bitcoin and Litecoin. In Uganda, the one and only crypto ATM is hosted by the Kampala Post Office, and it is managed by KIPYA Bit2Big, a local blockchain firm which has now given Ugandans a medium to buy Bitcoin, Bitcoin Cash, and Ether.
Back to Southern Africa, where Zimbabwe who prides itself with the first-ever crypto exchange in Africa runs one Bitcoin ATM in the Golix office in Harare. In this cash-strapped country, the machine provides a critical service that allows users to buy and sell Bitcoin, Bitcoin Cash and Litecoin.
In what comes as a surprise (to me too when I first found out), there is a Bitcoin ATM in Djibouti. It’s a surprise given the small size of the East African country and the nation’s apparent quietness about technology and even finance. There is currently only one in the country, and it is located at Appart Hotel Moulk, and the operator, Group DOS, has its eyes set on installing two more in the country.
On March 4, 2019, Bitcoin.com reported that Express Minds, a startup company, has set up a Bitcoin ATM in Gaborone, Botswana, which took the number of such machines in Africa to ten. The fiat-to-crypto machine, according to another report, was installed in a shopping mall in the capital to teach people how to use crypto wallets and virtual currencies, in spite of the country’s governments’ negligence towards crypto regulations.
One of the world’s largest research company, Dublin-based Research and Markets, says that the global surge of installed cryptocurrency ATMs around the world is expected to take the market by storm over the next five years. In the study which was called Crypto ATM Market – Forecasts from 2019 to 2024, the current global crypto ATM market of USD 18.513 Mn could be quadrupled by 2024, increasing to up to USD 183.779 Mn. The hopes are just that Africa will have a big part to play in this Bitcoin ATM surge saga.
According to Kofi Genfi, CEO of Ghana-based payment solutions firm, Mazzuma, “Africa needs Bitcoin ATMs just as much as it needs the blockchain technology. Specifically, we need cryptocurrency vending points, not essentially ATMS as such. We need these facilities to make the global exchange of value much more convenient, so Africans can exchange digital assets”.
Taking Pictures Of Frowns. And Smiles
It’s no news that crypto is still looked upon in parts of the continent as nothing more than a scam or sham or one of those Ponzi schemes made to look like a gold mine. And it is not just the users who are casting these aspersions on digital currencies, but African governments as well.
Despite the fact that the blockchain is birthing babies and storing degree certificates, some African countries are still unwilling to say “Okay, we think this could be good, so let’s give it a try.” It’s not just Africa, it’s a similar story in other countries in the world, including China, Russia, Vietnam, Ecuador, Colombia, and Bolivia.
In as much as only a few countries in Africa have banned crypto outright, there are no regulations in place to either adopt or even look into the use of these virtual currencies. What most of these governments and central banks are doing is waiting, seemingly patient to find out whether or not cryptocurrencies are real, safe and lucrative.
Rather than just jumping on the bandwagon, African countries seem to be waiting and watching if the crusade will be able to cross a nearby stream or scale a rugged mountain. Honestly said, they are hoping to learn from the mistakes of their neighbors who will regulate and innovate before they climb atop the coaster ride.
Seemingly wary about the results of adopting something whose founder(s) even appears to be a ghost, African countries have mixed feelings, and no one can really blame them. Nigeria, Kenya, Ghana, South Africa, and Zimbabwe are regarded as the front men in crypto adoption in Africa, but it comes with a jumble of speculations. In the most populous black nation, for instance, it almost a proceed-at-your-own-risk kind of approval, especially as these digital currencies are inherently volatile.
Well, Bitcoin has found a substantial place in the heart of Nigerians, thanks to the proliferation of online Ponzi schemes that have inoculated virtual currencies into awareness.
The Central Bank of Nigeria (CBN) made the first move on the chessboard by passing around a circular to all Nigerian banks, warning them to deal with crypto at their own risk. While substantive regulation yet pends, the circular was speculated to be more or less a ban. But what the CBN has reinforced is that wallet dealers should console themselves in the event of any financial tragedy.
In Kenya, the game is a bit more exciting and promising, even though the “caveat emptor” phrase has been resounded since 2017. Recently, the government of the Swahili-speaking country assumed more proactivity, as President Uhuru Kenyatta ordered for the creation of a blockchain and AI task force to look into the use of the technology within the existing framework of the East African country.
Meanwhile, South Africa is going for an experimental approach. Out of pure curiosity, the government is looking to cash in, as the South African Revenue Reserve Bank is scheming to set up a regulatory sandbox for Bitcoin and the likes. Basically, the country just wants to tax crypto activities.
Let’s Keep Clicking
A Bitcoin exchange was pre-announced in Egypt in August 2017, which stirred a lot of excitement. But the Central Bank of Egypt reacted to the development by disavowing digital currencies with claims that it has no intentions to regulate them.
Dampening many people’s moods, the positions were further painted with religious reservations, especially when the North African country’s Grand Mufti, Shawki Allam, outrightly said that trading crypto is forbidden under the Islamic Sharia Law.
It didn’t end there, as another Islamic guru took to the press to say that Bitcoin has no problem with the law, and that was enough to make prices of coins skyrocket from the state of rest it was put into by religious dubiety.
Rwanda says its citizen should hesitate from investing now because it’s too risky. “We advise people not to invest in it today. We have put up a team, and working with stakeholders to study more around this currency at the national level and a taskforce to position ourselves vis-a-vis these new technologies,” said Central Bank Governor John Rwangombwa.
While Botswana is adamant about beginning to regulate crypto, the fastest growing economy in the world, Ghana, has this: “The Bank of Ghana wishes to notify the general public that these activities in digital currency are currently not licensed under the Payments System Act 2003 (Act 662). The Bank of Ghana is now investing a lot of resources to enhance further the payments and settlements system, including digital forms of money and also to introduce cybersecurity guidelines to safeguard electronic and online financial transactions.”
The Bank of Mauritius has done its bit to warn against crypto trading, directing that: “Cryptocurrencies are not issued or guaranteed by the Bank. Users of cryptocurrency are exposed to risks. The public is advised that exchange platforms for cryptocurrencies are unregulated. The Bank will not accept any responsibility in case of any loss which members of the public may incur on account of any dealing in unregulated cryptocurrencies.”
The Moroccan Foreign Exchange Authority and its central bank have repudiated all forms of crypto trading, even going as far as threatening penalties as laid out under their current laws. The ban was set up after a local digital services company known as MTDS announced that it would start accepting bitcoin payments.
Africa needs an open currency competition and cryptocurrencies, and that’s according to Coindesk. The continent has been in the thick of ups and downs in the blockchain space. But that has not stopped it from holding seminars, workshops, and conferences to that effect. In fact, the number of blockchain-related events on the continent keeps multiplying from year to year.
From Mozambique to Zambia and from Nigeria to Zimbabwe, Africa has had its fair share of currency crises, and it is no longer a secret that the central banking system can be held accountable for most of the lags in the space. If privately launched cryptocurrencies are allowed to compete with currencies issued by the various central banks, it will help the said banks on the continent to improve and reform, in order to keep up.
The need for a decentralized system in Africa is the reason Senegalese pop musician, Akon, was praised when he launched his own cryptocurrency; Akoin. This goes in a way to say that we must resist the practice which seems to have thrown Venezuela into a quandary, where the state, according to reports, banned others from issuing digital currencies before it launched its own – the Petro. While no one can predict the future of the blockchain outright, developments in Africa should be welcomed and hopes placed at their barest.
Featured Image: Mattlulime