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Today I would like to delve into a different topic, focused on real utility and adoption: the transformative importance of cryptocurrency in the African continent.
Africa is often underestimated in the crypto narrative, but it is definitely emerging as a hotbed of innovation, financial inclusion, and economic empowerment, and a lot of these are thanks to the digital currencies and blockchain capabilities.
Developing countries have the ability to leapfrog technology: it’s not so much about choosing, it’s more about the need.
Let’s look at the main use cases and why this is relevant to Africa.
1. Bringing Infrastructure to Africa: Bridging the Gap in Financial Inclusion
Centralized entities in Africa are either ineffective or nonexistent: Africa is home to millions who lack access to traditional banking services.
And even though the internet and new fintech companies are democratizing forces, there were more barriers to accessing certain services, such as the need to have a credit card, which means you must be connected to traditional payment rails to begin with.
Another need is to be able to complete proper KYC. However, millions don’t have IDs, presenting another big friction point to participate in anything in the world.
The options to build layers of trust, reputation, and credit scoring to access to financial services is very limiting.
In this context, cryptocurrency, with its low entry barriers, is changing this reality. A simple smartphone and an internet connection are all one needs to access, store, and transact digital assets. This is empowering individuals who were once excluded from the formal economy, offering them a chance to build a more secure financial future.
2. Remittances Reimagined
Now, even if you have the connectivity, there might be other kinds of limitations.
For example, in Nigeria, it seems that banks have a limit of $20 USD per month for international transfers. Safe to say, it’s a very low ceiling.
At the same time, remittances in Africa are typically low in value, but high in volume. So options to do cross-border payments with the likes of Western Union become very expensive.
In conclusion, remittances are the lifeblood of many African families. However, the traditional remittance landscape is fraught with high fees and delays.
Enters crypto, which offers a cost-effective and swift alternative. Families can receive funds from abroad with reduced fees and waiting times, thus improving their quality of life.
3. Increase Sovereignty
There are 14 countries in Africa that are former French colonies. France has instituted this currency called the CFA franc, which is a currency pegged to the Franc, and now the Euro, and as part of the historical monetary arrangements associated with the CFA franc, the African countries using this currency have to deposit a portion of their foreign exchange reserves with the French Treasury.
Apparently, the French government created also some boundaries around interest rates, how much money can be printed, etc, so these governments lack full sovereignty with regards to their own monetary policy.
There are also African countries that do not print their own money. They outsource that to European printing press, and they have to pay printing fees (interest over what’s printed) and transportation costs.
No wonder the Central African Repulic made Bictoin a legal tender.
It is not because they are inherently pro-Bitcoin, but it is an alternative to be more sovereign.
4. Fostering Entrepreneurship
The majority of businesses in Africa are rather smaller in size, and more often than not, do not have real assets to collateralize. Banks will clearly not lend them credit, and when it comes to uncollateralized lenders, the interest rates might be calculated on a monthly basis, needless to say, at a high rate.
Now the African startup ecosystem has found an alternative in the blockchain technology, leveraging Initial Coin Offerings (ICOs) and decentralized finance (DeFi) platforms to access sources of capital.
5. Shield Against Economic Instability
Many African nations have grappled with economic instability and currency devaluation. Cryptocurrency offers a lifeline in such turbulent times. By converting their savings into cryptocurrencies, individuals can safeguard their wealth from inflation and financial crises.
Particularly in countries like Ethiopia where access to USD is very difficult, limited by an official rate and an unofficial rate with high premiums (the similarity with my home country Argentina is really sad).
6. A Catalyst for Financial Education
The rise of cryptocurrency in Africa is sparking curiosity and awareness about finance and technology. Communities are embracing blockchain, learning investment strategies, and practicing secure digital habits. This newfound financial education empowers individuals to make informed decisions and protect themselves from scams.
Final Thoughts
When we look at the news in the US and how much resistance to crypto there is from traditional institutions, we know that adoption will be harder. Why? because these institutions will continue to fight and attempt to ban crypto to maintain the power and control they have right now. And frankly speaking, most of the population doesn’t really care about crypto at this point because they are also used to the existing system.
However, in places like Africa, even though the crypto money is troublesome and chaotic, they still offer very valuable options for Africans. It is not just better money, it’s also lower fees, access, global remittance, and a platform for more powerful options like DeFi.
So while in developing countries adoption will likely take a longer journey, in the developing world like Africa, adoption is driven by necessity.
It’s not about not trusting fiat currency no more. Rather, it’s about doing things hat fiat doesn’t allow them to do.
Of course, as with any profound change, there are risks. Responsible regulation and continuous financial education will be essential in harnessing the full potential of cryptocurrency in Africa.
Yet, it is inspiring to see how cryptocurrency is unlocking new horizons of opportunity across Africa. This transformative technology is rewriting the financial narrative for millions.
And this is the reason why I’m investing my time, energy, and resources in the crypto space.
I hope this serves as a refreshing reminder of how impactful crypto can be when there is a real use case, real adoption, providing better access, better alternatives, and better opportunities to improve people’s lives.
And that’s it for today. Thanks for making it this far! Make sure to like, subscribe and share, so more people can find us!