When Afro was founded in 2018, the 30-odd members of the Afro Foundation were bent on creating it to be the leading cryptocurrency in Africa.
Based out of their Geneva headquarters and Paris, the team of artists (Mansour Ciss Kanakassy), experts (Karim Zine-Eddine, Thameur Hemdane) and lawyers (Fabien Lawson, Fortuné Ahoulouma) set out to develop a cryptocurrency that would reduce transaction costs in every corner of the African continent.
Fast forward to three years later, and Afro has not exactly caught on. Out of Africa’s 54 countries, just one, Côte d’Ivoire, has inked an agreement with the non-governmental organisation. What’s more, the deal does not permit Afro’s use as a virtual currency, but instead leverages its blockchain to ensure the delivery of registered letters.
Lower transfer fees
But David Nataf is not ready to throw in the towel. “We’re working to make Afro the bitcoin of Africa,” says the specialist in computer law and cryptology as he sits behind his desk at the Afro Foundation.
Interest in cryptocurrencies is ever increasing in Africa, where they are positioned as a welcome alternative in countries with high inflation.
10,000 transactions a year
Preferring not to disclose Afro’s user numbers, Nafat does admit, however, that the cryptocurrency “hasn’t yet reached the scale we desired”. “We’re laying the foundations. It’s kind of like when the internet was getting off the ground, it’s completely new,” he says.
Today, the foundation boasts 10,000 Afro transactions and 3,000 monthly uses of the eSIM system (compared to 1,160 monthly uses after its launch), which allows Afro’s use continent-wide. But these figures pale in comparison with Africa’s population of 1.3 billion.
And Afro is not the first cryptocurrency to have pan-African ambitions. Its competitors include Akoin, the dreamchild of Senegalese-American singer Akon, Nurucoin and Ubuntu Coin. According to economics professor Jérôme Mathis, “All of these cryptocurrencies are in their infancy.”
He says: “There’s no reason to exaggerate Afro’s importance. It’s still a small project.” Mathis also points out that Africa has 40 currencies across 54 countries and that upwards of 7,000 cryptocurrencies have been developed around the world. However, Afro does not rank among the 100 most valuable virtual currencies.
Pending negotiations in Benin and Cameroon
The foundation nevertheless intends to stay the course. “We’re in touch with central banks in several countries located in West, Central and East Africa. Our strategy is to operate all over Africa,” says Afro’s co-founder Daniel Ouedraogo.
Talks are already underway or “in the pipeline” with Benin, Burundi, Cameroon and Tanzania, says Nataf, though he refrains from revealing the full list so as to avoid “derailing the deals”.
In East Africa, the cryptocurrency market has established an open line of communication with governments. This progress is demonstrated by Tanzanian President Samia Suluhu Hassan, for instance, who asked the country’s central bank to weigh in on cryptocurrencies, though Tanzania has yet to approve the use of cryptoassets.
Proceeding with caution
“No clear regulations are in place in Africa at this time,” says Ouedraogo, adding that “some actors take a cautious approach” which complicates the negotiation process. “Each government responds differently. Some regard cryptocurrencies as unfairly competing against their national currency, while others want to regulate them to protect their citizens from abusive practices,” Mathis tells us.
Depending on the country, leaders have shown a wait-and-see attitude, called for regulation or banned cryptocurrencies outright. In North Africa, Algeria has taken a firmly anti-crypto stance. Morocco, for its part, is willing to embrace blockchain technology but does not allow cryptoasset transactions.
In Tunisia, where cryptocurrency mining and wallet ownership are prohibited, a teenager was arrested for using cryptocurrency in an online transaction. A little over a week ago, the country’s finance minister, Ali Kooli, told the media, citing the incident, that digital currency ownership should be decriminalised.
Nigeria, a bitcoin paradise
Although there is reason to doubt the prospects of Afro, or any other cryptocurrency for that matter in North Africa, the team behind Afro is looking to find success in blockchain-friendly markets like Kenya, Nigeria and South Africa.
Nigeria, with 13 million bitcoin users in 2021, ranked third in the world, after India and the United States, for trading volumes of the most famous cryptocurrency. According to TripleA, a website that publishes cryptocurrency statistics, more than a third of Africa’s bitcoin users are Nigerian and 32 million people trade bitcoin continent-wide.
Economics professor and virtual currency expert Nathalie Janson is, on her part, sceptical about the potential for Afro’s success, even though the cryptocurrency has “the advantage of working independently of the traditional banking system”. She also points out, however, that “adopting Afro means adopting the structure that created it, and the project’s creators have “limited name recognition”.
Criminals increasingly use cryptocurrencies to lure in unsuspecting marks. Two brothers from South Africa have vanished, along with Bitcoin worth $3.6bn from Africrypt, their Bitcoin trading platform. “A Cape Town law firm hired by investors says it can’t locate the brothers and has reported the matter to the Hawks, an elite police unit. It’s also told crypto exchanges across the globe to be aware of attempts to convert the digital coins”, reports Bloomberg. “This would be the biggest-ever dollar loss in a cryptocurrency scam yet. The nation’s financial regulator seems hamstrung because cryptocurrency is not yet a regulated product in South Africa.”
A young, tech-savvy population
Mathis echoes this view, noting that Afro’s greatest strengths – speed and low transaction costs – may not be enough to persuade those who are reluctant to use “technologies that only a select few fully comprehend”, as Jean-Marc Velasque, head of business consulting at Sopra Banking Software, puts it. On top of that, “hacking is a big concern in the cryptocurrency world,” Mathis says.
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Eschewing the caution of her colleagues, Giulia Mazzolini, country manager for France at the cryptocurrency trading platform Bitpanda, has a much more optimistic take on Afro’s potential. “Interest in cryptocurrencies is ever increasing in Africa, where they are positioned as a welcome alternative in countries with high inflation,” she says, adding that “over 80% of Africans don’t have a bank account”.
Between low banking penetration, significant remittances from Africans living abroad, little trust in banks and local currencies, and chronic instability, Africa could prove to be fertile ground for cryptocurrencies, with the added bonus that “the population is young and tech-savvy” there, as Janson highlights.
A compensation fund to ensure currency stability
Will Afro be able to catch up with its competitors and reach its objectives? Despite their reservations, we asked a handful of experts to envision an optimistic scenario for Afro. Janson thinks that users may see the cryptocurrency as worthwhile if a network of merchants adopt it.
Moreover, Janson, Mazzolini and Mathis agree that steps must be taken to stabilise and increase predictability of Afro’s price. For this to happen, Velasque says the cryptocurrency should be pegged to an official currency through the set-up of a compensation fund. As it turns out, the Afro Foundation is already pursuing this route.
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“Rather than replace a country’s official currency, Afro will co-exist with it by being linked to currencies such as the euro, the rand and the US dollar,” Nataf says.
Mathis suggests that Afro could be used for other purposes, following the example of Côte d’Ivoire, where the foundation struck a deal in June with the country’s postal service. The team is looking to expand the deal continent-wide by way of the Pan-African Postal Union.
Ouedraogo and Nataf plan to use Africa Blockchain Week, a virtual event to be hosted by Morocco from 28 June to 1 July 2021, as an opportunity to get the word out about their organisation. They have high hopes that Afro will gain plenty of traction in August once it begins trading on the Binance cryptocurrency exchange, a blockchain algorithm that could enable Afro to reach 50,000 monthly users by the end of the summer.
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