Bitcoin has been enjoying real success so far in 2021. Tesla and BlackRock have both invested in this crypto-currency. Visa, Mastercard and PayPal are slowly starting to integrate it into their payment methods and some of the world’s largest banks – such as Morgan Stanley, JP Morgan and BNY Mellon, which were previously on the fence about it – are seriously considering adopting it.
These encouraging signs have contributed to the rise in popularity of the first cryptocurrency, which reached a record value of more than $63,000 in April. This has also helped increase the popularity of other cryptocurrencies, including akoin and ubuntu.
This momentum has not escaped Africa’s notice. According to the US firm Chainalysis, monthly transfers of less than $10,000 in cryptocurrencies to and from the continent jumped by 55% between June 2019 and June 2020, to $316m.
The continent’s low banking rate and high mobile phone subscriptions make it the perfect place to implement these new digital currencies. However, this spring 2020 boom can be mostly attributed to a further devaluation of the naira, Nigeria’s currency, which took place back in March. This country accounts for 8% of global cryptocurrency transactions.
“The naira’s price is extremely volatile, particularly because of the existence of a real black market,” says Daniel Ouedraogo, an economics professor at the University of Paris-Dauphine. “Inflation is currently at 17%, which means that Nigerians’ purchasing power is constantly falling,” says Jérôme Mathis, his colleague.
“There is therefore a desire on the part of the population, which is young, urban and does not have access to the dollar or the euro, to free itself from this high inflation policy, which is possible to do so with crypto-currencies.”
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Savings and cybercrime
According to Mathis, Nigerians use crypto-currencies, and bitcoin in particular, to “shelter their savings and sometimes speculate” but also, and this is much more recent, “to exchange goods and services, even though not many people use this service for that purpose.” Timi Ajiboye, the founder and CEO of BuyCoins, told Reuters in September that cryptocurrency trading there had tripled after the devaluation of the naira, reaching $21m by June 2020.
Nigeria is not alone. People in other African countries that are suffering from volatile currency values, such as Kenya, Ghana, Egypt and Zimbabwe, have resorted to using virtual currencies.
But Nigeria is a cryptocurrency country for another major reason. “They are also used for cybercrime purposes,” says Mathis. “Large mafia and terrorist organisations no longer use bitcoin, contrary to what many people believe, as they prefer to use more anonymous crypto-currencies such as Zcash. However, small-scale extortionists, of which there are many in Nigeria, tend to use bitcoin,” says the researcher.
So that’s a pretty grim picture. However, cryptocurrencies can also be used to facilitate transfers to and from abroad, to replace “the punishing transaction fees, that sometimes amount to up to 20%, of companies such as Western Union, MoneyGram and WorldRemit,” says Mathis.
Extra-African transfers are still relatively uncommon on the continent. But this may soon change as more services have started offering this option, such as Kenya’s BitPesa platform and the virtual bank KDBox, which was a project launched by the start-up KodePay in Tunisia and Kenya.
Elite currency
In some countries with more stable currencies, such as in the CFA zone, the use of digital currencies remains, according to Mathis, “reserved for a wealthy elite wishing to diversify their assets.” Despite this limited adoption, French-speaking African countries are seeing the emergence of a number of local and regional cryptocurrency initiatives.
These are often either linked to technological projects – such as Akoin, the future currency of Senegalese-American rapper Akon’s smart city, which is located a few kilometres from Dakar – or political projects such as ubuntu, which is geared towards Côte d’Ivoire’s financial sector, and ambacoin, which is tailored to separatists in the English-speaking regions of Cameroon.
African monetary authorities’ reactions to these cryptocurrencies are just as varied as Africans’ enthusiasm for them. Some countries, such as Algeria, Morocco and Zimbabwe, have banned them outright. In February, Nigeria’s central bank reintroduced a ban on banks converting cryptocurrencies into current currencies, which was originally enacted in 2017.
Kenya’s central bank, on the other hand, recently said it was considering buying cryptocurrencies. This is “a direct snub to the IMF, which is very hostile to it and still claims that the shilling is overvalued,” says Mathis. “I think that many African states would like to commit their countries to blockchain projects, or even stablecoins, but their central banks are opposed to this move,” concludes the specialist, who advocates for regulating, rather than prohibiting, cryptocurrencies.
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