Why Bitcoin Will Continue to Grow in Africa

FinTech, Innovation, Regulation | December 2, 2018 By:

Globally, Sub-Saharan Africa and Southeast Asia constitute the largest population of unbanked persons. The situation has created the need for innovative and sustainable fintech solution in the bid to bring on board this social class in the current world of the commercial network.

With the increased spread of crypto-based financial solutions, a considerable number of start-ups have erupted within the African markets.

The Growing Popularity of Bitcoin in Africa

Since we first heard of cryptocurrency as an alternative facet of the global economy, the cryptocurrency world has for a long time been dominated by the Western countries and developed nations in Asia including South Korea, China, and Japan. Africa has lagged behind in the bigger picture as far as accelerating bitcoin is concerned.

Things seem to look up after a survey by Paxful reported that Africa’s bitcoin market is experiencing exponential growth, with a trading value of over $40 million per month. Additionally, the report also isolated Nigeria and Ghana as some of the African nations with robust bitcoin-trading markets. Other African economies where cryptocurrency adoption is experiencing a spike include South Africa (article convert btc to zar), Zimbabwe, and Kenya.

Factors that Propel Growth of Bitcoin in Africa

Although fear and skepticism over digital currencies, more individuals and organisations in Africa continue to embrace the new FinTech solution, the situation offers a sustainable solution to escape from fiat money, and tap into the economic value of the informal sector, a major booster of the African economy.

According to the International Labor Organization, approximately 66% of Africa’s labor force is in the informal sector. The high unemployment rates in many African nations has compelled business movers and shakers to create cutting-edge blockchain solutions and financial opportunities.

In Kenya, aspiring entrepreneurs are deeply engrossed in cryptocurrency as they look for alternatives ways of crowdsourcing to come up with start-up capital. In West Africa, the sales in bitcoin have greatly accelerated, and the West-African oil producer recorded a $4.8 million in weekly sells in January 2018.

In Africa, governments and other industry stakeholders haven’t developed or enacted regulatory policies to govern digital-currency transactions. That opens the markets to any individual or entity wishing to invest in cryptocurrency, as there is a lack of a legal framework to govern them. As recently indicated by the Central Bank of Kenya, the inability to regulate the currency presents a challenge in creating laws to govern bitcoin trade.

Most governments in Africa prefer virtual currency to traditional monetary transactions. In Northern Africa, Tunisia has the eDinar, a government-certified digital currency. In Senegal, the government is on the verge of creating the eCFA, and if all goes as planned, the model can be emulated by the neighboring Francophone nations.

There is growing fear and anxiety among Africans of an impending collapse of financial institutions or the inclusion of an arbitrary fiscal management system. Thus, Africans are inclined to transact in cryptocurrency as they fear to be unable to access banking services. Additionally, political instability in most African nations results in loss of money and assets, further pushing African investors to seek a secure and private trading system.

Let’s try and understand this migration shift.

Most people are pushed to opt for crypto-based transactions due to the notion that bitcoin eliminates the bureaucracy and bottleneck that have continuously derailed banking services. Nonetheless, this hypothesis is yet to be un-dug, and if the situation is proved, then cryptocurrency is not dwindling anytime in the future.

Bitcoin exchange also creates a reliable remittance channel in African nations that have suffered challenges in their currency and forex markets. Sending bitcoins is here a tool in addition to money transfer operators. 

Experts encourage the countries that face macroeconomic challenges to adopt cryptocurrency. That way, they can alleviate the negative economic impacts on the ordinary citizens by leveraging on payments through cryptocurrency platforms.

Top Benefits of Transacting Using Bitcoin

Trades in virtual currencies presents several inherent benefits that users of traditional financial solutions can’t enjoy. However, because the virtual trading system is still at a young stage in Africa, it is essential for people to weigh the opportunities and risks. Here are the top benefits that Africans can get from bitcoin exchanges.

  • Bitcoin-Value Stability & High Returns

Considering the history of the rise of virtual currency, there have been several fluctuations in value since the crypto-world was created in 2008. In 2011, bitcoin price fell from $31 to $2. In December 2013; from $1,242 to $600 before crashing to $300.

The real spike came in January 2017, when the prices jumped from $800 to $5000. In October, following a dive to almost half the price, $2900, it bounced back, hitting an all-time record of $5,856.

Considering the trend above, every time the value plummeted, it bounced back to a higher level, which is quite untrue with other forex and stock markets. Additionally, the percentage reduction in price has continuously gone down. It is, therefore, safe to state that the value is bound for the $6,000 mark. This is good news to African nations because price volatility seems to stabilize. The volatility rate right now is lower than it was when the technology was at its nascent age.

  • Enhanced Privacy and Security

Cryptocurrency trade is based on discretion. At no one point can an individual’s transactions be associated with their private information. Think of it as a cash-only transaction, which cannot be traced back to the purchaser. The encryptions on bitcoin transactions change with every trade, further enhancing security.

  • No Third-Party Involvement

One thing that has led to widespread adoption of bitcoin in Africa is that no government, financial institution or other third-party intermediaries can gain access to transaction details in the cryptocurrency platform. Thus, the system is not subject to interruptions and punitive regulations. It is purely a P2P system that vests all transaction control on the user.

  • No-Tax Transactions

Because no third parties can access or interrupt transactions, governments and other public revenue agencies cannot track transaction going on in the bitcoin accounts. One benefit with bitcoin is that they are not limited to sales taxes.

  • Low Transaction Charges

Foreign-currency trade and wire transfer systems impose high exchange fees. Because bitcoin trade is not disrupted third parties, the costs attached to every transaction is low. That is an advantage to foreign visitors to a country. Besides, conducting a transaction is quick, which eliminates the inconveniences caused by the bureaucratic banking systems.

Cryptocurrency: A Sustainable Fintech Solution for the Unbanked People

As initially indicated, Southeast Asia and Africa have the highest population of unbanked persons. With the widespread adoption of bitcoin exchange, this population can not only enjoy a unique trading system but can be elevated from financial inequality and accommodate in a service that required no conventional banking procedures.

Anyone in any social class can create a bitcoin account, and transfer cash online to any global destination. Alternatively, they can use bitcoin debit cards that are linked to VISA. These have a lower transaction expenditure.

In Africa, where young entrepreneurs are on their heels outsourcing start-up capitals, alternative crowdfunding avenues as presented by bitcoin has the power to fund innovation and entrepreneurship development in Africa’s developing economies.

Bitcoin and other crypto-based currencies are currently bringing a paradigm shift in the financial industry and are changing not only the commercial space but also the technological and political environment.

Bitcoin is online-based and thus, accessible by anyone. Its elaborate, unique infrastructure creates a decentralized system where each transaction can bypass state regulations and third-party appropriations to present equal opportunities for all.

Regulations of Bitcoin Exchange in African Countries

Cryptocurrency trade is gaining ground in Africa. A quick look in online queries about bitcoin reveals that South Africa, Nigeria, Ghana, Kenya, and Morocco have growing concerns for cryptocurrency as an alternative financial service.

While this situation presents a lot of investment opportunities, one tends to think, “What are the regulatory policies in Africa regarding cryptocurrencies?

African governments are yet to come up with regulatory laws to govern cryptocurrency trade. In all the African nations labelled above, it is only in Morocco that cryptocurrency is illegal. The bill was enforced following the announcement by one of the country’s technological brands, MDTS, that it would begin providing bitcoin transaction services.

Meanwhile, in Nigeria, after banning virtually any sort of cryptocurrency-exchange platforms, the government shifted its view, stating that there is barely any chance of regulating cryptocurrency. It neither has powers to control blockchain, just the same way you cannot control the internet.

On another token, The Central Bank of Kenya, through its boss, Dr Patrick Njoroge, revealed its acceptance of bitcoin as an alternative to traditional fiat money-transfer systems in a bid to limit fraudulent activities.

When matters come down to tax laws, South Africa’s SARS lacks laws to impose taxes on all transaction within the cryptocurrency platform. Instead, investments in bitcoin are regarded as intangible assets. However, in Nigeria, Ghana, and Kenya, individuals and organization providing blockchain-accelerated bitcoin exchanges are subject to tax revenues like other regulated companies in other sectors. Nevertheless, start-ups in this virtual-money platform will have to wait for governments to create clear regulatory policies.

Conclusion

Considering the rapid growth in large-scale cryptocurrency trade in Africa, the virtual-money platform presents a “gold-mine” for African citizens and businesses to boost their economic potential. Nonetheless, the future of the online trade lies in the adoption of new technologies among African countries.

Author bio:

Jens Ischebeck is an Africa focused website publisher. The main sites are apps-for-money-transfer.com and bitcoin-guide-africa.com (both sites cover international money transfer apps for inward and outward remittances) and fast-bachelor-degree.com (accelerated bachelor degree by online studying).