Cape Town - For a long time, African countries have struggled with infrastructure problems, which have made financial services less accessible.
Cryptocurrency could, therefore, be a good alternative to traditional banking in Africa, because this only requires a smartphone, writes Tim Fries.
Interest in cryptocurrency, a form of digital currency, is growing steadily in Africa. Some economists say it is a disruptive innovation that will blossom on the continent.
Cryptocurrency is not bound by geography because it is internet based; its transactions are stored in a database called blockchain, which is a group of connected computers that record transactions in a ledger, in real time.
According to Brookings, because cryptocurrency platforms bypass traditional banking services by introducing decentralised peer-to-peer lending services, they can help level the economic playing field and expand finance options to under-served customer markets.
In fact, a recent report by Chainalysis, a blockchain data platform, found that between July 2020 and June 2021, Africans received $105.6 billion worth of cryptocurrency payments – an increase of 1 200% from the year before, citing a Brookings report.
The big cryptocurrency global brands include Bitcoin, Litecoin, XRP, Dash, Lisk and Monero, but Bitcoin leads the pack in Africa.
Recently, the Central African Republic became the first African country to adopt Bitcoin as an official currency, becoming only the second in the world to do so, The Independent recently reported
A bill governing the use of cryptocurrency was adopted unanimously by Parliament, said Obed Namsio, chief of staff of President Faustin-Archange Touadera.
The Central African Republic is one of six central African countries that share the CFA franc – a regional currency that is backed by France and pegged to the euro.
There will be government-issued cryptocurrencies in Africa in the near future, predicts Shireen Ramjoo, CEO of Liquid Crypto-Money, a South Africa-based cryptocurrency consulting firm.
Although the African continent receives only 2% of the global value of all cryptocurrencies, their rapid growth will transform financing in an increasingly digital and urban sub-Saharan Africa, writes Brookings.
Meanwhile, internet penetration rate in Africa, as of December 2021, compared to the global average of 66.2%.
The World Bank hopes to help the continent achieve universal connectivity by 2030, but huge hurdles stand in the way, according to economists.
Whereas countries such as Ghana, Nigeria, South Africa and Kenya boast impressive internet penetration, South Sudan has an internet penetration rate of only 8% – one of the lowest in the continent.
Moreover, mobile network coverage is feeble in Africa's youngest nation.
According to a report by Deutshe Well, over the past decade, African leaders working with various local and international partners have made great strides in making the internet accessible for the continent's 1.4 billion people.
But – with just 22% internet connectivity – the continent remains significantly behind other world regions.
IT experts have long argued that the cost of data is too high for most people. In addition, lack of digital skills and literacy remains a stumbling block for many, particularly those living in rural areas, said the report.