Cryptocurrency Adoption in Africa Hindered by Rising Scam Cases
Cryptocurrency adoption is rising at a fast rate globally, with Africa being termed as the next frontier for adoption destination, thanks to conditions that are great for virtual currencies. The rapid surge in global cryptocurrencies’ adoption and usage has been linked to the fact that cryptocurrencies have become ubiquitous, prompting more national and regional authorities to grapple with their regulation.
Additionally, the full availability of crucial information on cryptocurrency has played a significant role in promoting the adoption of the cryptocurrency world over. While the world is quickly pacing towards crypto adoption, Africa seems to be struggling with cryptocurrency adoption thanks to a myriad of problems coupled with rising scams.
According to research conducted in 2019 by Statista termed Statista Global Consumer Survey, Latin America leads in cryptocurrency adoption. Five of the top 10 countries in the sample are located south of the U.S. border, with all of them scoring double digits in terms of crypto adoption. Brazil and Colombia lead the pack, with 18% of the respondents having used cryptocurrency. Argentina and Chile also follow closely at 16% and 11% respectively. Europe and Spain are among the countries in the Western nation with the highest number of cryptocurrencies users at 11%. Africa, a continent of over 1.1 billion people, had the lowest quantity of cryptocurrency users at 1%, mostly from South Africa.
Africa’s economic conditions are perfect for cryptocurrency adoption. Africa, specifically Sub-Saharan Africa, is reported to have the second-highest population of unbanked adults in the world, at about 350 million people, or 17% of the global total. Close to two thirds of Sub-Saharan Africans don’t own a bank account. In Africa, banks are mostly found in established cities and are, therefore, quite hard to access from remote, rural villages. Inaccessibility, coupled with excessive transactions, hinders the penetration of traditional banking services amongst the African population. Nonetheless, foreign remittances remain high, even as being the primary source of income for many African communities and households.
So, where does cryptocurrency come in?
The largely unbanked African population, coupled with other factors, create the ideal environment for cryptocurrency adoption for moving value and also solve financial challenges experienced by the unbanked. In Africa, cryptocurrency adoption presents a considerable potential for greater socio-economic inclusiveness. For instance, through enhanced financial security. Cryptocurrency usage will also offer additional opportunities for African economies attributed to its unregulated nature as well as the economic flexibility.
Cryptocurrency Adoption in Africa- Where are we?
In Africa, cryptocurrency adoption is still low, as compared to other parts of the world. According to Google Trends, several African countries, including Nigeria, South Africa, and Kenya, lead in search interest for “bitcoin,” but this has not translated into widespread adoption.
Nonetheless, cryptocurrency and blockchain have set foot in the continent with a promise of fixing some of Africa’s financial challenges. Several African countries have recognized the potential of cryptocurrency and are working towards their adoption. Cryptocurrency use in Africa will undoubtedly accelerate the financial inclusion of Africa’s unbaked while still providing an effective way of averting inflation, which severely affects the economy. Additionally, crypto use in Africa will boost cross-border payments outside traditional banking systems for over 15 million Africans working and living abroad.
The private sector, rather than national governments, spearheads crypto adoption in the African market, which has been apprehensive, reserved, or even worse, unreceptive towards crypto use and adoption. For instance, African countries such as Zimbabwe and Namibia are against crypto adoption despite the hyperinflation experienced in the country.
Nonetheless, not all African countries have developed a hard stance toward cryptocurrency. Several states have come out as regional frontiers in cryptocurrency adoption, even developing cryptocurrency regulations and taxation frameworks. The below countries led the way in cryptocurrency adoption in Africa:
Mauritius is a massive supporter of cryptocurrency. The country has been termed as the central hub of crypto in Africa after implementing a regulatory framework.
South Africa is another African country leading in cryptocurrency use and adoption. According to Statista, 16% of the South Africa population have used or owned cryptocurrency. The country has also developed cryptocurrency regulations and even educated her citizens of the safe use of cryptocurrency.
The Ghanaian central bank made a U-turn on cryptocurrency use pushing for its adoption. Ghana’s crypto-friendly environment has led to a surge in the crypto startup in the country, notably BTCGhana and Bitland. The country is also set to issue a digital currency backed by the Central Bank in 2020.
Hurdles Hindering Crypto Adoption in Africa
While Africa grapples with crypto adoption, several factors hinder its approval, as discussed below.
- Slow and Expensive Internet
Most internet users in Africa have to pay exorbitant fees to access the internet, which is usually quiet. Internet service providers are also limited to people in rural areas having no internet access. Highly-priced, slow internet hinders crypto adoption.
- Low Literacy Levels- A majority of people in rural Africa lack primary education, thus impairing their ability to understand cryptocurrencies and related technologies, which can get complex at times. The effect is that the population cannot develop trust in digital currencies without prior education.
- Mobile Money- Mobile money is quite popular in Africa and grows at an unprecedented rate. The convenience, simplicity, and efficiency of mobile money provide real competition to cryptocurrency adoption. Most people would prefer mobile money over cryptocurrencies with scalability issues.
- Lack of clear regulations and guidelines-Most African countries are yet to develop clear rules and guidelines regarding cryptocurrency use. Similarly, several African countries are against cryptocurrency use, therefore, hindering its adoption.
- Cryptocurrency scams- With the majority of the African population lacking explicit knowledge on cryptocurrencies, many have been scammed. For instance, Dunamiscoins Resources Limited, a crypto startup in Uganda, has been accused of scamming dozens of people through fraudulent deals. Such scams impair cryptocurrency adoption in Africa.
What can be done to enhance crypto adoption in Africa?
Africa is ripe for cryptocurrency adoption, but several issues need immediate attention. To begin with, there is a need for African countries to develop clear guidelines and regulations on cryptocurrency use. This will not only attract investors but also create confidence in the general population to start using digital currencies in their daily lives. Also, with an increase in cryptocurrency scams, stringent measures should be implemented to protect the people from such scams, which are quite costly. Finally, like mobile money, which is simple and straightforward to use, crypto products should be user-friendly such that anyone, even an illiterate person, can use it. This will enhance the adoption of cryptocurrencies among the African population predominantly composed of illiterates.
Bottomline: Could it Be the The Future
In the coming years, there will be a surge in cryptocurrency adoption in Africa. Already, African startups are beginning to integrate blockchain technology into making secure and transparent transactions as well as solving longstanding problems in the continent. More than 15 Bitcoin exchange firms have emerged in the African crypto market with the sole aim of providing cheap and efficient trading services to African users. Currently, cryptocurrency is gaining rapid popularity in South Africa and Nigeria, with activists believing that having been let down by the conventional system, the new currency can help stabilize the economy. Nonetheless, Africa will be a hub of crypto use if only the continent overcome the hurdles discussed above.
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