Blockchain and Cryptocurrency in Africa: 50 Ones to Watch

Cryptocurrency and Blockchain technology are frequently cited as the next FinTech revolution given their promise of fast, secure and affordable transfers of capital. While mobile money services have been around for over a decade now, their importance hasn’t yet diminished – The Economist, a news service, reported that during the coronavirus (COVID-19) lockdown in Q1 and Q2 2020 the value and number of mobile money transactions in Rwanda increased five-fold. In June 2020, the Central Bank of Kenya reported that mobile money transactions reached KSh 450.98 billion, reflecting a 15% increase from the previous month.

So if mobile-money and the rise of digital-banks continue to meet the needs of consumers so effectively, then where do cryptocurrency and blockchain start-ups fit in this picture? To unpick this we first need to understand the difference between the two technologies. A cryptocurrency is a digital asset secured by cryptography, transactions are then denominated in terms of a virtual token. A blockchain is a component of the transaction effectively acting as a digital ledger used to record the transactions between parties. Because blockchain technology offers a single, immutable reference for any transaction it’s use case extends beyond financial transactions including contract law, voting and governance..

Blockchain across Africa

Our analyst’s found technology start-ups across industry vertical’s leveraging cryptocurrency and blockchain technology. As expected the vast majority of start-up activity was focussed around cryptocurrency exchanges; such as South Africa’s Luno, or remittance payments, such as B2B financing tool BitPesa.

However, our analysts also reported more specialist use cases in Agriculture, Healthcare, Transport and Logistics and even for recording Real Estate transactions such as Nigerian PropTech HouseAfrica.

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Is Africa ready for cryptocurrency and blockchain?

The cost of cross-border remittance payments, the unpredictable nature of local fiat currencies and even the added cost of mobile money services mean that cryptocurrencies are becoming an increasingly attractive option to consumers and business owners across the continent. In a 2020 publication authored by Hootsuite, a social media aggregator, and We Are Social, a US-based think tank, they reported that 12% of South African internet users, and 10% of Nigerian internet users owned a form of cryptocurrency (third and fifth highest ownership globally).

Excluding rounds such as Initial Coin Offerings (ICO), our analysts have so far recorded $22.475 million USD raised by African cryptocurrency and blockchain companies in 2020. According to a 2019 report published by Chainalysis, a US-based think tank, Africa accounted for 2% of all cryptocurrency value sent and received globally (approximate $8.0 billion USD sent and received.

While remittance and currency devaluation is driving growth in cryptocurrency and blockchain start-ups, retail sized transactions (transfer made under $10,000 USD) account for around 30% of transactions. Chainalysis, report that a significant portion of cryptocurrency transactions related to business transactions between two parties either within Africa or globally. Research published by the World Bank suggests that cross-border payments between African countries costs an average of 9% in fees.

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With a large and growing population of early-adopters using cryptocurrency for commercial and personal reasons, it is likely that we will continue to see adoption of blockchain technology not just in Financial Services, but in complimentary sectors too.

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This article was first published in October 2020.

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