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Oct 9-12, 2024

Cryptocurrency in Africa

The Rise of Cryptocurrencies in Africa: Should We Be Scared?

Cryptocurrencies have gained popularity among the financially marginalized low-income population. This section lacked access to the majority of African banks. Even when they were, low-income account customers were deterred by exorbitant transaction fees.

Another aspect is economic stagnation in African economies, which has been exacerbated by debt crises and political instability since their independence. As a result, nations such as Nigeria now have weak currencies destroyed by inflation.

Cryptocurrencies claim to address both financial exclusion and the issue of depreciating local currencies.

Cryptocurrency enables everyone with a mobile device and internet access to participate in operations comparable to those conducted through financial institutions and middlemen. This includes making payments, remitting funds, and investing.

Investments are especially appealing to the technically savvy. It allows them to hold assets that are unaffected by increasing inflation and weakening home currencies.

Cryptocurrencies are also faster, cheaper, and simpler to utilize than traditional methods. That is because technology enables peer-to-peer transactions rather than relying on intermediaries. Throughout the pandemic and lockdowns, these currencies were more accessible than traditional institutions. This boosted their use and growth throughout Africa.

What are the consequences of a large number of people having cryptocurrencies?
cryptocurrency in Africa

This could boost economic activity in African countries. People who do not have access to banks or banking services can pay for goods and services with cryptocurrencies.

Crypto transactions are also seen as a more secure means of transacting. Unless someone acquires access to your crypto wallet’s private key, they cannot sign transactions or access your assets.

The system also promotes transparency. All cryptocurrency transactions occur on the publicly available blockchain ledger. Some programs allow anyone to search for transaction details, including where, when, and how much cryptocurrency was transmitted from a wallet address.

What are the risks?

First, cryptocurrencies are quite complex. They demand a certain level of technological savvy to embrace. A large proportion of the adult population in Sub-Saharan Africa (34.7%) is illiterate and may be unable to comprehend it. This, to some extent, flips the financial inclusion debate on its head.

Second, while it is suggested that the blockchain is a more secure form of transacting, the negative is that if you lose your private key, you will be unable to retrieve your assets. If you have a bank account, you are safe from this hazard.

Third, cryptocurrencies have a history of volatility, (which is currently evident in the crypto market). This has negatively impacted regular investors, particularly those who do not comprehend.

Another major concern for African governments is the possible danger to monetary sovereignty. If cryptocurrency becomes more extensively utilized than local fiat currency, national monetary agencies, such as central banks, may be unable to use monetary policy to lead their economies to growth. After all, such a policy is primarily implemented using home currency.


The undermining of effective capital restrictions in African countries is a related threat. These are essential for preventing capital flight from home economies. Any weakness can cause severe volatility in currency rates and the quick depreciation of indigenous currencies.

There are also concerns about financial stability. This could be due to financial institutions, such as banks, having considerable exposure to cryptocurrency enterprises, such as through loans. Some African countries, such as Nigeria, address this issue with regulations that limit transactions between banks and crypto asset service providers.

What’s ahead?

Despite the market’s current fall, Bitcoin is the future of money and financial transactions. And there are indicators that cryptocurrencies are here to stay, as seen by their growing acceptance by governments. At one extreme, the governments of El Salvador and the Central African Republic have approved Bitcoin as legal tender, despite widespread criticism over its execution and impact on their economies.

Others, such as Nigeria, have acknowledged the importance of state representation of digital currencies in the form of central bank digital currencies. Many other countries are now looking into this idea.

It is worth noting, however, that the adoption of central bank digital currencies has been extremely low in underdeveloped nations that have implemented them. Countries are also investigating the economic impact of central bank digital currencies and whether adoption is the best strategy.

However, for cryptocurrencies to live up to their promise on the African continent and elsewhere, a globally coordinated and holistic approach to regulation is required, as transactions are global. Although some progress is being made on this front, the current fragmented approach to regulation around the world is not optimal.

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