High inflation rates, volatile currencies and underdeveloped banking infrastructure are likely to result in an increase in the adoption of cryptocurrencies in Africa, a report by cryptocurrency multinational Luno and digital asset company Arcane Research shows.
Cryptocurrencies also offer lower-cost and faster remittance payments than is currently available on the continent. Traditional money transmitting services charge very high fees and intra-African payments are often slow, says Arcane Research CEO Tjoborn Bull Jenssen.
While much of the focus elsewhere has been on investment, speculation and trading, the utility benefits of cryptocurrencies are more needed in Africa than on other continents. Cryptocurrencies present solutions to many of the financial challenges in Africa. The current context is ideal for an alternative money system to take root, notes Luno GM for Africa Marius Reitz.
Although each country has its own particular set of circumstances, African nations share some key similarities and trends. The growing, young and mobile-native population on the continent is more likely to adopt a new financial system, and cryptocurrency has a particular role to play in servicing the unbanked, the 'State of Crypto: Africa' report shows.
"There are, however, obstacles that must be overcome for cryptocurrencies to reach their full potential in Africa," Reitz says.
Typical crypto-enabling infrastructure in other regions such as nodes, mining operations, supporting merchants, automatic teller machines and exchanges are not prevalent in Africa. Along with regulation, these could be obstacles in cryptocurrencies reaching their full potential in Africa. Internet and electricity networks will require more investment.
"The lack of crypto-specific infrastructure presents a huge opportunity to deliver the much-needed transformation of financial systems across many countries on the continent," he points out.