The unstable financial environment makes the continent an ideal environment for cryptocurrency.
A new report entitled, The State of Crypto: Africa Report by Luno and Arcane Research, has revealed that the entire African continent’s economic landscape is an ideal launching platform for cryptocurrency.
According to the report, Africa’s high inflation rates, unstable currencies, and underdeveloped banking infrastructure make it the ideal environment for the rapid adoption of cryptocurrencies. The continent has the potential for integrating crypto assets that offer the benefits of traditional financial instruments, such as the hedging capabilities of Gold.
In addition, cryptocurrencies also provide faster and more affordable remittance payments in comparison to traditional methods for money transfers.
A common concern for traditional money transfer services is the high service charge fees and the lengthy processing times. This can be very costly due to the volume of remittances. Last year, ex-pats sent over $48 billion back to their families in Africa.
While each country within the continent does face their own nuanced set of circumstances, as African nations they share geographical issues and concerns. One is the predominantly young and mobile-native population on the continent, the presence of which increases the likelihood of adopting a new financial system. Cryptocurrency can also play a role in providing crucial financial services to the unbanked.
However, there are a few obstacles that the continent needs to address before cryptocurrencies reach their full potential.
The General Manager for Africa at Luno, Marius Reitz, stated that the utility benefits of cryptocurrencies need to be highlighted more in Africa than in other continents. This is a pivot from the focus when it comes to cryptocurrencies, which is usually in investment, speculation, and trading.
“Cryptocurrencies present solutions to many of the financial challenges in Africa. The current context is ideal for an alternative money system to take root.” Reitz explained.
The usual infrastructure that is required for cryptocurrencies to operate in other regions are not prevalent in Africa. These include nodes, ATMs, exchanges, supporting merchants and mining operations.
The report also states that countries also need to consider investing more into their internet and electricity grids.
As reflected in recent Google Trends data, there is increasing interest in the cryptocurrency industry. Uganda, Nigeria, and South Africa ranked 3rd, 8th, and 11th respectively on the topic of cryptocurrency.