Africa is a relatively untapped gold mine as there are tons of opportunities yet to be fully explored. Savvy investors can see this and are continuously pouring huge sums of money into the continent. The infusion of cryptocurrency into the African banking sector is an opportunity yet to be fully explored. Although the crypto movement is relatively new compared to other financial markets such as forex and stocks, it has had a significant impact on banking and financial markets globally, including in Africa. African banking remains largely cash-based, but there has been an increase in the use of digital payment systems within Africa, particularly in the sub-Saharan region.
In Africa, crypto is currently opening up new ways for SMEs to gain easy access to investor funds. Also, we believe that cryptocurrency is not just a temporary wave that will disappear soon, but a permanent solution to the long-term challenges of traditional banking systems. The number of crypto users in Africa is likely to continue to increase as digital payments gradually become preferred over cash payments as they save time and are so easy even from a mobile phone.
The Current Role of Cryptocurrencies in African Banking
Early adopters in Africa have decided that they will not be left out of the crypto move that is the latest innovation in the world of money. According to a policy summary A United Nations agency known as UNCTAD, Cryptocurrencies are becoming increasingly popular in African countries. A significant percentage of some African countries currently use digital currencies as a means of banking their money. According to the policy brief, the percentage of crypto users as of 2022 is 8.5% in Kenya, 7.1% in South Africa and 6.3% in Nigeria. Another African country known as the Central African Republic made a bold move and did adopted bitcoin as a legal tender, after this announcement everything south african forex brokers increased the purchase price of Bitcoin following the market trend.
Crypto in Africa has real use cases as digital currencies are currently solving a number of economic challenges in the African region, especially sub-Saharan Africa. One notable use case for crypto in Africa is to reduce financial challenges for the micro, small and medium enterprise sectors to provide easier valuation to investment funds. According to Chainalysis, $562 million worth of investment in sub-Saharan Africa was made through popular cryptocurrencies like Ripple. As funding is a major challenge in Africa’s business and housing sectors, easier access to investor funds through crypto crowdfunding is definitely a much-needed innovation.
In addition to businesses using crypto to obtain investment funds, individuals are also using crypto to facilitate personal banking transactions. Among Africa’s crypto-savvy population, it’s not uncommon to see people using crypto to accept payments, especially from international clients or employers. Due to rising inflation, some cryptocurrency users are even storing their wealth in stable cryptocurrencies like USDT to preserve the value of their money instead of leaving it in their local currency. Also, some experienced and smart investors in South Africa (and other African countries) are involved in crypto trading, a the best crypto trading platform in South Africa is probably Exness.
How crypto will change banking in Africa in the future
African banking is still heavily dependent on cash, but digital payments are slowly taking over regional banking, especially in cities. Cryptocurrency is a significant part of digital payments in Africa, but no one can know for sure the future of cryptocurrencies in the world, including Africa. Corruption within some African governments has resulted in citizens’ lack of trust in government. Perhaps this is the reason why the launch of Nigeria’s national digital currency called e-naira was not well received by Nigerian citizens.
Mobile payment is currently a key part of Africa’s traditional digital banking. This is due to practicality and easy availability even in remote villages where the Internet is not available. Some of the challenges of the traditional banking system are the heavy reliance on third-party payment intermediaries and the lack of complete transparency of transaction details. Therefore, in the future, crypto will most likely be the platform of choice for many peer-to-peer transactions among Africans. As more people in Africa continue to adopt cryptocurrencies, the government’s power to create arbitrary laws in the banking sector will slowly be eliminated. It can be very annoying to have unnecessary sanctions and restrictions on your bank account just because the government feels it can do whatever it wants.
In addition, cryptocurrencies are a solution to financial insecurity in the African banking sector. The intense security of the blockchain makes it almost impossible for hackers to access someone else’s funds without a wallet seed. The security, transparency and easy availability of cryptocurrencies are likely to be key factors in African banking in the years to come.
On the other side
The future of crypto in Africa’s banking sector is full of possibilities, but there is a possibility that the growth of crypto in banking in the region could be a bumpy road. Crypto threatens the sovereignty currently enjoyed by some African governments as they lack access to control and place unnecessary restrictions on citizens’ crypto earnings. Therefore, the fight against cryptocurrency adoption could be so fierce and perhaps even enough to stagnate the growth of cryptocurrency in some African countries.
It is clear that cryptocurrencies will continue to shape the future of banking in Africa. The question is what kind of future will cryptocurrencies actually create in the African banking sector? There is a legitimate concern that cryptocurrencies could end up being a safe haven for hiding illegal funds because it is possible to create a cryptocurrency that no one knows the real owner of.
Why should you care
As a crypto enthusiast, you may or may not live in Africa. It doesn’t matter because crypto is a global change in the world of money, so even if you don’t live in Africa, you might want to invest in companies that promote crypto adoption in Africa. A business idea as simple as educating Africans on how to buy cryptocurrencies could turn into a great investment if managed properly with the right set of business skills.
If you are not interested in creating a cryptocurrency business in Africa, simply investing in popular cryptocurrencies and holding them for the long term could be a smart investment decision. Of course, you probably shouldn’t put all of your life savings into crypto investing or trading. Remember cryptocurrency is here to stay, don’t be left out.