The Path To A Bitcoin Standard In Africa

[Bitcoin]

The Path To A Bitcoin Standard In Africa

A Bitcoin standard in Africa could mean economic growth, higher quality of life and financial freedom for all Africans.

This is an opinion editorial by Charlene Fadirepo, a former U.S. federal regulator and Bitcoin activist.

In this article, I will be discussing the current state of the rapidly growing Bitcoin ecosystem across the continent of Africa and how this progress will enable the path toward Africa's Bitcoin standard.

Merriam-Webster's dictionary defines an ecosystem as a "complex community of organisms whose environment functions as one whole ecological unit." In the context of the continent of Africa, the Bitcoin ecosystem is a nascent but promising network of peer-to-peer and traditional Bitcoin exchange platforms, community educators, investors, Bitcoin core developers, entrepreneurs and enthusiasts, working in concert in pursuit of an African Bitcoin standard. I believe Africa represents the most elegant use case for a Bitcoin standard in existence. In the paragraphs that follow I will explain why.

Africa's Bitcoin Ecosystem's Key Strengths

Widespread Monetary Pain Creates Fertile Ground

The continent of Africa is home to 1.4 billion people who span 54 countries and nine provinces. It is estimated that 2,000 distinct languages are spoken on the continent which adds to the rich diversity that exists from North to South Africa and from East to West Africa. Despite the diverse and rich nature of the culture of the continent, there is one common experience that exists across nearly every country in Africa. This common experience can be expressed as "monetary pain." The continent of Africa boasts one of the world's most fragmented banking, payment and currency systems which adds significant complexity to simple financial tasks like the payment of a bill, sending money to loved ones or accepting money as a business. Government corruption, years of currency mismanagement and hyperinflation have resulted in debased fiat currencies that provide little value to everyday African citizens. In June, the inflation rate in Nigeria hit a 65-month high of 18.6%. Worse still is the case of Zimbabwe: Annual inflation in Zimbabwe hit 192% in June 2019 -- a 13-month high for the country. Yet it is the very brokenness of Africa's collective banking, payment and currency systems that embodies Africa's greatest strength. Africa presents the perfect opportunity for a permissionless, censorship-resistant monetary system like Bitcoin to not only survive but thrive. For many African countries, the necessity of Bitcoin is proving to be the mother of invention.

As far as progress, there is no African country further along that path towards an African Bitcoin standard than Nigeria. A June 2022 study by the financial payments company, Block Inc., revealed that 43% of Nigerians shared that they would use bitcoin to buy and sell goods and services. Furthermore, Nigeria was the country with the highest comfort level of using bitcoin for remittances of all of the countries included in the 9,500-person study. According to data, nearly 25 million Africans live outside Africa. The large numbers of Africans living outside of Africa drive Africa's huge remittance market which is among the largest in the world. In 2019, remittance flows to sub-Saharan Africa were recorded to be $48 billion. Nigeria alone received about half of the total remittance market flows and Bitcoin is already filling Nigeria's huge remittance market gaps. It should be noted that the cost to send money to Africa averages around 9% as compared to the United Nations' Sustainable Development Goal for remittances which is 3%. In addition, the costs of intra-country remittances in Africa are extremely high as well. These high money transfer fees imposed by banking incumbents are predatory and they are hurting Africa's most vulnerable communities. Thankfully Nigerians and many other Africans are proactively switching to Bitcoin to avoid these expensive fees and to ease the pain of their country's inefficient banking and currency systems.

Africa's Ecosystem Is Strengthened By Youthful, Ambitious Population Demographics

The other key strength of Africa's Bitcoin ecosystem is favorable demographics. Western countries have much older populations as compared to African countries. In 2020, the median age in the United States was 38 years old and the median age in the UK was 40 years old. However that same year, the median age of the continent of Africa overall was much younger at 20. A look at individual countries provides even more favorable statistics. In Nigeria, the median age in 2022, is 18.1 years old, Kenya is next at 20 years old, and South Africa is slightly older at 27. African countries have youthful vibrant populations that are hungry for the innovation and opportunity that an African Bitcoin standard could present.

Last year, I created the "Bitcoin In Nigeria Show," which is a Bitcoin education video podcast focused on amplifying the stories of Bitcoin founders and ecosystem builders that are leading the Bitcoin revolution in Nigeria. In my opinion, the sheer magnitude, scale and progress of Nigeria's people-led Bitcoin revolution just couldn't be ignored and it needed to be celebrated. An April 2022 report by KuCoin revealed that 33.4 million Nigerians, which accounts for 35% of the population aged 18 - 60, currently own cryptocurrencies or have traded cryptocurrencies over the past six months. I believe that a key driving force behind Nigeria's Bitcoin adoption and surge is due to what I call Nigeria's young tech-savvy digerati, who are successfully using Bitcoin to solve their daily monetary pain at scale. In the previously mentioned study by Block, Nigeria emerged as the top nation with the highest rates of optimism about Bitcoin's future at 60%, as compared to the 29% optimism rate in the United States. It should also be noted that several of the existing Bitcoin platforms servicing Africa were founded by Nigerians. Africa's youthful population of digital natives -- especially Nigerian digital natives -- are helping to lay the groundwork for an African Bitcoin Standard.

Africa's Ecosystem Is Strengthened By Centers Of Activity, Platform Diversity And Favorable Regulatory Environments

The original mandate of the "Bitcoin In Nigeria Show" was to focus on Bitcoin's progress in Nigeria. But after one full year of running the show and meeting so many incredible Bitcoin entrepreneurs in Uganda, Kenya, South Africa, Ethiopia, Namibia and other African countries, I quickly realized that the show's scope was far too limited. Nigeria was indeed the first country in Africa to enjoy significant Bitcoin adoption trends at scale -- but it certainly will not be the last. I have since broadened the scope of the "Bitcoin In Nigeria Show" to tell more stories of the incredible African Bitcoiners building Bitcoin-based companies, platforms and communities across the continent of Africa.

A common misconception that I hear often is the statement that there are not enough Bitcoin financial services platforms operating in Africa. This false statement also assumes that African consumers don't have access to reputable credible Bitcoin platforms. Thankfully, this is not the case. African Bitcoiners have a vibrant mix of both peer-to-peer and traditional trading platforms to purchase and sell their bitcoin. While all platforms don't work in each country, and the exchange volume varies by platform, this list includes and is not limited to Binance Africa, Local Bitcoins, FTX Africa, Paxful, Crypto.com, Coinbase, BitNob, HeliCarrier, BuyCoins, Patricia and Machunkura. For African Bitcoiners with higher risk tolerance and a desire for privacy, there are also in-person bitcoin trading options that occur via private WhatsApp and Telegram groups all across Africa.

The ability of any country's Bitcoin ecosystem to grow and reach its full potential is dependent somewhat on a country's regulatory environment. And much like Africa's collectively fragmented banking, currency and payment systems, the regulatory environments across African countries range drastically from full regulatory bans on Bitcoin use to full government agency support. The fastest Bitcoin ecosystem growth and development in Africa is concentrated in five core countries: Nigeria, South Africa, Kenya, Botswana and Morocco. Nigeria leads Africa in peer-to-peer trading volume. In 2020, Nigeria was ranked among the top two countries in the world on Paxful's platform with a volume of $566 million. South Africa also has high bitcoin trading volumes and has one of the more favorable regulatory environments due to the South African Reserve Bank's stance that cryptocurrencies like bitcoin are not currency. However in July 2022, the South African Reserve Bank indicated that more cryptocurrency regulations are coming. Morocco has the highest peer-to-peer trading volume in North Africa, although cryptocurrency use has been banned in Morocco since 2017. The wide range of existing Bitcoin financial services platform options, the concentrations of ecosystem activity by country and somewhat favorable regulatory environment supports Africa's path toward a Bitcoin standard.

Africa's Bitcoin Ecosystem's Key Development Areas

The growing African Bitcoin ecosystem is not without its challenges. A recent article by Abubakar Nur Khalil, the CEO of Nigeria-based Bitcoin-only venture capital fund, Recursive Capital, discussed the critical need to develop a pipeline of skilled Bitcoin Core developers based in Africa. In addition, widespread power grid infrastructure limitations also slow the growth of the Africa Bitcoin ecosystem. Sub-Saharan Africa, the region of 45 African countries below the Sahara Desert, occupies 13% of the world's population, but 48% of the share of the global population without access to electricity. The region's power sector is underdeveloped, from energy access, to installed capacity and overall consumption. However, recent interest and investment in renewable sources like hydroelectric, wind and solar power via public-private partnerships are creating momentum for positive changes. For example, the Kipeto wind farm is Kenya's second-largest wind-power project and has a generation capacity of 100MW of clean, renewable electrical energy. In Namibia and Botswana, the Mega Solar project is the largest solar power program in Southern Africa. This project is scheduled to achieve 2-5 GW of renewable solar power energy for a region currently dependent on coal mining. These projects support the trend of a positive future for stabilizing the power grid across various countries in Africa. The existence of more reliable low-cost power sources introduces the opportunity for the development of a strong Bitcoin mining sector across Sub-Saharan Africa in the future.

Africa's digital divide offers a formidable challenge as well. The term digital divide refers to a region's gaps in access to internet connectivity. Data shows that 75% of people in Africa do not have sufficient reliable internet access. Another study found that internet penetration across Africa represents only 36% of the population. It should be noted that the same study estimated the global internet penetration to be 62.5%. Despite these challenges, African Bitcoin entrepreneurs, like South African Bitcoin developer, Kgothatso Ngako, the founder of Bitcoin custodial wallet, Machankura sees a huge opportunity. Ngako created Machankura as a Lightning wallet that offers bitcoin purchase and selling services to Africans who use feature phones, which are basic single-function phones with no internet access. Unlike in the United States, where smartphones are most common, feature phones comprise a large share of the mobile phone market in Africa. In early 2022, 22 million feature phones were shipped to Africa, as compared to 19.7 million smartphones. Feature phones cost less and require less energy to power. When I spoke to Ngako on a recent episode of the "Bitcoin In Nigeria Show," he said "I see bitcoin as a form of money. I want to get other people to see bitcoin as a form of money." Innovative companies like Machankura will accelerate Africa's pace toward a Bitcoin standard.

Earlier we discussed the 2,000 distinct languages spoken across the continent of Africa. Despite the number of languages spoken, many financial education materials including Bitcoin educational materials still remain in English. Thankfully translation projects like Exonumia based in South Africa and led by Ngako, and communities like Bitcoin Mtaani led by Kenyan Bitcoiner, Guantai Kathurima are working to convert key Bitcoin teaching materials to African local languages. The creation of culturally relevant solutions to solve Africa's unique challenges is the way forward in pursuit of a Bitcoin standard in Africa.

The Promise Of A Bitcoin Standard In Africa

The promise and potential of a Bitcoin Standard in Africa becomes more realistic each year that African communities suffer from the economic woes of excessive currency devaluation and hyperinflation set in place by authoritarian governmental regimes. Countless other decentralized finance, bitcoin-backed, or native blockchain liquidity token solutions pretend to solve Africa's problems but only recreate existing centralized systems where wealth remains under the control of the most powerful. In the case of Africa, the movement to a Bitcoin standard is not a "nice to have" -- it is a must-have. I see it as a moral imperative for humanity. Bitcoin protects human rights, provides critical currency stability, enables intra- and intercountry business commerce, supports low-cost remittances and offers individual Africans agency and ownership over their financial lives. Bitcoin allows us to imagine a safe, lawful and prosperous Africa where financial freedom and economic justice are equally accessible to 1 billion-plus people across the continent. Despite the aforementioned cultural complexities, infrastructure limitations, and other significant challenges, I could not be more bullish on Bitcoin in Africa. In the words of French poet, Victor Hugo, "There is nothing more powerful than an idea whose time has come."

This is a guest post by Charlene Fadirepo. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

Source: The Path To A Bitcoin Standard In Africa