Fact: Refugees fleeing the May eruption of the Mount Nyiragongo volcano were helped in the city of Goma in the Democratic Republic of Congo, by Bitcoin. The displaced people left their burning homes with nothing but the clothes on their back. Chainglob crypto news founder Gloire Wanzavalere went to the refugee encampment and gave out Bitcoins to the displaced people, who didn’t even have paperwork necessary to open new bank accounts.
Fact: One Bitcoin is worth roughly one million Rand in South Africa. Crypto Hustle YouTuber Grey Jabesi recently tweeted “Kids who used to buy #Bitcoin from me 5 years ago are now buying homes for their Moms. What a time to be alive.”
And — one other Fact: The old stereotype of the fleece-wearing, backpack toting, mansplaining crypto bro is changing. Over 1,000 African-Americans gathered this September past at The 4th Annual Black Blockchain Summit at Howard University entitled “Reparations & Revolutions!”. And just last week, entrepreneur and crypto investor Rodney Burton aka “Bitcoin Rodney” a man who by shifting his mindset went from prison to millions using crypto, organized the Reinvent Yourself with Crypto conference. The event designed to close the wealth gap for the Black community had speakers from Black entertainment and tech including Angela Yee, Tiffany Haddish, Marlon Wayans, Akon, Jamie Foxx, Rick Ross and Aries Spears.
Which brings me directly to the matter at hand — the cryptocurrency revolution and the African diaspora.
One of the most interesting conversations taking place in the crypto space right now revolves around the fact that African-Americans outpace Whites and Hispanics in crypto investments. An April 2021 Harris poll found that 25 percent of Black Americans and 15 percent of Hispanics say they’ve bought NFTs versus 8 percent of White Americans. Further, the same poll found that 23 percent of African-Americans own cryptos, compared to 11 percent of White Americans and 17 percent for Hispanics. “Minority adults are also much more likely to think that meme stocks and other unconventional assets will remain valuable in the long term,” Will Johnson, the CEO of The Harris Poll wrote in a blog post in April. “And they’re much more likely to want to wager on yes/no events if an app allowed it,” he concluded. What does that mean?
A large part of this has to do with the fraught historical relationship between the African diaspora and the banking system. There is also the cold, hard fact that 57% of Africans on the continent are unbanked. Now, add to the mix the fact that about 40 percent of the African banking customers surveyed prefer to use digital channels for transactions and you have the possibility of a revolution. Further, it is not in the interest of African central banks to give up power to cryptos. As early as 2015, the central bank of Kenya was warning citizens not to engage in Bitcoin trading. But as Tim Fries of The Tokenist noted this past September, Bitcoin has gained over 11,000% in value since the Central Bank’s Public Notice, while the Kenyan Shilling (KES) has lost 7% of its value. So – who are you going to trust?
And then there is the curious case of Nigeria, which has become the crypto powerhouse on the continent.There is also the problem of unstable currencies in Africa. Nigeria’s soaring inflation rates earlier this year literally led to the Bitcoin revolution in that country. Earlier this year, when the Central Bank of Nigeria prohibited crypto trading, Bitcoin surged to the record high of $80,000 on the Luno exchange. Nigeria, by the way, has all the ingredients for a robust crypto revolution: rampant inflation; a young population (half under 19 years old); a drop in demand of the country’s top export (oil); an undeveloped infrastructure and, last but not least, a high concentration of cellphone subscriptions (187.9 million). All of these factors have led to Nigeria’s mobile phone users adopting Bitcoin as an alternative to the unstable currency.
Countries with unstable currencies are seeing greater crypto adoption. Argentinians and Venezuelans know hyperinflation all too well, which is why cryptos are so popular there. And it is why cryptos could explode in Sub-Saharan Africa. According to World Bank data, Sub-Saharan Africa’s median GDP per capita is $1,483. The European Union, by contrast, has a GDP per capita at $33,927, or more than 20 times that of Sub-Saharan Africa. Central banks of most African countries are, predictably but unfortunately, hostile to cryptocurrency exchanges.
Further, it is impossible to talk about Africa’s quiet crypto revolution without bringing up diaspora remittance payments. Remittances link members of the diaspora to the place of their familial ties abroad. Cryptocurrencies already play a tremendous role in cross-border payments around the world, particularly in Africa. Money transfers across borders account for over $500 billion of value moving across borders. And despite the COVID pandemic, remittance flows remained strong to lower and middle-income nations, concentrated largely in Sub-Saharan Africa. And a large number of crypto transactions on the continent involved remittances in the form of peer-to-peer payment.
Remittances are a large and stable source of external financing across the diaspora and in Sub-Saharan Africa account for a recorded $48 billion to the region in 2019, but the actual numbers are probably significantly larger. There is, curiously, overlap between Africa’s leaders in cryptocurrency trading and top recipients of remittances. Cryptocurrency-based remittance services have surfaced in Mali, Senegal, Zimbabwe and South Sudan — three Top Ten Sub-Saharan nations in absolute amounts.
There are even remittance businesses being formed atop peer-to-peer platforms. Ray Youssef, CEO and founder of peer-to-peer (P2P) cryptocurrency exchange Paxful told Chainalysis that a South African user originally from Nigeria saw how hard it was to send money back home, and started a business where he would take cash from other Nigerian expats, convert it into Bitcoin, send it to someone in Nigeria via Paxful, and have that person convert it into Naira and deliver it to the person’s family. He also spoke of another woman living in Kenya that has done the same thing, sending money back to people in Malawi.
And the story is no different in the Caribbean where remittances ($3 billion) make approximately one third of Haiti’s GDP making it the most remittance dependent economy in the Western hemisphere, with 84% of those funds originating from the US in 2020. World Bank data indicates that fees paid on those remittances can be as much as 19% costing over $30 million per year for people that are plagued with poverty, unemployment and a 200% surge in kidnappings post-COVID. Naijacrypto a P2P exchange headquartered in Nigeria is the first exchange to formally offer the Gourde, Haiti’s local currency and thereby being its first expansion beyond the African continent.
Africa is home to the world’s smallest cryptocurrency economies, with only two percent of the global value of all cryptocurrencies received and sent. But countries like Nigeria, Senegal and Kenya are growing players in the space and have garnered the interest of tech legends like Jack Dorsey, who has turned heads with his much talked about Bitcoin investment in Africa and even further speculation on his plans after stepping down from his role as CEO of Twitter. Last November, Senegalese-American singer and songwriter Akon, taking a page out of the Afro-futurism of Black Panther, launched his Akoin crypto coin. The ubiquity of cellphones has lowered the bar for entry into the space.
Africa is chronically underbanked, which is a huge opportunity for crypto.
There are two ways to look at the crypto revolution currently making its way through the African diaspora. One is with a certain amount of skepticism, citing the influential Chainalysis 2020 Geography of Cryptocurrency Report, which notes that Africa has the smallest cryptocurrency economy of any region valued, collecting only 2 percent of the global value of all cryptocurrencies received and sent. This approach views the crypto revolution through the glass half empty prism, Africa as the smallest cryptocurrency economy by continent.
But Africa is also – glass half full version — the most dynamic. This brings us to the second way to look at the crypto revolution and the African diaspora – with optimism. According to that same Chainalysis report, the continent ranks as the third fastest-growing Bitcoin and cryptocurrency economy in the world. Africa’s cryptocurrency market has grown over 1200% by value received between July 2020 and June 2021, according to ChainAnalysis. Further, Kenya, Nigeria, South Africa, and Tanzania all rank in the top 20 of Chainalysis’s Global Crypto Adoption Index.
Every day in Africa the global Bitcoin and cryptocurrency market is growing. Another reason to be optimistic are the stories of digital entrepreneurship that are being told on the continent. Witness: one-year old Ejara, a blockchain-based mobile investment platform uniquely tailored for African and diaspora markets. Ejara is a term of Islamic jurisprudence that means “providing services and goods temporarily for a wage.” The company has raised $2 million to pioneer crypto and investment services particularly in Francophone Africa. Founded by Nelly Chatue-Diop of Cameroon, Ejara has a rather interesting origin story. In 1994, France devalued the CFA franc, and as a result of the devaluation CFA member countries’ governments — like Cameroon’s — imposed wage freezes and layoffs. Ms. Chatue-Diop and her family, then middle class, and many other Cameroonians were plunged into financial crisis. She told TechCrunch of that period of her life: “Overnight all our savings dwindled and the aftermath was that the government couldn’t even pay salaries. So even at that tender age, I asked myself how we managed to do everything right and still end up in that zone. So it stayed on my mind.” In those years, the kernel of Ejara was born.
Blockchain, a truly groundbreaking technology, offers Africans like Ms. Chatue-Diop a chance to have control over their savings and income, a chance to protect and grow their wealth from outside of the whimsy of the old colonial masters. But Bitcoin’s legal status across the continent is problematic. It is seen as a competitor to the status quo, and so is being blocked at the highest levels of Central Banks across the continent.
Africa sees a larger share of its overall transaction volume made up of small retail-sized payments accounting for 7%, considerably higher than the global average of 5.5%. Cryptocurrencies are easier to navigate and more trustworthy than many African currencies. Banks, typically, are behind the times. Chinese suppliers more and more are being asked to be paid by African retailers in Bitcoin. It is easier and more convenient for both sides. On the Chinese supplier side, it is as a protection against the currency devaluation; on the African retailer side, they don’t have to go through the process of buying dollars using the local currency or shell out fees to money-transfer firms.
We are at now the beginning of what can only be properly construed as a digital financial revolution in crypto. According to Chainalysis, cryptocurrencies have grown by 1,200% in Africa to $105 billion in market value in the last year. The African diaspora is embracing this revolution. The relationship between money and the diaspora no longer has to be mediated by the banks. As countries like Nigeria are excluded from “global prosperity,” they are moving towards P2P exchanges. The movement is picking up steam. Hold on tight, because things will be moving fast in this space from here on out.
Richard Thompson is a leading technologist who after an illustrious 20 year career on Wall Street running NY derivative technology for Barclays Capital and front office trading for BlackRock embarked on the challenge of building Digital Air Technologies and Analytics (D.A.T.A), a world class digital transformation company focused on enterprise and institutional clients. He is passionate about closing the generational wealth gap for the African diaspora and is the author of “Crypto Uncovered: The Evolution of Bitcoin and the Cryptocurrency Marketplace”
(Linkedin: @richard-thompson)
