Africa is the second largest and currently second most populous continent in the world, after Asia. This region has long been popular for having lots of rich and diverse cultures, must-see destinations, and extreme wildlife adventures. But recently, Africa has been gaining the spotlight for another notable reason.
In recent years, Africa’s southernmost country has become famous for its interest in cryptocurrencies—specifically bitcoin (BTC), which is today’s most dominant digital currency among the thousands of others. With the rising popularity of bitcoin in South Africa, some prominent names in the crypto space consider the country to be the next frontier for bitcoin.
There are many possible indicators for this. Let’s explore some of the most popular reasons why South Africa is one of today’s leading markets for crypto adoption.
An opportune financial infrastructure
An article published in 2017 regarded Africa as the unbanked continent, notably because more than 60 percent of the Sub-Saharan population didn’t have a bank account. In other words, they had no access to commercial banks and their services. This paved the way for a lot of Africans to find an alternative payment option for their region. The answer? Mobile banking.
The use of mobile phones for financial services in African countries replaced the need for a bank account. Unlike traditional banks that were often limited by geographical concerns, mobile banking has made it so that payment services can reach even the most remote areas of some African countries.
However, after years of financial inclusion plans and development, the region’s situation has significantly recovered over time. In recent years, there’s been a rise in the number of individuals with access to traditional banks and their services in some African countries. A fact sheet released by the FinMark Trust—an independent nonprofit trust—noted that in 2018, more than 80 percent of the South African population was banked.
Despite that, it can’t be denied that Africans have significantly utilized the potential of mobile financial services—the very reason the continent was dubbed as the “global leader in mobile money” back in 2017. And since cryptocurrencies, like bitcoin, work solely digitally, Africans find it more accessible and efficient to use. This brings us to our next point.
High levels of financial and technological knowledge
We mentioned that most Africans are very familiar with using mobile phones for monetary transactions. Apart from that, Africans are known to be very technologically literate, which is probably one reason why bitcoin and the powerful technology behind it, known as the blockchain, have spiked clear interest in the region.
Data from Google Trends reveals that bitcoin is the most searched term in some African countries in the last five years. These countries include Nigeria, South Africa, and Ghana—the top three over 60 other regions.
The high levels of finance and technology literacy of some Africans contributed to their enthusiasm for ingenious technologies such as bitcoin, blockchain, and other popular digital solutions.
Exploring blockchain technology and accessing various crypto exchanges and peer-to-peer marketplaces for bitcoin trading in South Africa are simple tasks that are not as challenging when compared to creating an account and accessing the services of commercial banks.
The favorable costs and efficiency of money transfers
In addition to the difficulties traditional banks face in reaching every possible area in various African countries, transactions with conventional financial institutions are costly and often slow-moving or delayed. Apart from geographical limitations, transactions with cash also require a lot of personal information such as name, date of birth, and home address, to name a few.
With bitcoin, transactions like deposits and withdrawals, along with sending and receiving money, are much cheaper and nearly instantaneous. People also like the fact that these transactions don’t require a lot of personal details.
As bitcoin offers cheaper, more convenient, and fast alternatives for transferring money in and out of African borders, its adoption in the region is increasing significantly.
A dramatic increase in bitcoin use and ownership
With all the remarkable applications that this ingenious digital money offers, data from Paxful shows that there has been a steady increase in the number of new African bitcoin wallet holders. For the past five months, there’s also been an upward trend in trade volume involving Rand, South Africa’s government-issued currency.
Paxful.com South African Rand (ZAR) Volume
This significant increase in bitcoin trading volume is also influenced by the emergence of various cryptocurrency marketplaces in Africa. This factor also yields more income-generating alternatives through bitcoin trading and arbitrage opportunities, as the number of individuals who accept bitcoin in South Africa grows.
The volatility of the rand
Aside from being a decentralized, efficient, and borderless payment method, one of the most striking features of bitcoin is that it’s considered to be an excellent means of preserving wealth. It’s often compared to precious metals, specifically gold, in terms of storing value.
South Africa’s fiat money, known as rand (ZAR—from Zuid-Afrikaanse rand), on the other hand, was reported by Bloomberg as being the most volatile money among the world’s “major currencies.” On March 19, 2020, an article noted that the “one-month implied volatility for the rand versus the dollar surged to the highest since the aftermath of the financial crisis.” Two days before this new record, ZAR’s volatility versus USD “climbed to the highest in more than eight years.”
This story alarmed a lot of investors, since the rand’s value swung swiftly in a negative direction. With this kind of volatile tendencies of ZAR, many Africans have begun to explore the use of BTC to protect their funds against painful price falls.
Other possible reasons
From wild currency fluctuations and remarkable cross-border transactions, to developing financial infrastructure and emerging crypto markets, there are a lot of incredible driving factors to the growing adoption of bitcoin and other cryptocurrencies in the vast continent of Africa. It’s no wonder that it’s been dubbed as the most promising region for BTC and other crypto-related opportunities.
During the early years of BTC’s adoption in the region, the South African government didn’t release stringent crypto laws—apart from tax regulations, “Anti-Money Laundering” (AML), and “Know Your Customer” (KYC) protocols.
Meanwhile, recent reports say that there’s “a significant lack of related infrastructures, such as crypto mining operations, supporting merchants, smartphone penetration, and Internet connectivity,” in the region. But the government has yet to clarify the grounds on crypto in African countries.
The regulations will likely be focused more on the involved service providers and institutions rather than bitcoin and other cryptocurrencies. Let’s see how the fair regulation story progresses. For now, with the present crypto rules, it’s with no doubt that industry players will still view Africa as bitcoin’s haven and premium destination.
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