![](https://cryptotimes.africa/wp-content/uploads/2023/07/shutterstock_1415893247_small-scaled.jpg)
The role of cryptocurrencies in sub-Saharan Africa
Even while only 2% of all cryptocurrencies’ value is spent on the African continent, their explosive growth will change how money is spent in a sub-Saharan Africa that is becoming more urban and digital. In fact, according to a recent research by Chainalysis, a blockchain analytics platform, Africans received $105.6 billion in bitcoin payments between July 2020 and June 2021, an increase of 1200 percent from the previous year. Notably, Kenya, South Africa, and Nigeria are among the top 10 nations for bitcoin use according to Chainalysis.
By delivering decentralized peer-to-peer lending services instead of traditional banking services, bitcoin platforms can level the playing field in the economy and increase the availability of financing to underserved client markets. In fact, cryptocurrencies are well-positioned to address a number of economic issues in the area, from bridging the financing gap for micro, small, and medium-sized company (MSME) sectors to making remittance transfers easier. In fact, according to Chainalysis, up to $562 million in remittance payments worth of the $48 billion sent to sub-Saharan Africa in 2019 were made possible by cryptocurrencies like Ripple. Cryptocurrencies have also sped up the availability of cheap mortgages and are allowing for erratic revenue patterns that restrict lending.
By using crowdsourcing to finance residential real estate development using cryptocurrency, Empowa, a Mozambique fintech start-up, embodies the ethos of this new movement—the democratization of finance. By avoiding conventional funding barriers and utilizing the blockchain platform to direct funds toward developers and innovators, it serves as a proof of concept for decentralized finance in Africa. The bitcoin community was transformed into MSME lenders in East Africa by Pezesha, a Kenyan fintech company that specializes in MSME credit scoring and loan origination, in order to unleash new capital and create a worldwide pool of lenders who can invest directly in Kenyan businesses. In a span of four months, one of its short-term loan portfolios experienced a threefold turnover. Through this initiative, foreign lenders can send USD stablecoin, a type of digital currency that is linked to an external asset like gold or fiat money, convert it to Kenyan shillings, and use other credit-scoring tools to close the capital gap between MSMEs and investors. Pezesha has arranged over 3,751 loans as of the time of this writing in Kenya and 344 in Ghana.
Top 10 Countries in Crypto Adoption Index
1. Ukraine
2. Russia
3. Venezuela
4. China
5. Kenya
6. United States of America
7. South Africa
8. Nigeria
9. Columbia
10. Vietnam
Despite the scalability of decentralized finance and the operationalization of blockchain technology in other nations and areas, African policymakers have had difficulty integrating cryptocurrencies into their current monetary system. In reality, many African nations have ignored this financial innovation, keeping cryptocurrency exchanges but failing to provide a regulatory framework or reluctantly authorizing trade but failing to offer their population an exchange.
The government is unable to “shut the stable door after the horse has bolted.” Blockchain technologies are the wave of the future, and any attempt to outlaw them—or even too interfere in their functioning—would suffer the same fate as earlier attempts by the state to impose restrictions on behavior. Furthermore, limiting cryptocurrency use now, when it is facilitating breakthroughs and has so much potential, would jeopardize the funding of crucial industries like MSMEs, affordable housing, and remittance payments just as Africa most needs these solutions.
Government still has a role to play, and it should. For instance, Kenya has only recently created a “regulatory sandbox” to crowd-source funding for MSMEs. The Kenyan Capital Markets Authority describes this testing environment as a “tailored regulatory environment that allows for the live testing of innovative capital markets related products, solutions and services with the potential to deepen and develop the capital markets prior to launching into the mass market.” In other words, Kenya’s approach to blockchain and artificial intelligence was to provide a secure environment for the oversight of emerging tools, methods, or services having the potential to benefit the general public. With this strategy, the state can promote exploration and advancement without formally endorsing novel behaviors. African nations should set up their own regulatory sandboxes in addition to developing the capacity to identify and trace all transactions, guaranteeing adequate identity for all residents (to validate clients and ensure the security of transactions), and shoring up a strong cybersecurity infrastructure.
While no one can foresee the future of cryptocurrencies, we do know that their uniqueness necessitates an equally innovative regulatory approach—one that is just as invested in the benefits of innovation and entrepreneurship as the behaviors it aims to regulate.