According to Michael Cohen of Stone Bridge Ventures, cryptocurrencies and decentralized finance have continued to surge in popularity in recent years throughout Africa. Given that the continent faces a number of monetary challenges, cryptocurrencies are in a unique position to solve those issues. In fact, a lot of the increased popularity only happened in the past few years following the pandemic and shows no signs of slowing down.
With a combination of digital finance literacy, government regulation, and even a blossoming startup scene, Africa has all of the right conditions that have led to the rise in the popularity of cryptocurrencies. Some startups like Momint are making it easier for people to get into crypto with a new voucher service that allows them to use cryptocurrencies at various regional and international retail outlets.
Seeing how cryptocurrencies have become a mainstay in the continent, it is worth studying what factors led to their acceptance.
Becoming a Legal Tender in Africa
The first major boost to cryptocurrency’s legitimacy in the continent was its legalization on a national level. Bitcoin became the prevalent crypto option for many owing to its overall market cap, which led to more people investing and making payments with it. In fact, people began using it for everyday transactions, replacing the need for fiat currency for some people.
According to Michael Cohen of Stone Bridge Ventures, the Central African Republic recognized how quickly Bitcoin was growing and denoted it as a legal tender in the region. Similarly to El Salvador before it, the Central African Republic became the second largest region to start using cryptocurrencies along with fiat currency.
Africa ranks third worldwide in terms of crypto growth, and one of the factors that contribute to it is how the government allows individuals to use it instead of fiat currency.
A Blossoming Startup Scene
Other major factors that have led to the acceptance of cryptocurrencies in the region are often the rising inflation rates. Rising inflation rates especially affect the bottom tier of the country’s population and make cross-border remittances and money transfers much more difficult. Therefore, when cryptocurrencies came around as a possibility, many were quick to jump on and leave their fiat currencies behind.
According to Stone Bridge Ventures Senior Account Manager Michael Cohen, this unique openness to accept cryptocurrencies with open arms caught the eye of many international investors. And to profit from the increased attention, many startups started popping up to offer their services to the African people. This upward, positive cycle led to a 1200% growth in cryptocurrencies in a single year between July 2020 and June 2021.
In 2021, startups made as much as 90 million USD in a single quarter, with an increase of as much as 1,668 percent over the last quarter. So with the continued support of investment firms, there are plenty of new businesses to diversify crypto trading options and keep the economy going.
To conclude, Stone Bridge Ventures Senior Account Manager Michael Cohen found that with a unique combination of cultural openness, international investors, government support, and startups, Africa continues to see increased growth in cryptocurrencies.
