Cryptocurrency use is gaining momentum everywhere around the world. The progress made in the last couple of years makes it more certain that they are here to stay. From everyday payment settlements to the storage of wealth, electioneering, etcetera, the real-life applications are quite a number. Consequently, a few developed countries have now embraced cryptocurrency for various purposes. All of these cumulatively form the reasons to believe that cryptocurrencies would be a part of the future.
However, there have been going concerns about cryptocurrency use in Africa, especially as to how innovative and sustainable it can be. Although there are a few great African cryptocurrency-driven projects already, there is a need to effectively keep up with the pace. While there are the obvious benefits that cryptocurrency adoption would have, a few possible limitations have also been identified.
In the end, Africa’s ability to overcome the challenges on its road to effective cryptocurrency adoption, would determine how much benefits it can enjoy.
The benefits of cryptocurrency use in Africa
Over the years, cryptocurrency use in Africa has solved a number of critical problems for the populace. Consequently, there has been an increasing rise in the number of people who want to own one digital currency or the other. The following are three recognized benefits of cryptocurrency use in Africa
- Hedge against high inflation rates
Several African economies have been consistently characterized by high inflation rates. Usually, these inflation rates significantly erode the value and purchasing power of the individual local currencies. When this happens people have to spend more to buy less. Generally, high inflation rates have been a major contributing factor to the lower standards of living for Africans. This has been a major problem for decades, and cryptocurrencies seemed to have come as the much-needed savior.
Consequently, many Africans consider bitcoin and altcoin ownership as a good hedge against economic inflation and local currency devaluations. For instance, when Zimbabwe’s inflation rates started to reach about 175.66%, Zimbabweans typically opted out of using the local currency. This was particularly the time when bitcoin came to a heightened prominence in the African country.
- Unified currencies for effective trade
Africans love to trade and exchange goods and services with the rest of the world. However, currency differences and payment barriers have been a big obstacle- as far as fiat currencies are concerned. Transaction payments in foreign currencies are way expensive, as there are huge fees and fluctuating conversion rates to worry about. This makes it less profitable for Africans to do trade with businesses in other countries.
Fortunately, cryptocurrencies have solved these problems. Using bitcoin or any of the altcoins, payments can be easily made in a unified currency form. This also allows users to skip the formal procedures required by regular centralized systems for currency conversions.
Now, businesses can leave their payment funds in the accepted cryptocurrency form. This way they can readily make payments without losing to fluctuating conversions rates that may occur in fiat to cryptocurrency conversions.
- Unrestricted and faster trade payments between different geographical locations
Many African countries have had economic policies that restrict foreign exchange flow, and this may hinder some businesses. The use of cryptocurrencies removes the hindrances, in a big way. Now, Africans also use cryptocurrencies because the transactions are unrestricted and largely unlimited. This is because there are no such things as payment limit restrictions from a regulating body like the central bank of a country.
Also, people love the fact that cryptocurrency payments are usually faster and more reliable than fiat currency transfers. Cryptocurrencies have enabled Africans to send and receive payments in just split seconds. This also consequently opens more earning and trade opportunities.
Current limitations of cryptocurrency use in Africa
Although cryptocurrency popularity and use in Africa is on a steady course, the following are some of the most important limitations at this time:
- Poor Internet Infrastructures
Essentially, cryptocurrencies cannot be sent or received if there is no internet to initiate and follow through with transactions. This is currently one of the biggest hindrances to cryptocurrency use in Africa. Usually, fair internet provisions are available in many of the urban centers, while it is extremely little to no internet access in rural communities.
But then, an estimated over 60% of the African populace reside in rural communities. This ties the possibility of huge cryptocurrency use to improved internet service infrastructure- which may not come in a few years.
- Lack of proper and adequate awareness
Public awareness of the prospects and potentials of cryptocurrency is still quite low on the African continent. On average, only a few people really know and understand the purpose of cryptocurrencies. The fact still remains that most of Africa is still very much used to the fiat currency system. Hence, for some people, the concept of cryptocurrencies seems too complex and abstract. There have also been biases, especially as regards cryptocurrency volatilities and their propensity to significantly dip in price
- Inadequate blockchain and cryptocurrency expertise
Most of the cryptocurrency solutions utilized in Africa are developed from other continents. The issue with this, however, is largely in the long run. Blockchains and cryptocurrency solutions basically should be developed based on specific needs that they aim to solve. For instance, there might be a blockchain/cryptocurrency that tackles the peculiar healthcare needs of Africans.
Usually, more ingenious solutions- suitable for the specific problems in Africa, would likely be developed by Africans. This means that Africans would more likely be in the position to create cryptocurrency solutions that could solve their problems.
However, this would not be possible if there are just a few developers in the field. Currently, there are no many African developers who could build blockchain and cryptocurrency solutions that match the peculiar needs of Africa. Essentially, the way forward is in skill development and acquisition, which actually could be cost-intensive.
Now, although Africa is still relatively young in cryptocurrency development and use, there are huge prospects for the future. Various concerned stakeholders have started to think of the best ways to deplore cryptocurrency solutions, and cut down the limitations. From the look of things, the continent’s cryptocurrency front would have become a force to reckon with, in the next few years.