For some time, the media have been extolling the extraordinary growth of cryptocurrencies in the countries of the continent and, in general, in emerging and developing ones. But beware, not all that glitters is gold.
According to Chainalysis, the private New York company that studies the applications of new technologies called blockchain , in 2020 the cryptocurrency market in Africa grew more than 1,200%. In the international top list of the 20 countries, first for their use, 5 are African: Nigeria, Kenya, Togo, South Africa and Tanzania. The rest, with the exception of the US, are all emerging or small-sized countries.
For Africa it is not about the market share, which is the smallest in the world, but about the number of citizens involved. According to a study by the World Economic Forum, in 2020 the sector on the African continent would have grown by 105.6 billion dollars.
The so-called blockchain is a set of information technologies that make it possible to create a digital register that stores data transactions between different parties connected to each other, in an open and secure way. It is a new technology which, as such, can have positive and innovative applications in various sectors. It can also be used in relation to the so-called “internet of value”, with which, instead of information, values, such as coins, are exchanged.
This is where cryptocurrencies come into play, of which bitcoin is the best known. They operate globally through computer networks that connect users and their computers directly, peer-to-peer . They are decentralized and, therefore, without the traditional centralized management of banks and governments.
There are already several hundred. Even all the big techs, the global tech giants, such as Amazon, Google, Facebook , and the Chinese Alibaba, are working to create their own cryptocurrencies, totally private and out of any kind of government and institutional control. There are for financial transactions of all types and sizes, such as the dash for small purchases, litecoin to pay bills, subscriptions, paxful in particular for remittances, and so on.
Of course, these aspects make them very attractive to the African population, who still do not have access to banking services for 57%. For electronic payments with cryptocurrencies, only a smartphone is required.
In Africa, the weakness of local currencies, volatile exchange rates, unstable political and banking systems, financial restrictions, inflation risks, lack of trust in national institutions also play a role in favor of cryptocurrencies.
Undoubtedly, they can be used - and they already are - for the remittances that migrants send to support their families of origin. The transition costs are lower than those applied by money transfer centers , for which a volume of remittances equal to over 50 billion dollars in cryptocurrencies is already estimated. For example, one third of paxful users are in Africa, particularly Nigeria, where there are already 1.5 million.