Africa is considered one of, if not the most promising region for the adoption of cryptocurrencies. The unique opportunity available on the continent results from a mishmash of different favorable economic and political issues.
For instance, the vast young population, high currency inflation rates, and the costly transaction costs. Therefore the growth potential of Bitcoin and other cryptocurrencies in Africa is massive.
Yet, the adoption of cryptocurrencies in Africa is still relatively low compared to other regions worldwide. This is according to a recent Arcane Research Report on the State of Crypto in Africa.
The State of Crypto – Africa report highlights several hurdles that still stand in the way of high cryptocurrency adoption on the continent.
1. Competition from Mobile Money Services
The availability of mobile money services on the continent is a double-edged sword for adopting crypto payments and blockchain-based services. Although mobile money has made users gain trust in digital and mobile payment solutions, wide adoption poses a threat to crypto adoption. Crypto’s strong-holds that could help steal market share include decentralization, low-cost or free transactions, and the instant nature of being able to send money across borders.
2. Low Smartphone penetration
There are few smartphones on the continent. South Africa leads in smartphone use, with around 51% of the population owning one. However, the adoption rate is increasing rapidly, which will present a growth opportunity for crypto use. For now, most cryptocurrency wallets only work on smartphones. Thus, crypto falls out of favor when the continent’s mobile payment services operate on both feature and smartphones.
3. Resistance from Regulators
Regulatory barriers have become a major hurdle for the adoption of crypto. Currently, over 60% of African governments are yet to spell out their stand on cryptocurrencies(PDF).
Only four African governments are friendly to crypto, including South Africa, which currently has the highest ownership of crypto to users aged 16 to 64, Senegal, Tunisia, and Sierra Leone.
Morocco, Algeria, Libya, Zambia, Zimbabwe, Swaziland, and Namibia have either banned or prohibited its use. The remaining countries, including Kenya, are yet to decide. Most regulators are apprehensive about crypto’s volatility, lack of governance, and the prefiltration of scams.
4. Poor electricity and Internet coverage
For now, cryptocurrency payments rely on an internet connection. However, that may soon change due to an increasing focus on transmitting cryptocurrency payments without having an internet connection.
Currently, only 39% of Africa’s population has some form of access, with seven countries having less than 10% internet penetration rate as of Q1 2020. Monopolies in the telecom sector have also driven the cost of internet use and mobile data high. Aside from internet access, about 57% of the population has no access to electricity.
Despite these challenges, the research firm is positive about cryptocurrency growth in Africa in the future. The report was made by Arcane research in collaboration with Luno, ranked as the leading cryptocurrency exchange in Africa.