Mobile money is booming in Africa, and digital currencies are at a close second, due to the same reason: 30% of Africans lack access to traditional financial services such as bank accounts and credit cards.

By Eran Feinstein, Chairman of 3G Direct Pay Group

Consequently, they are mostly limited to cash transactions, which impede on their ability to choose where to make purchases and do business. Cryptocurrencies play an important role in the development of technology-driven markets, and as Africa shifts a large portion of its business to technological and virtual endeavors, it is only natural that cryptocurrencies should become significant.

New research from PricewaterhouseCoopers reveals that the acceptance of the cryptocurrency, Bitcoin, has achieved critical mass and, as such, is positioned to disrupt the payments market. For Africa, cryptocurrencies hold many benefits, such as:

Pan Africa – Connecting Africans
Currently, each African country has their own currency, and Africans are unable to even complete transactions in other African countries within the same system, such as M-Pesa: a user in Ghana cannot send an M-Pesa payment to another user located in Kenya, for example.

Economic growth in Africa is often hindered by the lack of regional trade that cryptocurrencies can enable without necessitating the adoption of a single currency such as the Euro. As a decentralized currency with no real authority, cryptocurrencies would enable less expensive and more widely accepted cross-border transactions between African countries than the currently popular mobile payments. While mobile payments are more well-established and trusted in the region, and they do allow for cross-border transactions, they are costlier than cryptocurrencies and do not work across all borders.  Cryptocurrencies enable swift, cheap transactions that will broaden markets and possibilities, both for the individuals and the countries, and contribute to Africa’s growth.

The World at Africa’s Fingertips
Cross border transactions are currently incredibly expensive for those who are lucky to have the ability, but as 30% of Africans do not have a bank account or credit card, world markets are unavailable to them. The surge in usage of mobile phones has introduced Africans to alternative forms of remittance, which have, in turn, been a tremendous boost to business and individuals. However, mobile payments still rely heavily on currencies such as the Dollar or Euro, as well as African eWallets, such as M-Pesa, all of which cause very high currency exchange fees. Cryptocurrencies are decentralized, and thus, have no exchange fee, as they are accepted worldwide, thus both saving the user fees and enabling them to purchase products and services from other countries, which were previously unavailable to them.

Additionally, freelancers will be able to accept payments in the cryptocurrency of their choice, thus facilitating cross-border work. Freelancers will no longer be limited to business in Africa and will be able to work with clients worldwide, as receiving payments will no longer be a challenge. Payments can be sent and received quickly, anywhere in the world, 24/7, without having to account for banking holidays, currency exchange rates, banking fees, and more.

Security, Trust, and Transparency
Cryptocurrencies have no central authority figure, such as a government, and transactions are transparent. While personal information is never revealed, each person has a unique address where their transactions are listed. As such, cryptocurrencies are safe against identify theft, and merchants cannot add fees without the customer’s’ knowledge. Anyone can view all transactions at any given time, but cryptocurrencies are cryptographically secure, meaning they cannot be manipulated by any person or government. Cryptocurrencies cannot be seized and funds cannot be frozen by governments or financial intermediaries, so users can be confident that they have complete control over their money. For many Africans, this level of security and transparency is precisely what they need and demand.

Risk in cryptocurrencies is very low; since transactions do not carry any personal information, cannot be reversed, and are encrypted, the chance of fraud for merchants is very low. Bitcoin carries multilayer protection, including physical access to the computer, meaning the chance of theft is significantly lower than other currencies. Consequently, merchants will be able to do business in higher-risk areas. This also means that companies and individuals that may have been hesitant to work with some African countries will now have the ability to confidently expand their offerings to Africa, as well.

Creation of New Services
The introduction of cryptocurrencies like Bitcoin in Africa can spark numerous technological advances to support its usage. Ideally, people will be able to elect to receive their salary in the cryptocurrency and financial institutions can issue cryptocurrency-backed credit cards. Tipjars, both virtual and physical, can also have an ability to be cryptocurrency-based, which can broaden usage capabilities.

Advances in the field are already taking place in Africa: A Ghana-based IT company has recently created a bitcoin-producing farm, adding capacity to the global pool, thus promoting Bitcoin development in Africa. Companies such as BitPesa enable Africans to convert Bitcoin received overseas into local currencies.

Disadvantages of Cryptocurrencies
While cryptocurrencies boast a plethora of advantages, at the present time, very few businesses, in Africa and worldwide, currently deal with them. As such, adoption and growth in Africa is severely hindered. However, as more international companies begin to accept cryptocurrencies, Africa, too, will be able to reap the benefits. Likewise, cryptocurrencies are currently very volatile, with very few coins available and demand rising daily. However, volatility is expected to decrease with time.

Additionally, public awareness of cryptocurrencies in Africa is currently very low. As people are not aware of them, they have yet to demand their acceptance at local business. However, with an estimated million Bitcoin wallets in Africa at the end of 2015, with nearly one third being used by Kenyans, the potential of cryptocurrency in Africa is clearly high. Therefore, lack of awareness is only a temporary issue.

Finally, since cryptocurrencies are anonymous, it has been known to be used for illicit purposes. Nonetheless, while traditionally Bitcoin was viewed as a black market currency used to cover up illegal activities, its widespread adoption by respected companies has given it validation and enabled it to grow.

Cryptocurrencies can potentially transform Africa by enabling an increasingly open trade in the continent itself and worldwide. Cryptocurrencies facilitate cross-border transactions by providing users with one lone currency and little to no fees. Additionally, the security and transparency of the network will provide Africans with the trust that they do not feel with their local financial institutions. With so many Africans lacking bank accounts and electing to utilize mobile payment platforms like this one instead, cryptocurrencies will undoubtedly transform into the largest game-changer for African economies in the upcoming decade.

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