This new sector of the digital economy, whatever you call it — blockchain, crypto or Web3 — is growing rapidly in Africa. It’s time to get up if you have been asleep on this sector.
Why? Chainalysis analytics says that Africa’s cryptocurrency market grew by over 1,200% between June 2020 and July 2021. Africa was led by particularly high adoption rates in Kenya and South Africa, Nigeria, Tanzania, and Tanzania. This made it the third fastest growing cryptocurrency economy. But that’s not all. Chainalysis found that Africa is the leader in global crypto transaction volume from peer-to–peer. This indicates that crypto-unfriendly countries are finding more ways to circumvent explicit and implicit bans.
In addition to the growth in cryptocurrency trading across Africa, there has been an increase in activity from grant funders, government agencies, venture capital firms, governments, and blockchain networks/protocols over the past 12 months.
Related: Why Crypto Firms ignore Africa as a Potential Adoption Site
Every day, it seems that leading blockchain networks announce new initiatives focusing on Africa. In the past twelve months, Ethereum, Stellar and Celo have been actively jockeying for position to help build and mold Africa’s Web3 economy.
The Ethereum Foundation contributed resources to an insurance program that benefited over 6 million farmers in Kenya.
Stellar Development Foundation announced several initiatives, including a partnership in Africa with Flutterwave to create new Europe-African remittance routes, an investment in Nigerian remittance platforms, boot camps for African startups, and a $30 million matching funds. This fund has already invested in Afriex which is an Africa-focused company that serves users in Nigeria, Ghana and Kenya.
The Celo Foundation announced its own initiatives, including a partnership with a Burkinabe startup in order to launch a stablecoin to track the value of CFA Francs, a partnership in Kenya with Mercy Corps Ventures to pilot financial inclusion for gig workers, equity-free grants to several African projects as part its Wave IV Grant program, support of early-stage African businesses via Celocamp boot camp and a Founders In Residence program where 40% of the first cohort was Africa-focused founders.
Related: “We don’t like money”: The story of Bitcoin and the CFA in Africa
Cardano was also busy on the continent. Charles Hoskinson, chief of Cardano, visited Africa from South Africa and Egypt, and outlined Cardano’s vision for Africa. Cardano’s Africa-focused Commercial Arm EMURGO Africa was established at Kenya. EMURGO Africa plans to invest $100M in more than 100 pre-seed Blockchain startups in three years. EMURGO Africa also announced investments in Adanian Labs, Adaverse and Cardano announced a partnership to create a “peer to peer financial operating system.”
Venture capital investment
Not only did blockchain protocols see more activity, but startups also raised more money in the past twelve months to support individuals, businesses, and other entities in the Web3 economy.
Investors were attracted to on/off-ramps, which act as bridges between traditional economic systems and the new Web3 economy. Fonbnk secured a seed round that was well-received and exceeded expectations to create the most convenient way for millions Africans to access digital assets. This is possible by simply using prepaid airtime. Canza Finance, a platform powered by a network physical agents, also received funding.
Over the past twelve months, fundraising has increased for cryptocurrency wallets and exchanges. Examples of these include VALR ($50 Million Series B), Cowrie Exchange and Yellow Card. VIBRA (Africa Blockchain Lab), Busha. OVEX, Ejara. Bitmama. Revix.
Investors are attracted to infrastructure providers that make it easier for others to create crypto products. These included LazerPay and KotaniPay as well as Payourse, Flux and Emtech.
In the same way, venture capital funding was also awarded to blockchain-enabled services which use blockchain technology in a wide range of applications. Pravica and HouseAfrica are some of the examples.
Lending-related services were not left out, with NFTfi, Goldfinch and other organizations raising risk capital in the past year.
Global investors have also been attracted to studios, super apps, and other platforms that fulfill broad Web3 goals over the past twelve months. You can see fundraises by Nestcoin and Africa Blockchain Center, as well as Jambo being one of the most prominent examples.
Related: Venture capital vs. cryptocurrency, blockchain, DAOs, and Web3
In addition to Web3-focused startups, others announced that they would use funds from recent fundraises for Web3 related projects. Carry1st, a publisher of mobile gaming content in Africa, stated that gaming content is increasingly beginning to integrate with NFTs, cryptocurrencies, and that it would use some capital raised from its recent fundraising round for Web3 play-to earn gaming.
Another example is African fintech unicorn Chipper Cash. It recently closed a major fundraising round that brought global cryptocurrency exchange FTX onboard as an investor. Samuel Bankman-Fried, CEO of FTX, stated that FTX is investing in Chipper Cash to help “accelerate crypto adoption within Africa and elsewhere.”
Given the market trends and the recent fundraising activity, it is clear that Web3 funders and founders are in for exciting times.
Grants and partnerships
Venture capital investors and blockchain networks aren’t all attracted by the chance to shape Africa’s Web3 economy. Diverse NGOs are also keen to explore the potential impact Web3 offers across Africa.
Mercy Corps, a non-profit humanitarian organization, launched a Crypto for Good fund of $1 million to support blockchain-based projects in Africa and other emerging markets. The UNICEF Innovation Fund is a financial vehicle that focuses on technology for the next billion users around the world. It makes equity-free cryptocurrency investments up to $100,000 in startups in Africa (and other UNICEF program countries) that are developing blockchain-based solutions that “have the potential of benefiting humanity.”
Over the past twelve months, even Jack Dorsey, the former CEO of Twitter, and Jay-Z joined the action. The Bitcoin Trust Fund was established, which is a 500 Bitcoin (BTC), vehicle. Four Africans were appointed to the board of the fund to help determine how it will be managed — this could include a strong focus on Africa.
Related: Jack Dorsey is wrong, venture capital won’t run Web3
Apart from grant funding, there are many other indicators that point to the growing popularity of Web3 across Africa. Quidax was the first African cryptocurrency exchange listed on CoinMarketCap. This is arguably the most authoritative source of cryptocurrency data in the world. To much fanfare, cryptocurrency derivatives exchange FTX announced a partnership to help build infrastructure linking African markets to the global Web3 economy.
frican governments, and the Web3 economy
The potential impact of corporate partnerships, NGOs and venture capitalists on Africa’s Web3 economy are not to be underestimated. However, the government is still an important actor that can either stimulate or hinder its growth. However, so far, the governments of Africa seem to be embracing cryptocurrencies with a healthy dose skepticism.
One example is the Nigerian government. The memo was sent by the central bank of the country in February 2021. It caused quite a lot of chaos and drove many users underground away from official cryptocurrency exchanges to peer-to-peer transactions.
For financial institutions that are regulated by the Central Bank of Nigeria, it has declared that “dealing in cryptocurrency or facilitating payments for cryptocurrency exchanges is forbidden”. Further, the Central Bank of Nigeria directed financial institutions to identify persons and/or entities that transact in [cryptocurrency] and close such accounts immediately.
Although Nigeria’s example is quite impressive, it’s not unique. According to the U.S. Library of Congress (November 2021), cryptocurrencies had been banned in roughly one-half of all African countries, explicit or implicit.
It is worth noting that Bitange Ndemo, a renowned University of Nairobi professor of Entrepreneurship, has these words:
“Blockchain technology is the future. Any attempt to ban them or to intervene too much in their operation would be met with the same fate as any other state attempts at circumventing behavior.
Despite a generally hostile or even skeptical attitude to cryptocurrency trading and ownership in many European countries, there has been an increase in the acceptance of other uses of blockchain technology by governments, especially central bank digital currencies (CBDCs).
Nigeria launched its eNaira in Oct 2021. South Africa participates in the Bank for International Settlements multi-CBDC experiment Project Dunbar. Morocco, Tunisia and Ghana are also actively exploring digital currencies backed up by their respective central bank counterparts.
Similar: What is a CBDC (Certified Buyers Club)? Why central banks want digital currencies
One view is that blockchain-based solutions will be explored by more governments on the continent, even CBDCs. This could lead to a more informed approach to Web3 economics and policy frameworks that better reflect the needs of users. This optimism is welcomed, even though it remains to be seen.
Africa’s Web3 Future
The new Web3 economy is creating myriad opportunities around the globe. It has huge implications for Africa. We are on a mission using the latest blockchain technology to bring real value to billions unbanked, underbanked, and underserved people across Africa and other emerging market countries. We are excited to see different blockchain protocols, investors, grant funding agencies, governments, and startups interested in doing the exact same. The current state of affairs in Africa and the speed of innovation across the continent make it clear that Web3 Africa’s future is bright.
The Intellence team is to be thanked by the author for their editorial support with this article.
This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Michael Kimani is co-founder of Fonbnk and heads of growth. Fonbnk allows millions of people in Africa and other emerging countries to take part in the Web3 Economy by simply using their prepaid airtime.