Africa Is Experiencing a Crypto Renaissance

Crypto adoption appears to be growing across the continent of Africa.

Crypto adoption is making significant advances in Africa, with crypto ownership, trade volume, and regulation all moving toward greater adoption.

A recent report by Arcane Research and Luno found that Uganda, Nigeria, South Africa, Ghana, and Kenya are frequently among the top 10 countries by Google searches for the word “Bitcoin.”

The report describes the continent as “one of, if not the most promising region for the adoption of cryptocurrencies,” emphasizing Africa’s combination of low existing crypto adoption alongside an “enormous” domain possibility.

The firms emphasize that Africa exhibits a young population, frequent monetary crises and currency failures, large unbanked or underbanked populations, and expensive means of payment.

South Africa emerges as crypto hub

While Nigeria has long dominated the continent’s trade volume, the report found that South Africa has the highest percent of cryptocurrency ownership or use among internet users in Africa with 13%, followed by Nigeria with 11%.

Worldwide, South Africa ranks fifth for crypto adoption among connected citizens.

This past week saw South Africa post its second-strongest weekly volume on peer-to-peer Bitcoin (BTC) marketplace Localbitcoins, with nearly $1.65 million worth of BTC changing hands.

The surge in trade activity saw total P2P volume for South African trade edge out Kenya last week with $1.95 million in trade across Localbitcoins and Paxful.

Last month, South Africa’s financial regulator issued a policy document asserting that crypto assets and activities relating to virtual currencies “can no longer remain outside of the regulatory perimeter.”

P2P volumes surge across Africa

Nigerian P2P trade is rallying to record highs, producing $9.2 million in combined weekly trade.

Kenyan trade has also seen a recent spike, with Localbitcoins trade between BTC and the Kenyan shilling producing its second-strongest week on record for the third consecutive time.

Morocco and Egypt have also posted record trade activity in recent weeks.

The increase in volume across the continent has also seen P2P volume from Sub Saharan Africa beat out Latin America for the first time.

Continue reading “Africa Is Experiencing a Crypto Renaissance”

Digital Dollar Project Releases White Paper Laying Out Groundwork for US CBDC

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A U.S. think tank working towards a digitized dollar has released a white paper detailing inaugural aims and use cases for a central bank digital currency.

 

On May 28, the Digital Dollar Project released its white paper, a 30-page document detailing the potential applications of a CBDC. The white paper continues the nascent think tank’s work to push forward development of a digital dollar.

The project and the tenets of the new white paper

The paper details certain core tenets of what it considers a digital dollar and what it will push forward.

The Digital Dollar Project was founded by former leaders of the Commodity Futures Trading Commission and professional services company Accenture. One of those founders is Daniel Gorfine, the head of the CFTC’s fintech office until this past fall.

Gorfine told Cointelegraph, “What we’ve been trying to do through the digital dollar project is catalyze action and this paper is a key step in that direction.”

The new white paper expresses Gorfine and co-founder and former CFTC Chair J. Christopher Giancarlo’s documented interest in operating alongside traditional financial authorities and existing payment mechanisms including cash and Automated Clearing House Technology.

Testing out any new technology

The paper charts out an impressive array of use cases for a digital dollar — for example, the colossal remittances corridor between the United States and Mexico. It also eagerly looks to future pilot programs to test these use cases out as separate components:

“Through engagement with stakeholders, the public sector, and our advisory group, we intend to refine these use cases further and identify potential pilots to test the value hypotheses and inform design decisions.”

Noting the importance of subdividing the wide range of tasks that a digital dollar will be expected to streamline, Gorfine said of pilots:

“Piloting can take place in different pieces or bites relative to the overall topic. You can imagine, for example, exploring tokenization and its impact on financial inclusion and access. You can separately look at government benefits programs and how to disburse to individual recipients.”

Weighing centralization and privacy

In keeping with the project’s desire to work within existing regulatory bounds, it explicitly does not seek to upend the current monetary system of the U.S. Several times it mentions maintaining the format of currency flowing from the Federal Reserve to financial institutions and then to the public:

“A digital dollar will be distributed through the existing two-tiered architecture of commercial banks and regulated intermediaries.”

While some recent legislation has called for direct consumer access to accounts with the Fed, Gorfine explained the Digital Dollar Project’s proposed structure as partially an effort at decentralization:

“Relying primarily on the private sector and regulated banks and money transmitters seems like a much better approach.  Public solutions would only make sense if there are remaining gaps and problems to solve for. […] If you think about the way the Fed developed, it was attempting to decentralize the federal banking system and related policy decision making.”

The white paper similarly calls for any digital dollar to operate within existing Know Your Customer or Anti-Money Laundering requirements. At the same time, both the white paper and the project’s founders have historically mentioned privacy as a central concern. That subject remains to be determined, based on the 4th amendment as well as future legislation.

“This is a very meaty and important area. Ultimately, these are policy choices that need to be made by the government,” Gorfine said of privacy. “I think what we flag in the paper is a champion […] model by anchoring and analogizing to physical cash.”

The COVID-19 pandemic stirred up a lot of talk about how to reconfigure the financial system to be more responsive, including a number of bills calling for a digital dollar.

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Bitcoin May Be the Solution to Africa’s Broken Financial System

According to a recent report, Africa’s lack of traditional financial infrastructure makes the region fertile ground for cryptocurrency adoption.

 

A recent report suggests that the lack of traditional financial infrastructure makes Africa a place where cryptocurrency adoption is likely.

The report — shared with Cointelegraph by a Luno representative on May 27 — sheds light on Africa’s financial infrastructure and the role that cryptocurrencies play in it.

The author of the research, which was jointly conducted by market analysis firm Arcane Research and crypto exchange, Luno, wrote that the financial landscape seen on the continent plays a role in forming appetite for crypto in Africa:

“Although it is a diverse region, African nations share some key similarities and trends. Economic problems, from high inflation rates and volatile currencies to financial issues such as capital controls and a lack of banking infrastructure, create a fertile ground for an alternative to germinate.”

Per the report, cryptocurrencies such as Bitcoin (BTC) can potentially solve all the aforementioned challenges. One use case for crypto assets in Africa is remittance, which currently forms an important source of income for local families.

According to a World Bank report published in April, expats sent around $48 billion back to families in Sub-Saharan Africa in 2019 alone. Still, using traditional remittance services to send money to the region allegedly results in an average fee of 9% for a mere $200 remittance.

According to the Luno-Arcane report, intra-African payments often have to deal with high fees and low speeds. According to World Bank data, in Sub-Saharan Africa there are over 56% less commercial bank branches per 100,000 adults than the world average. This shows that traditional financial infrastructure is not just less efficient, but also less accessible in the region.

Bitcoin adoption in Africa has already started

Bitcoin-enabled services attempting to tackle those issues already exist in Africa. One example of such a service given by the report’s author is Bitpesa; a Kenya-based firm that enables its users to leverage Bitcoin for international payments and remittances with lower fees than traditional services.

Bitpesa was initially only meant to be an exchange platform allowing Kenyan citizens to send money to mobile money wallets, without requiring bank accounts. Later the service expanded to other African countries and now has representatives in London and Luxembourg, among others.

In late January 2019, the World Economic Forum appointed the CEO and founder of BitPesa, Elizabeth Rossiello, as one of two co-chairs of the Global Blockchain Council. This shows how the innovation brought on by this Bitcoin-enabled service was recognized worldwide, also outside Africa.

The report also mentions Paxful, a Delaware-based peer-to-peer, or P2P, crypto exchange competing with Localbitcoins, as another player in the African crypto ecosystem. A recent report showed that surging African demand drove P2P Bitcoin trading volume on Localbitcoins and Paxful higher than what it was at the peak of the 2017 bull run.

Marcus Swanepoel, the CEO of crypto exchange Luno, told Cointelegraph that he believes the adoption of cryptocurrencies in the region will continue to increase. He explained:

“Crypto use in Africa will continue to rise, and it is only a matter of time until digital currencies will become ubiquitous. […] Given how readily they’ve adopted crypto, I would expect countries in Africa to be the first to make the full transition from their traditional financial systems towards crypto.”

Swanepoel claims that Luno was the first such company to operate in Africa and currently has African offices based in Lagos, Cape Town and Johannesburg. He revealed that those “three offices have so far processed approximately $4.5 million per day on average in 2020.“ He also shed some light on his firm’s plans to expand in the continent:

“Africa is one of, if not the biggest early adopter of cryptocurrencies, and a very important market to us, being home to approximately three fourths of our customer base. We’ve seen high rates of adoption in the likes of Kenya and Ghana specifically, but we’re always looking to expand our reach and welcome more customers across the continent. A priority for us has always been education, not just buying and selling cryptocurrencies, and that’s something we’ll continue to do, especially in the territories in Africa that we know have been ravaged by broken financial systems.”

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Documentary Review – Banking on Africa: The Bitcoin Revolution

A new crypto documentary promises to tell the story of how cryptocurrency can affect social change across the African continent.

Another week, another cryptocurrency documentary review… Although Banking on Africa: The Bitcoin Revolution, released May 22, promises something a little different.

For a start, amongst the usual crypto-101 and industry-overview fare, a focus on how Bitcoin and cryptocurrency is transforming the African continent feels like a breath of fresh air. After all, wasn’t “banking the unbanked” one of the nobler use-cases for Bitcoin, before it became all about the price?

In addition, most documentaries don’t have an accompanying in-depth 37-page report, allowing viewers to dive deeper into “The State of Cryptocurrency in Africa” and follow up on the topics covered in the film.

Both the report and the documentary are supported by cryptocurrency platform, Luno, which has a strong presence in Africa, having originally headquartered in Cape Town.

This left me wondering whether I was about to watch an overly long promo-piece, when I attended the virtual premiere earlier this week. However, they did send takeaway pizza, so who’s gonna complain?

Life-changing stories of crypto in Africa

The film opens with Lorien Gamaroff, founder of the blockchain-based social outreach project Uziso, standing outside a Soweto school in the dark.

He is about to unveil a project which enables donors from around the world to support such schools by sending funds to cryptocurrency-enabled smart electricity meters.

It also features the story of Alakanani Itireleng, Africa’s original Bitcoin Lady, who discovered Bitcoin when trying to help her terminally ill son, and set up Botswana’s SatoshiCentre to spread the word of Bitcoin in Africa after he sadly passed away.

Strong theme left me wanting more

So far, so promising. Exploring how Bitcoin and cryptocurrency can enact actual social change in African communities desperate for the opportunity to improve their living conditions is a strong theme.

Unfortunately, for me personally, the film doesn’t explore this theme deeply enough. The threads featuring Gamaroff and Itireleng are spread across the film’s 47 minute run-time. But they are interspersed with more general comment, explaining Bitcoin and cryptocurrency in relation to traditional financial systems, and the benefits it can bring.

Sure, this is delivered by crypto personalities from Southern Africa, and gives an African perspective on the subject, exploring why the continent is well-suited to best realize the potential of the technology… but in general terms, this isn’t that different from elsewhere in the world.

Don’t blame the player…

This isn’t the fault of the film, but of the niche nature of the cryptocurrency world itself.

While those who follow the industry (our readers included), are often passionate about it, this is still only a tiny fraction of the population. Certainly not enough to rely on to create a sizable audience for your latest film, for example.

For the majority of people, crypto is still an often impenetrable and confusing subject, so such entry level explanations are still necessary in the attempt to attract a mass audience.

To be fair, the film achieves this balance well, but leaves me wanting to discover more of the individual projects which are changing Africa for the better. Yes, the report has such information, but a majority of viewers probably won’t even realize that report exists.

I have no hesitation in recommending this film, which is available now on Amazon Prime video to rent or buy (and free for Prime subscribers).

But where many cryptocurrency-related documentaries have felt overly long, I genuinely wish there was another half hour or so of this, giving some more practical examples of how crypto can change the Africa continent, and the world.

NB: To its credit, despite funding the film, Luno has stayed out of the filmmaking process entirely. The film promotes cryptocurrency, promotes Africa, but never once promotes Luno… to which I doff my hat.

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Jack Martin

 

 

 

China Strikes Down 10% of Global BTC Hashrate, Who Will Pick Up The Slack?

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The government of China’s Sichuan province moves to stamp out Bitcoin (BTC) mining activity, citing that growing cryptocurrency prices have led to the escalation of illegal activity under the guise of mining.

Sichuan — 10% of the global hashrate

According to estimates from Cambridge University, Sichuan is responsible for almost 10% of the global hashrate. In fact, this single Chinese province mines more Bitcoins than the entirety of the U.S. or Russia.

China: Bitcoin Mining Map. Source: Cambridge University.

China: Bitcoin Mining Map. Source: Cambridge University.

Apparently, Sichuan was previously trying to attract the miners in order to combat the economic downturn and employment brought about by the COVID-19 pandemic. Instead, allegedly, “illegal fundraising” and multi-level-marketing schemes flourished.

What’s next?

It’s not clear whether these recent issues will in effect stamp out mining in Sichuan. China’s crypto community has been flourishing despite governmental constraints. As Christopher Bendiksen, head of research at CoinShares, told Cointelegraph:

“I don’t think Bitcoin miners in China have ever been, you know, quote unquote, comfortable. If what you mean is that they feel safe and certain about their right of ownership. And, you know, the idea that the government just won’t show up one day and take all the stuff. I really doubt that they’ve ever felt comfortable with that. Now, it’s probably worse than ever.”

However, what would happen if this time around, the authorities took their directives seriously and moved with full force to stamp out all the Bitcoin mining in Sichuan? Who would pick the slack?

Going West?

Philip Salter, head of operations at Genesis Mining, the company that emphasizes that it does not do any mining in China.

“The thing with China is that China has cheap production costs, the CapEx is very low. Everything is cheap and fast in China. But the operating costs are <…> not so low because most of the country’s fueled by coal and coal is the most expensive energy source. So actually, the operating costs are not so good in China.”

Probably, the more profitable and stable miners would be able to move their equipment to other Chinese provinces. It could also add fire to the latest pro-Western trend in the industry. Even China’s giant Bitmain has been operating a 50 megawatt farm in Texas. Bitcoin mining in Texas has been burgeoning thanks to the low electricity prices and friendly local officials.

With the halving already putting a lot of pressure on miners, leading to the reduced hashrate, this latest stress test will probe Bitcoin’s resilience once again.