Centralized and Decentralized Finance Startup Landscape in Africa | BanklessAfrica Newsletter
This is BanklessAfrica Newsletter, a newsletter about staying up to date with well-curated news about crypto and Web3 around Africa
Hey, BanklessAfrica fam!
What a week of firsts!
Bankless Africa has officially launched Sats and Gwei, a podcast hosted by our very own Miss Purple & Nekhee, which is focused on keeping you well informed on the hottest Web3 and cryptocurrency stories within Africa. You can expect to hear about the latest standings of the crypto markets as well as national currencies, progress on adoption, funding, growth in the continent, and financial tech news. Thank you to the podcast team for making crypto news in Africa more accessible.
In a weird but somewhat predictable turn of events, a few African countries and individuals seem to have tightened their attitude to cryptocurrency. A group of Kenyan students were arrested for crypto-related fraud, while a South African person accused of defrauding others of $50,000 worth of bitcoin has threatened to sue those claiming he is a scammer. In some more interesting news, Kenyan and Nigerian central banks seem to have endorsed CBDCs over cryptocurrencies. What they don’t know, though, is that just like winter, we’re coming and we’re yet to make Africa Bankless!
On to more firsts: in a bid to help in this adoption of the Bankless lifestyle for non-English speaking Africans, we have added some educational content on Web3 and its advantages, all written in pidgin. How awesome is that!? Maybe in the near future we will be adding more languages, so keep a look out for that.
In this issue, we take a look at the growth and landscape of Centralised and Decentralised Finance in Africa.
We’ll continue to show great commitment in educating the continent and building, despite the state of the market.
Well done BanklessAfrica!
Ahlan wa sahlan (Welcome)
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📈 Historical Snapshots
As of June 17, 2022
Top Assets by Market Cap
Name: Bitcoin (BTC) Price: $18,411.87 Market Cap: $352,172,566,606
Name: Ethereum (ETH) Price: $963.18 Market Cap: $117,104,721,511
Name: Tether (USDT) Price: $0.9988 Market Cap: $68,082,545,221
Centralized and Decentralized Finance Startup Landscape in Africa
Why Africa Is a Prime Location for Crypto Adoption.
Africa is a prime location for crypto adoption. According to the UN, Africa is home to the world's youngest population, with 70% of people under the age of 30 years. These demographics present a huge opportunity for cryptocurrency startups and developers to reach this young, untapped market. Though we are currently in a bear market, or the long winter as crypto natives call it, we are building. A recent report by Standard Bank and blockchain investment firm Crypto Valley Venture Capital (CVVC) indicates that blockchain startups received 11x more capital in Q1 2022 than Q1 2021. In this piece, I will try to highlight the startups building with these two systems- CeFi and DeFi.
Centralized Finance Crypto Startups in Africa
There are many centralized crypto-finance companies in Africa, including Binance and FTX Africa. Together, these companies are creating a new system for fiat money and cryptocurrency exchange and trade. Although CeFi isn't commensurate with the web3 ethos of decentralization, each of these companies is helping to move cryptocurrency adoption in Africa forward by giving people access to financial services they might not have otherwise had. Case in point: fintechs and exchanges accounted for more than 70% of the crypto project funding raised in Africa in 2021.
Source: African Blockchain Report by Standard Bank & CV VC
Regulatory Bodies and Centralized Finance
As more companies explore the possibilities presented by web3 and finance, there is an increasing need for regulatory bodies to help blockchain startups navigate the legalities of the industry and protect its users. Established regulatory bodies can provide a layer of credibility and legitimacy to these companies as they enter into new markets and industries. The best way that regulatory bodies can help these blockchain startups is by providing industry-specific legal expertise to African companies, particularly on how to gain access to banking services and how to comply with anti-money laundering and know your customer (KYC) laws.
Web3 Centralized Finance Startups
Bitmama makes it easy for novices to invest in cryptocurrency with the safe and secure Bitmama platform. Whether you are looking to buy your first $5 worth of bitcoin or want to build a strong portfolio, Bitmama gives you access to today's most exciting digital assets and allows you to manage them all in one place. The company raised 751K USD in pre-seed funding from five investors. Bitmama claims to be available in over 100 countries.
BitAfrika allows users to easily buy and sell bitcoin and a few other coins. The company is headquartered in Ghana. The company also offers OTC and bulk order purchases for businesses and organizations.
Like Bitmama, Yellow card is also a place to buy and sell crypto in Africa; they claim to be present in over 14+ countries. The company raised 15 million USD in a series A funding round from Twitter co-founder and Square CEO Jack Dorsey and Coinbase Ventures, among others.
Buycoins is a site where users can buy and sell assets such as cryptocurrencies and stocks. Unlike other exchanges on the market, Buycoins has competitive prices, offers a wide range of assets, and is easy to use for beginners. Buycoins has raised a total of 1.2 million USD to date.
VALR is a cryptocurrency exchange based in South Africa and valued at $240 million - the highest-funded crypto startup in Africa at the time of this writing. VALR has raised a total of 59.2 million USD to date.
Quidax is also a cryptocurrency exchange that allows users to buy and sell crypto in their local currencies. The company's brand is very friendly and jovial. The company recently unveiled the CEO of Marvin Records, Don Jazzy, as their brand ambassador. Quidax has raised 3.6 million USD to date and is the first African crypto startup to be listed on coinmarketcap.
Decentralized Finance Startups in Africa
Decentralized finance, or DeFi, is a term to describe the set of blockchain-based projects and protocols that together create the decentralized financial infrastructure that can provide financial services without centralized providers such as banks and brokers.
DeFi is still a nascent industry in Africa. However, there are a few companies making strides.
Canza Finance, domiciled in Atlanta, Georgia, is building an open non-institutional-based financial system in Africa. The company has raised a 3.27 million USD seed round. Canza Finance’s ecosystem partners include Celo, ConsenSys and Square, among others.
Backed by Google Launchpad and Binance, Xend Finance is building a global DeFi platform for individuals, cooperatives, and credit unions. The company has raised 2 million USD to date.
Blockchain Infrastructure Payment Providers
These companies provide the foundational layer for operating crypto wallets and exchanges,including APIs and backend systems.
Payrouse describes itself as "Tools and infrastructure for building user-friendly crypto products". The company is backed by Y combinator, Celo, and Allegory Ventures, among others. Payrouse raised 600K USD in a seed round in 2021.
Kotani Pay provides an offramp API for blockchain startups. The company, headquartered in Kenya, has raised 61K USD in funding to date.
Flux positions itself as the Neobank for fiat and crypto and is present in over 17 countries. The founders dropped out of the university to build this startup, which is now in Y Combinator.
The company describes itself as a "UK-based fintech group specializing in Pan African cross-border payments using blockchain and cloud technology."
CeFi and DeFi Work Together for Adoption
We have attempted to throw light on the landscape of crypto companies in Africa, but this is by no means the full picture. The majority of venture funding still goes towards the finance industry. Where there are problems, there are opportunities. Together CeFi and DeFi are working away in the background, bringing financial services to places that previously did not have access to these products and services. In this way, we can measure their impact by the number of people who now have this financial newfound access. Today's venture capital numbers are impressive, but it is important to note that there is still more work to do. While the focus remains on providing financial services to the unbanked, we cannot lose sight of the many other demographics who also need help. The hope for Africa is that with one foot in both the CeFi and DeFi worlds, it will remain agile enough to meet future needs in whatever form it may take.
📰 News and Opinion In and Around Africa
Author: Terence Zimwara
Sebasa Mogale, a Radio Presenter from South Africa, has threatened to take legal action against individuals that reported him to the police for the supposed bitcoin fraud.
He was accused of defrauding investors in his bitcoin investment scheme, with some of his victims claiming to have been hit with a combined loss of over 50,000 USD.
Sebasa Mogale's lawyer, however, has dismissed these accusations, demanding that these individuals show proof of payment into the defendant's account.
Author: Terence Zimwara
The deputy governor of the Central Bank of Nigeria, Kingsley Obiora, and the governor of the Central Bank of Kenya, Patrick Njoroge, were reported to have announced their preference for Central Bank digital currency (CBDC) over cryptocurrencies.
Both bankers believe that cryptocurrencies are too unstable to be reliable payment methods, seeing as they are known to aid financial instability, and CBDC on the other hand, would be the better option to help reduce transaction cost and promote reliability.
Njoroge had suggested that the Central Bank of Kenya will follow in the steps of the Nigeria Central Bank to issue its own CBDC. According to Bitcoin.com News, the Central Bank of Kenya has begun examining the public's views on CBDCs.
Author: Dustin Jung
Over the years, the cost of financial activities by banks in Ghana for everything including service fees all the way to Know your Customer (KYC) — a method of validation from banks — have been a barrier to a high number of citizens. The only viable option for many is transacting at a very small scale with mobile money — a financial service which has much less strict requirements for account owners.
However, these transactions cannot be carried out to an international level because of their cost. On the other hand, the inclusion of blockchain based services into the financial services continues to aid in reducing financial costs incurred; transactions are potentially faster, more reliable and much cheaper.
The ability for blockchains to be reliable and free from third-party agents of facilitation has gone a long way in helping citizens that do not operate in the local banking systems, or as they are commonly known, the ‘unbanked’.
Over 70 countries are working on establishing their various national currencies as central bank digital currencies - CBDC to enable digital financial activities. This is likely to mean further regulation and possibly restrictions on cryptocurrencies, as well as a loss of privacy for citizens wanting to transact with them.
Author: Victor Oluwole
The Central Bank of Ethiopia has warned on the use of cryptocurrencies, asserting that these currencies are being used in carrying out some unauthrized transactions and schemes that relate to money laundering.
While some countries have placed an absolute ban on the use of cryptocurrencies, others have placed restrictions — in the form of an 'implicit ban' — on how they can be used.
Countries with an absolute ban include Algeria, Egypt, Morocco, and Tunisia. Others with implicit bans include Benin, Burkina Faso, Cameroon, Mali, and Libya.
Author: Justinas Baltrusaitis
A group of Kenyan students have been arrested by Kenya’s Directorate of Criminal Investigations (DCI) for cryptocurrency-related crimes. Proceeds from the scams were used for lavish entertainment and to buy properties.
One property deed found in their possession was said to be valued at Sh 850,000 ($8,000). Among the items recovered from them were laptops, hard drives, WiFi routers and SIM cards. The students, who are from the Kenyatta University, allegedly used credit card phishing emails to hack the cards of unsuspecting citizens who mostly resided abroad.
Cyber-related crimes seem to be thriving in the country due to a lack of proper government regulation. The country’s ICT minister reported that about $120m of investor funds have been lost to crypto scams in 2021 alone.
🏴 Inside BanklessAfrica
Woohoo! Bankless Africa is super excited to announce the launch of a new podcast called Sats and Gwei. Hosted by none other than the amazing Miss Purple and Nekhee, Sats and Gwei is focused on helping you stay well informed and bringing you weekly crypto news updates from around the continent. Have you listened to the first episode yet?
📝 Pidgin Parlour
Web3 Education for inside Africa
Omo since dem launch Web3, na wetin all man dey yarn oo. Plenty people wey dey all over the continent don dey take part for Web3 based on say na hin be the third generation inside the evolution of web technologies. The technology really choke. Web3 na something wey many people believe say be the new innovation wey replace the normal websites and application wey no get Blockchain technologies and many other features. Those ones don dey cast already. Web3 na the foundational layer wey internet dey use provide website and application services and na the new technology wey just come out recently. Many countries don dey involved in the space cos las las no one wan carry last, abi you check am na. E sha get some African countries wey never grab wetin be Web3 and the kain advantage en fit bring to them.
The Things Wey Make Web3 Make Sense
Web3 na the kain technology wey you go fit use do many transactions and interactions online. E dey associated with crypto. The way crypto currency transaction dey work na hin go give you small understanding on many things wey Web3 fit do. Many African countries don dey use web3 based on say dey don see the mad things the technology fit do — how you fit run transactions, interact with people via video chats, voice chats and also come get access to payment linked applications in one place kwa.
For Web2 — the former one wey dey before Web3, you no fit dey do all those kain things there based on say those ones na just text and video embedded files na hin that one dey programmed to dey work on.
Another thing be say Web3 dey decentralized and wetin that one mean be sey for the space, all man be Boss. No be only 1 person or group of people be Oga for the space, so everybody dey fully in charge of their own data, identity, relationships, communications, money — the list plenty! Nobody fit access these details without your permission. This decentralization come make the security to dey tight wella. E dey almost impossible to hear sey dem hack person for the space.
Web3 also been create easy way to turn person existing data into assets wey get value and these kain assets go come become the ones wey dem fit buy, sell or trade over decentralized network.
Las las, shey you don see sey Web3 really make sense and en go good if Africans adopt am fully.
🥷🏾 Airdrops Hunter
📚 Learning Centre
Looking to take advantage of the bear market by investing? NFTs might be an option to consider, however, nothing in the markets is ever certain, so if you do decide to go the NFT route, remember to exercise caution, do your own research and remember that no one is at liberty to give you financial advice unless they are qualified advisors.
In the article linked above, Kaf takes us through what makes NFTs valuable and the different use cases for these Non Fungible Tokens, besides the more obvious art aspect.
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