How Crypto Offers the Potential for Financial Inclusion Across Africa| Bankless Africa Newsletter
This is Bankless Africa Newsletter, a newsletter that helps you stay up to date with well-curated news about crypto and Web3 around Africa.
Hey Bankless fam!
The past week was a long one! We had a lot going on, from demos, to events, governance, and a host of many other cool things. We do hope you enjoyed every bit of it as much as we did. With this issue we will give you some updates and possibly more exciting news.
We had the opportunity to host our first product demo with Pillow Fund. They introduced us to their crypto savings app, showing us how it works, how to make deposits, and many other interesting features. Remember, we had them on our podcast not long ago; if you have not heard it yet, be sure to listen.
Excitement looms as Ethereum has finally given us a date for the Merge. The Merge is the transition from the Ethereum blockchain's Proof-of-Work (PoW) consensus mechanism to the Proof-of-Stake (PoS), and is expected to drastically lower the amount of electricity consumed by miners and reduce the overall carbon emission by 99%. Ethereum maximalists welcome this as one of the most significant developments in the cryptocurrency space this year, and it’s only a few weeks away. Experts say this is an essential step towards Ethereum's market cap surpassing that of Bitcoin. With this bear market, do you think that is possible? We will certainly find out soon.
Our podcast this week was with ETHSafari, celebrating the decentralized future in Africa. We featured David Mortech and Alfred Opon, who share their experience of the subject and the event itself. ETHSafari is shaping up to be one of the most exciting crypto events happening this year for Africa.
The global adoption of cryptocurrency and blockchain has been rising slowly, but for millions of people on the African continent, crypto has been a literal lifeline. In this issue, we are going to discuss how crypto is used for financial inclusion across Africa.
Re ea u amohela (welcome).
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📰 News & Opinion In and Around Africa
Author: Anthonia Isichei
The Central African Republic's top court (constitutional court) ruled on Monday, August 29, 2022, that it is unconstitutional to purchase e-residency, citizenship, or land with the country's new cryptocurrency (Sango coin). The court believes that their nationality has no market value and should be sold in this way.
The Sango coin was launched in July 2022. On the Sango website, the CAR citizenship can be obtained for $60,000 worth of Sango which must be locked for five years. The e-residency can be purchased for $6,000 worth of Sango coin which must be locked for three years and a 250 square meter plot of land can be purchased for $10,000 worth of Sango, which must be locked for ten years.
Before this, the country's President Touadera spoke about plans to tokenize the country's mineral resources which aim to provide job opportunities and help build the nation's economy. In response to the court decision, the President's spokesman said they respect the Court’s decision and will look into other alternatives.
Author: Terence Zimwara
Pezesha, a Kenya-based fintech company, has raised $11 million through its Pre-Series A debt-equity funding round. This fund is aimed towards solving working capital problems for micro, small, and medium-sized enterprises (MSMEs) operating within Nigeria, Rwanda and Francophone African countries.
Hilda Moraa, Pezesha’s founder, has identified information asymmetry as the root cause of working capital problems in MSMEs. The fintech solves this through their API-driven credit scoring technology to ensure quality and responsible borrowing.
Reports say that aside from offering funding to MSMEs, Pezesha would precisely target women entrepreneurs who currently don’t have easy access to funding through the more formal banking systems.
Author: Faustine Ngila
Ethiopia, who once banned cryptocurrency, now displays proactiveness in protecting citizens from cybercrime in the cryptocurrency industry. Despite knowledge of the rise in cybersecurity threats in Africa, no African country has laid down preventive measures against cyberattacks in the crypto market except Ethiopia.
Crypto trading remains illegal in most African countries except for a few such as the Central African Republic. In May, a nationwide crackdown on payment providers facilitating crypto trade was executed in Uganda. This was after $2.7 million was lost to ponzi schemes.
Cryptocurrency platforms which were once thought to be impenetrable by hackers have now become the biggest targets for cyberattacks. The reason seems to be that they are at the receiving end of proceeds from fraudulent transactions.
Author: April Joyner
VC Jocelyn Cheng believes that stablecoins have important utility in emerging markets, because they could be linked to a stable asset such as the U.S. dollar, and it makes accessing the U.S. dollar more affordable.
When these counties (emerging markets) need foreign currency like the U.S. dollar for exchange in their own country, they wouldn't need to go through the bank to get local currency and then exchanging it with a local trader, which will cost them some fees. There are companies like Caliza, a B2B platform that provides a synthetic-US-dollar account, where you can deposit your local currency and convert to USDC easily.
The income of over 800 million people globally depends on remittances, crypto plays a crucial role in making remittances faster and cheaper.
Author: Terence Zimwara
According to the latest study by Triple A, Africa has about 53 million crypto owners, constituting 16.5 percent of the global figure which is an estimated 320 million.
With Nigeria taking the fourth place in the world crypto ownership rankings, putting them behind the United states, India and Pakistan. Nigeria has over 22 million crypto owners, the country still tops the chart in terms of the number of people searching for ‘bitcoin’ and ‘crypto’ keywords on google.
South Africa comes second to Nigeria in the number of crypto holders in Africa with 7.7 million holders. Egypt and Tanzania come in next with 2.37 million and 2.32 million holders respectively while the Seychelles ranks lowest ranked with 1,257 of the country’s population owning crypto.
How Crypto Offers the Potential for Financial Inclusion Across Africa
While mainstream Western hype surrounding cryptocurrencies tends to focus on the potential for profits by treating crypto as financial assets or stores of value, there are many cases around the globe where citizens living under authoritarian regimes or in inflationary economies look to cryptocurrencies as financial lifelines to secure the most basic needs.
In this article, we focus on how cryptocurrencies are being explored to solve problems of financial exclusion across Africa, drawing on two examples from Togo and Sudan.
Combatting Colonial Financial Institutions in Francophone Africa
Consider for example Farida Nabourema, a Togolese-born human rights activist who has been fighting for democracy in Togo via civil resistance since she was in her teens. In May 2022, Farida spoke at the Bitcoin Miami conference on a panel entitled Bitcoin as Freedom. During the panel discussion, which was moderated by Alex Gladstein of the Human Rights Foundation, Farida called bitcoin the “currency of decolonization.” She describes how Togo still uses a colonial currency, the CFA franc (officially renamed the ‘Eco’ in 2019), heavily controlled by corrupt Togolese government officials as well as the French national government, which for various reasons has devalued the currency by 50% multiple times via monetary policy. Farida sees cryptocurrencies — specifically, bitcoin — as a potential tool for the liberation of citizens from exclusionary and outdated financial institutions.
The CFA Franc is the official currency of six Central African countries and eight West African countries. Critics have pointed out that France continues to exercise a colonial rule over nominally independent African states through the existing financial institutions. For example, a direct result of the CFA being controlled by the French treasury means that France receives more money from the African countries than it gives in aid, and African states lack any monetary policy sovereignty whatsoever.
Moreover, African leaders who speak out against this financial system and push for reforms are repeatedly removed from office, oftentimes fatally or violently. In the case of Farida’s native Togo, every single Togolese politician who works toward escaping or reforming this system has either been assassinated or removed via a coup. Because the CFA franc is not a convertible currency, meaning that it cannot be easily bought or sold on the foreign exchange market, CFA holders must first exchange their currency to Euros which involves giving the European financial markets a cut of the money. This leaves holders to either stay within the CFA Franc system, or move to another more expensive one that does not serve the people.
Farida points to cryptocurrencies as potentially offering a path toward monetary independence, free from the problems plaguing citizens in the 14 African countries still officially using the colonial CFA franc. In fact, Farida is organizing the Africa Bitcoin Conference in Accra, Ghana in December 2022 to increase collaboration and deepen networking between African actors and those operating in developed economies.
Protecting Against Corrupt and Inflationary Monetary Systems in Sudan
Consider also the case of the Sudanese activist who goes by the pseudonym Mo, who describes how cryptocurrencies such as bitcoin can provide a gateway to the global monetary system for the billions of citizens around the globe living in extreme inflation and oftentimes authoritarian governments, including his native Sudan. Many of these authoritarian governments with weak currencies have unfriendly relations with the US, which restricts citizens from being able to fully interact with the USD-backed global economy.
The economic history of Sudan involves dictators imposing economic restrictions such as ordering death sentences on individuals who owned their own money, as well as the transition to Islamic money (dinar) in the 1990s which went back to the Sudanese pound with an imposed triple-digit-level of inflation, which persists today. The combination of high levels of inflation and a corrupt ruling class do not bode well for the economic freedoms of Sudanese citizens.
Mo points to the potential of cryptocurrencies in protecting against these issues; an example could be bitcoin serving as both viable digital gold and digital cash. Daily applications of bitcoin across Sudan today include bank transfers, immediate cash withdrawals in emergencies, or as a store of value to hedge against the 10% monthly inflation rates.
Crypto Has the Potential to Liberate
Of course, these are just two examples of individuals in two African countries who are turning to cryptocurrencies such as bitcoin to combat institutional financial exclusion in their respective home countries. Although cryptocurrencies do not provide a panacea, across Africa and around the globe there are many examples of citizens living in inflationary monetary systems who could potentially be liberated by this technology. In fact, it is estimated that only 13% of the world’s population live in a liberal democracy with a reserve currency.
Thus, as exciting as it is to cheer on Twitter as the trading price “number goes up”, it is vital to also keep in mind the implications of cryptocurrencies for human rights and basic necessities for the billions of vulnerable citizens who hope to cheer as crypto helps “financial inclusion goes up”.
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ETH SAFARI 🦓🇰🇪
You're not going to want to miss out on this event!
ETH Safari is the first Ethereum Conference and Hackathon of its kind in Africa; it promises to be an unforgettable experience for anyone who wants to learn more about blockchain technology.
Save the dates as it is happening on the 18-24 September 2022 in Kenya!
The conference will have a hackathon with impressive prizes and there will be talks by local, regional, and international speakers in Web3.
Buy your ticket today — we look forward to seeing you there!
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