Bitcoin may be gaining rapid ground around the world, but some markets have proven to be more prepared for accepting the cryptocurrency than others.
This has certainly the case in Africa, which has historically been undeserved by financial institutions largely due to the exorbitant costs associated with operating physical bank branches.
Startups taking advantage of growth opportunity in Africa
Recently, BitX, a bitcoin exchange and wallet provider, announced it had raised $4 million in funding to advance the firm's growth. While BitX is actually headquartered in Singapore, the firm also has offices in South Africa, Nigeria, and Kenya. Naspers Group, of South Africa, led the Series A round of funding. 1
BitX is not alone in its efforts to bring bitcoin to Africa. Earlier in the year, ICE3X launched the first bitcoin exchange in Nigeria. Startup Bitsoko recently snagged a grant from none other than the Bill & Melina Gates Foundations. According to the firm, it plans to use the funding to grow its bitcoin service offerings in Kenya. Along with providing the ability to spend bitcoin at any merchant accepting the cryptocurrency, Bitsoko also provides merchants a variety of tools, such as customer loyalty program, analytics, payroll software, and more. 2
Why Africa is ripe for bitcoin?
Critical to the growth of bitcoin in Africa is the development of products and uses for the virtual currency, which these companies are proving is well on its way to happening. Yet another reason why bitcoin has such phenomenal potential in Africa is the record level of mobile phone penetration. As a result, anyone has the ability to download a bitcoin wallet to their digital device, transfer cryptocurrency, and make payments.
Further facilitating the potential for widespread adoption of bitcoin in Africa are government fiat policies that tend to be unstable. For example, in 2009, Zimbabwe opted to completely abandon its national currency. Africa is also home to some of the highest legacy remittance services charge fees in the world. In sub-Saharan Africa, rates tend to run about 10 percent on average.
Not only does this make the continent ideal for adoption of bitcoin, but also the rapid growth rate of cell phone usage has made Africa even more ideal for bitcoin disruption. Statistics indicate that 85 percent of the population in Africa already has cellphones. Even more astounding is the fact that smartphone usage grew by 98 percent last year. With any cell phone, regardless of whether it is a smartphone or not, Africans can gain access to the bitcoin system.
Around the world, investors and entrepreneurs have turned their attention to the potential for growth of bitcoin in Africa. At the same time, homegrown African startups have already begun to experiment with the potential offered by bitcoin. This has proven to be particularly true in Kenya, considered the heart of East Africa's economy.
Yet, at the same time, Africa is not without its struggles when it comes to the adoption of bitcoin. Many of those struggles are similar to those faced in other countries. For instance, hackers recently demanded a bitcoin ransom from a large Kenyan bank.
Despite those struggles, Kenya appears to be better primed for the adoption of virtual currency than many other African countries and perhaps even more so than many western economies. Google and Apple may be making news in the United States for the launch of mobile payment services for smartphones, but in Kenya, around 40 percent of the country's GDP is already making its way through Safaricom.co.ke's mobile money service, M-Pesa. 3 Clearly, bitcoin is around to stay in Africa.
1) BitX South Africa. https://bitx.co/za
2) Bitsoko. https://bitsoko.co.ke/