The last two decades have been tumultuous for African banking, with big international banks moving out of the continent and a bevvy of more nimble local banks stepping in to mop up opportunities in a fast-growing region. A technological revolution in the form of digital banking helped smaller banks spread swiftly across the continent. Already, however, a disruptive new technology is sweeping Africa; cryptocurrency. And banks are going to need to decide quickly: are we in?
By Conrad Onyango
The transition has been swift. Just two decades ago, most banking in Africa was performed offline, due to limited internet reach. Now, African banks are on the verge of adopting fintech’s big disruptor, cryptocurrencies.
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The latest indicator of the speed of this change was a vote of confidence in Yellow Card, a Pan-African cryptocurrency exchange platform, at this year’s Africa Financial Industry Summit (AFIS 2023). During the summit, which brought together over 1,000 financial industry leaders, regulators, bankers, and fintech entrepreneurs, the exchange was recognised with the award of ‘Disrupter of the Year’.
“The award speaks to the power of stablecoins and this technology, especially in Africa. A cryptocurrency company winning an award with a bunch of bankers voting on it, shows how far the industry has come,” said Chris Maurice, the founder and Chief Executive Officer of Yellow Card.
The Disrupter of the Year Award acknowledges companies that have “demonstrated resilience in challenging times and whose innovation represents a market disruption”, according to the summit organisers.
The Nigerian-headquartered Crypto firm with a presence in 20 African countries including Kenya, Uganda, Tanzania, and Rwanda has transacted over US$2 billion since its launch in 2019, according to its founder.
Maurice told a panel at the summit that the next decade will see a shift from the use of international wire transfers to the use of stablecoins for all cross-border transactions.
As a result, intermediary banks that currently make a profit of US$30-US$40 off every leg and hop of a transaction will lose this revenue.
“This is the next technology that banks should be the first ones to jump into the bandwagon. It is surprising that more banks haven’t invested in and looked into stablecoins,” said the Yellow Card CEO.
African banks and central banks have traditionally been hesitant to adopt cryptocurrencies due to their high volatility, complexity, and their perceived threat to a country’s monetary sovereignty.
Several African countries have established regulations for digital assets, including Nigeria, which was the first African country to introduce a digital currency, the eNaira, and test the implementation of a Central Bank Digital Currency (CBDC).
In South Africa, cryptocurrency use is legal, but providers must register with the Financial Intelligence Centre (FIC) and comply with anti-money laundering and counter-terrorist financing (AML and CTF) regulations.
Although Kenya’s Central Bank Regulator stated that Central Bank Digital Currency (CBDC) is not an immediate priority in 2022, the government has proposed a 3% tax on digital assets in the current fiscal year.
Morocco, Ghana, and Mauritius are also among the countries promoting an enabling environment for crypto adoption in the region.
These regulatory developments could be a pivotal moment in the history of worldwide digital assets.
The founder of Yellow Card stated that although the African continent was relatively slow in adopting the internet compared to other parts of the world, the emergence of cryptocurrency and related technologies has provided a new and open field where no one has claimed victory yet.
Africa, he acknowledges is well-positioned to become a leader in the space.
“Africa is in the driver’s seat and in a position to win. If regulators across the continent can adapt and can make a move on it, this is a technology that is here to stay and that Africa can win,” Maurice explained.
According to the Chainalysis Global Crypto Adoption Index (2023), Nigeria and Morocco rank among the top countries in the world for cryptocurrency adoption.
Other African countries such as Togo, South Africa, Ghana, and Tanzania have also shown high rates of adoption since 2021.