Africans have one issue with the banking industry: trust. Trusting the bank to keep their money, to undertake global financial transactions, and to serve as a third party isn’t something they cherish – the unbanked population on the continent will tell you more.
Some Africans still prefer ‘under my pillow’ forms of money storage. Then there are cryptocurrencies – a currency that allows them to send and receive money regardless of their location and to save without prying eyes from the government or a bank.
But there’s trouble. Though the private sector is fast adopting cryptocurrencies into the continent, the public, the government, and authorities are on a different page. These are some of the troubles cryptocurrencies face on the African continent.
A highly illiterate population
A total of 153 million adult Africans with two-thirds being women, came into the 21st century unable to read or write. The situation hasn’t changed much even today. Apart from not being able to help their children with homework, their illiteracy also limits them in their income-earning endeavors, as well as other social spheres. When it comes to cryptocurrencies, illiteracy is a bigger stumbling block.
We are not just talking about sending and receiving cryptocurrencies across the globe. We are also talking about keeping one’s coins safe. Cryptocurrencies require a degree of knowledge in receiving and sending money since everything is done through a cryptographic address. To protect one’s coins, there’s the need to ensure two-factor authentication of one’s wallet so as not to deal with scams, which Africa is known to house a lot with Nigeria accounting for over $12.7 billion in cyber fraud in 2013 alone (Ultrascan Advanced Global Investigations)
Talk about two-factor authentication, password protection tactics, and software, as well as cryptographic addresses even to most educated Africans, and it will look like explaining sex to a virgin. How much more the illiterate? Though a lot of African cryptocurrency platforms have simplified the process of sending and receiving cryptocurrencies across the globe, keeping one’s coins safe and maintaining a cryptocurrency wallet isn’t that simple.
The illiteracy rate of the African is, therefore, one of the biggest stumbling block to cryptocurrency usage and adoption on the continent. If the continent is not careful, they will end up banking the already banked population instead of banking the unbanked (who are mostly illiterates) through cryptocurrencies.
High mining power
If you happen to have access to uninterrupted electricity for more than 24 hours in some parts of Africa, it’s just a mistake either on the part of the electricity company or the problem. Some African countries experience light outages like the sudden occurrence of lightning. Mining cryptocurrencies in such a continent?
Cryptocurrency mining is a power-consuming endeavor. Take bitcoin and ethereum and combine their mining power, and you’ll understand how a great deal of power is needed to mine them. According to information from Motherboard and Digiconomist, the annual electricity consumed by bitcoin is around 28.80 TWh. That’s enough power for 2,671,832 U.S households annually. Bitcoin power usage alone forms 0.13 percent of the world’s electric power consumption.
Then there’s ethereum and the increasingly uncountable altcoins that are springing up everywhere. How will Africa cope with the uninterrupted power, the insufficient electricity, and the low technological infrastructure? Without a concerted effort, the continent might as well consider going to bed and waking up the next day with the mindset that cryptocurrencies were just a dream.
Institutional regulations and adoption
Building a startup, especially a tech-oriented one in Africa is like hunting a wild lion. You come out as a hunter or the hunted. The nature of regulation in Africa is sometimes confusing and funny. Whiles, you deal with one business regulation with one ministry, you might be going against another regulation of a different ministry – then you realize the disparities in regulations.
Can this landscape be used when cryptocurrencies need a lot of support from governments and state institutions to thrive? The environment is not enabling enough for cryptocurrency-oriented start-ups to thrive. From Kenya to Ghana, Nigeria to Uganda, and from South Africa to Zimbabwe, cryptocurrency start-ups are springing up around the continent.
This move will change cross-border money transfer and business transactions, it will help ease remittance time and costs, and give the African a good solution to move and store value. But the move is not something that only start-ups should be concerned about. Though many governments like South Africa, Nigeria, Kenya, and Zimbabwe are making big strides towards finding out how to regulate the sector, a lot needs to be done on a continent-wide scale.
Some start-ups are operating blindly without support or any regulation. Institutions find the cryptocurrency market to be too risky to invest. Some governments don’t even know of anything called cryptocurrencies. Some religious-oriented people see cryptocurrencies to be the end of the world. That is Africa and cryptocurrencies.
But there is hope. Since a lot of start-ups are coming up, we hope governments, institutions, and individuals take steps to deal with the issues as they come so that Africa does not remain a continent that just adopts and use new technology, but one that develops it.
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