As a seasoned crypto investor with roots in Africa and experiences spanning continents, I can confidently say that the future of global finance lies in the hands of blockchain technology. The tectonic shifts we are witnessing today are not just tremors but seismic movements that will reshape economic hierarchies forever.
As crypto continues to transition from a niche interest to an important financial tool, we’re starting to see the potential for how it could help reshape traditional global economic hierarchies.
The global stage is witnessing significant changes, as powerful nations are actively competing for safety, wealth, and dominance. This competition is manifested in various ways, from economic sanctions, asset confiscations, and the transformation of financial systems into tools of conflict, to the recognition of Bitcoin (BTC) and other cryptocurrencies for international trade transactions. In essence, the global financial landscape is evolving rapidly and will never resemble its previous form once this transformation is complete.
In times of economic turmoil and instability, there’s usually a chance to establish something innovative. A striking demonstration of this can be seen in El Salvador embracing Bitcoin as legal tender, while in China’s Greater Bay area, under the umbrella of web3, we witness the birth of a novel financial system.
It’s striking to note that significant changes are unfolding across Africa, yet these developments seem to go largely unnoticed by the world at large. For example, when it comes to venture capital investment in blockchain technology, Africa accounted for only 1.3% of the global share in 2023 and a mere 0.6% during the first half of 2024. In stark contrast, the United States, where Wells Fargo is headquartered, took a massive 47% of the global blockchain venture capital market.
Given the progression of robust regulatory structures throughout Africa, is it advisable for Venture Capitalists to prioritize Africa as a prime location for investing in the long-term potential of blockchain technology?
Blockchain-powered economic advancement across Africa
The intricate nature, wide variety, and inherent difficulties found in numerous African economies create an ideal setting for the blossoming of inventions based on cryptocurrencies.
One way to rephrase the given text is as follows: The fundamental principles of blockchain – efficiency, transparency, and eliminating intermediaries – are potent solutions for tackling various obstacles. Blockchain presents a distinctive chance to surpass traditional systems and avoid the inefficiencies in infrastructure that have impeded progress on the continent in numerous aspects.
The potentially revolutionary impact of blockchain can be felt particularly keenly in the financial services industry.
As an analyst, I’ve noticed that a significant number of individuals and businesses on this continent lack access to traditional banking services, often referred to as being ‘unbanked’ or ‘underbanked’. However, the rise of cryptocurrencies is proving to be a game-changer in this landscape. By facilitating peer-to-peer transactions, these digital currencies are fostering local economic activity from the ground up. Moreover, they serve as a bridge, enabling informal sectors – which were previously excluded – to participate more fully in the formal economy. This integration results in improved credit access, refined business practices, and overall strengthening of our economic foundation.
As traditional banks and fintech companies expand their services, they are increasingly offering cryptocurrency solutions to their customers by partnering with crypto exchanges for liquidity and infrastructure support. This trend suggests that it won’t take much longer before people in Sub-Saharan Africa have easier access to stablecoins like USD Coin (USDC), providing them an opportunity to save in a more robust currency than what’s typically available locally. The potential impact of this development should not be understated.
Powering start-up innovation
Over the vast expanse of the continent, forward-thinking start-ups tirelessly strive to unlock the complete power of cryptocurrency while tackling obstacles that hinder wider acceptance. Yet, expanding these solutions proves difficult without sufficient investment capital.
As a crypto investor, I’ve been privileged to be part of the incredible journey at VALR. This experience serves as a testament to the transformative impact that venture capital can have, not just on the cryptocurrency scene in Africa, but also on our continent’s broader economy.
By successfully securing our largest venture capital raise for cryptocurrency in Africa, VALR has been able to significantly increase investments in cutting-edge technologies that are now accessible to over 1,000 corporate clients and more than 800,000 retail customers across the globe. Some of our major clients hail from beyond Africa. Our journey underscores the potential of African startups to compete on a global scale. With appropriate financial support, African blockchain projects can bolster local economies and disseminate their knowledge worldwide.
The importance of regulatory clarity
While the potential for blockchain and crypto in Africa is vast, regulatory uncertainty has undoubtedly been a significant barrier to greater VC funding across the continent.
But this is not a universal trend. South Africa, in particular, has taken a proactive and collaborative approach to regulating the sector. With a clear regulatory framework in place, South Africa has over 100 licensed crypto companies. Even before the licenses were granted, regulatory clarity was a positive driver for investor sentiment. In 2023, South Africa secured 21% of all blockchain venture funding in Africa.
It’s evident that African nations adopting progressive and transparent crypto regulations are experiencing economic benefits across various sectors. For instance, legally recognized cryptocurrency businesses in South Africa are generating substantial tax income and offering job opportunities not just within Africa but globally. The decentralized nature of blockchain companies fosters a lucrative export opportunity, making South African technological advancements and financial services accessible to a global market.
To boost Africa’s portion in international blockchain startup financing and fuel innovation, it is crucial for additional regions (not only African) to mimic South Africa’s regulatory approach. Progressive legislation that fosters growth is vital for establishing a favorable ecosystem where blockchain technology can prosper.
The path forward: Embracing the crypto opportunity
Due to its intricate issues, Africa stands to gain significantly more from blockchain advancements than any other region worldwide. However, at present, venture capital investment in this area doesn’t reflect the potential opportunities available.
VCs should not overlook the African continent in favor of more developed markets such as the US. Despite challenges, there is vast potential to invest in blockchain projects that could transform the continent’s growth trajectory while delivering returns.
Simultaneously, African authorities should seize the potential of cryptocurrencies instead of shying away from it. It’s clear that several local currencies, such as the Nigerian Naira, are losing ground and may eventually become valueless. Cryptocurrencies represent a genuine opportunity for African nations to strengthen their positions within the global economic landscape, much like El Salvador has done.
As an analyst, I firmly believe that by establishing a transparent and favorable regulatory framework for blockchain technology, African countries have the potential to entice venture capital investments. This influx of financial resources can fuel the growth and expansion of groundbreaking blockchain innovations, thereby generating employment opportunities and driving economic progress across the continent.
Ben Caselin currently holds the position of Chief Marketing Officer at VALR, a prominent cryptocurrency exchange that has received backing from Pantera Capital. Based in Johannesburg, this exchange is the largest by trade volume across Africa. It caters to over 1,000 corporate and professional investors and boasts more than 800,000 traders globally.
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2024-09-20 14:04