Africa Crypto 2023 RoundUp
As we write the last pages of 2023, it’s time to take stock of the biggest cryptocurrency updates from Africa. 2023 has generally been an interesting year for the cryptocurrency industry. This article breaks down all you need to know about the African cryptocurrency sector in 2023 — highlighting news on regulation, major adoption events, investments, and central bank digital currencies.
The industry spent most of 2023 in the red as prices of assets declined, and regulatory pressure increased. Nonetheless, there were still positive highlights as new platforms came to life, and a positive rally began towards the end of the year. The African space felt the full effects of these things as adoption slowed down without the price funfair, while some projects struggled to stay afloat due to the bear market and the major black swan events from 2022. Surprisingly, the fortunes of cryptocurrency enthusiasts are looking to change for the better as regulators have adopted a softer stance, which is a massive step forward. Here are all the cryptocurrency-related highlights in 2023 from Africa:
Investments
Tracking investments on the continent could be a hectic task. The biggest resource for information on African crypto deals is the “African Blockchain Report” by CV VC. The report usually provides reports for the year before. The 2022 report that came out in 2023 indicated a 429% increase from the $90 million raised in 2021. According to the report, African blockchain funding grew more than 12.5 times higher than general African venture funding on a year-on-year basis. This shows positive development in the African Web3 industry.
Reported investments in African Web3 firms 2023:
- Centbee, a blockchain payments firm based in South Africa and the UK, secured $1 million in pre-Series A funding led by Ayre Ventures founder Calvin Ayre.
- Fedi, a financial and data technology company, secured $17 million in a Series A funding round. Nigerian Bitcoin advocate Obi Nwosu founded the company.
- South African-based Carry1st raised $27 million in a pre-series B round. The gaming startup’s raise was led by BitKraft Ventures.
- Nestcoin secured $1.9 million in funding led by Hashed Emergent. The Nigerian-based company attracted funding from Hashed Emergent, Alter Global, Magic Fund, CMT Digital, 4DX Ventures, Base Ecosystem Fund (Coinbase), and Adverse Accelerator (Emurgo).
- An African-focused software solutions company targeting central banks, Emtech, raised a $4 million seed investment led by Matrix Partners India. The company is working with the Central Bank of Ghana to develop the e-cedi.
- Kenyan women-focused education hub Bitcoin DADA received $10,000 BTC from Samara Asset Group.
- African Bitcoin and Lightning developer hub Qala was acquired by BTrust, a non-profit organization founded by Block CEO Jack Dorsey and rapper Jay-Z.
- Kenyan crypto on-ramp Kotani Pay closed a $2 million pre-seed funding round led by P1 Ventures.
- Unconfirmed local reports claim the embattled cryptocurrency exchange, Patricia, raised funds to cover an alleged loss of $2 million to a cyber attack.
- Nigerian-based decentralized mobile internet sharing and monetization network platform WiCrypt Network got a $150,00 grant from Microsoft.
Amid the good news, there was some bad news. Some African-based projects that had raised capital the year before shut their doors. The biggest highlight on this front is LazerPay. The Nigerian-based crypto and Web3 startup reportedly raised $1.1 million in 2022 in a funding round backed by Nuwa Capital, Voltron Capital, Nestcoin, and Shola Akinlade of Paystack. LazerPay shut down in 2023 due to the inability to raise more funds.
Major Crypto Adoption Events in Africa in 2023
Despite the bear run, cryptocurrency adoption and innovation continued across the continent. From more places accepting cryptocurrencies to Web2 companies embracing cryptocurrencies, many developments signal the importance of cryptocurrencies on the continent.
The population in sub-Saharan Africa is the world’s youngest, with 70% under 30. This demographic creates fertile ground for the adoption of cryptocurrencies. Multiple sources indicate a strong level of cryptocurrency adoption. Coingecko’s 2023 report on the most curious about crypto, Nigeria placed first, while Kenya placed 15th. Nigeria was ranked second in Chainalysis’s “2023 Global Crypto Adoption Index,” which generally highlighted the growing crypto adoption in developing countries.
The top cryptocurrency markets in Africa in 2023 feature some familiar names, with Morroco joining Nigeria, South Africa, Kenya, and Ghana on the list. Here are some major adoption events that made waves on the continent:
Flutterwave embraces stablecoins: At the Africa Money and DeFi Summit West Africa 2023 in Accra, Ghana, the most valuable startup and fintech unicorn in Africa, Fluterwave, announced that it will integrate USDC through a partnership with Hedera blockchain. This may signal a major adoption point as Flutterwave processes billions of payments across the continent. The announcement feeds into the narrative that stablecoins would become an essential part of cross-border payments, especially in Africa.
Pay with Bitcoin in over 1k shops in South Africa. South African grocery retailer Pick n Pay now accepts Bitcoin across 1,628 stores. The nationwide rollout allows store customers to pay for items using cryptocurrency via smartphone apps or by scanning a QR code and accepting the South African rand’s conversion rate at the time of payment. Currently, it is the largest adoption by a single brick-and-mortar store in terms of scope on the continent and one of the most extensive worldwide.
Crypto Regulations in Africa in 2023
Before 2023 and most of 2023, there was little to no good news when discussing cryptocurrency regulations in Africa. This sentiment has largely changed as regulators in areas with high adoption of cryptocurrencies change their tone about the industry.
South Africa: A bright spot for cryptocurrency adoption and regulation, South Africa formalized its regulatory mechanisms for digital assets in 2023. The Financial Sector Conduct Authority (FSCA), South Africa’s financial regulator, published a notice in 2022 that the Financial Advisory and Financial Intermediary Services Act (FAIS) has been updated to include a definition of cryptocurrencies. This clarity kick-started the formalization of cryptocurrency regulations in the country.
In 2023, the regulatory body announced that all cryptocurrency exchanges operating in the country would need to obtain licenses by the end of the year. The FSCA has reviewed 128 applications from crypto service asset providers (CASPs) but only plans to discuss 36 during its upcoming end-of-year meeting. By the end of 2023, 36 cryptocurrency firms would have received licenses from the FSCA.
Other regulators in South Africa have also caught on with the trend of specifying rules related to crypto. South Africa’s Advertising Regulatory Board (ARB) introduced a new clause to protect consumers from unethical cryptocurrency ads in 2023. The clause requires that crypto ads “expressly and clearly” state that investments may lead to a loss of capital “as the value is variable and can go up as well as down. “
Kenya: The East African country has been at the heart of several regulation-related conversations in 2023 due to proceedings in parliament concerning crypto and the launch of some major projects. The Kenyan cryptocurrency community has been fighting the Capital Markets (Amendment) Bill 2023. The bill amends the tax code, defines crypto assets as securities, and imposes a capital gains tax on them. The Blockchain Association of Kenya (BAK) filed a complaint against it with the High Court of Kenya.
The fight has resulted in some positive developments. The Blockchain Association of Kenya has been directed by the National Assembly’s Departmental Committee on Finance and National Planning to create the draft of “what could become a virtual asset service provider’s bill.” This will make Kenya one of the first places in the world with industry representatives spearheading the development of a regulatory framework for cryptocurrencies.
Beyond conversations of the Capital Markets (Amendment) Bill 2023, Kenya’s National Assembly has been busy with WorldCoin-related issues. WorldCoin quickly gained prominence in Kenya, which raised many eyebrows due to the nature of the project. A Kenyan parliamentary committee set up to look into the project’s operations recommends regulators shut down Worldcoin’s operations in the country. The committee mentioned that WorldCoin did not comply with orders to halt operations in May 2023 and cited privacy concerns.
Despite the tension with regulators, reports from local media sources indicate that WorldCoin plans to make an official comeback in 2024.
Ghana: Ghana’s regulators have been hostile to cryptocurrency in the past. Like other states, the Ghanaian government released statements telling the populace to avoid crypto-related investments due to a lack of regulations and an increase in bad actors. 2023 came with some change in tone; beyond pushing hard on its own central bank digital currency (CBDC) — the e-cedi, Ghanaian regulators have shown an interest in embracing a friendlier tone for crypto.
Ghana’s Securities and Exchange Commission (SEC) announced that it has started taking steps toward regulating digital/crypto assets to minimize potential harm to investors. The announcement was made by Director General Daniel Ogbamey-Tetteh at the 2023 Ghana Capital Market Conference.
“We are in the era of digital assets – and taking a cue from IOSCO who are encouraging its members to incorporate frameworks in their respective regulations to oversee the activities of digital/crypto assets in order to minimise potential harm to investors, we have commissioned a task force to assist the Commission acquire requisite capacity in that space,” he said.
Namibia: In July, the Namibian National Assembly passed the Virtual Assets Act 2023. With this new act, the Southern African state aims to establish a regulatory authority to supervise virtual asset service providers and related activities. Namibia’s new crypto law currently sets out licensing requirements for firms but lacks clarity on how regulators will treat crypto, which still creates more questions than answers.
Nigeria: The biggest icing on the cake is the change in policy direction by the Central Bank of Nigeria in December 2023. Africa’s biggest cryptocurrency market suffered a major setback when the central bank barred all banks and other financial institutions from enabling transactions related to cryptocurrencies. The impacts of this directive went beyond the Nigerian market as companies like Flutterwave and Paystack, payment providers used by various exchanges in other markets like Ghana and Kenya, had to cut their integrations. This changed how the cryptocurrency ecosystem in Africa worked and shifted the tides towards a reliance on peer-to-peer (P2P) trading.
In December 2023, the Central Bank of Nigeria lifted restrictions on Nigerian banks facilitating cryptocurrency transactions. The guidelines establish minimum standards for virtual asset service providers to open bank accounts in Nigeria. The jury isn’t out on how this will fully impact cryptocurrency adoption in Nigeria, but the consensus is that it is positive for the West African country.
More highlights: Zambia indicated that it was conducting tests to make cryptocurrency laws that would end in June 2023. Zambia’s innovation, science, and technology minister, Felix Mutati, explained in a Reuters interview that the central bank wanted to check what will happen in the real world when cryptocurrency operations are allowed in the country.
The Central African Republic continues to be an interesting case. After announcing that Bitcoin is now a legal tender, very little has happened since then. Following the 2022 announcement, the government launched a new Sango crypto hub initiative to boost the local digital asset sector. The project then announced that it would launch a token, which has been delayed since. In March 2023, the project announced another delay, citing legal and regulatory obstacles. In August 2023, the project extended its scope to include tokenizing Central African Republic land and natural resources.
Caution with CBDCs
More African countries are flirting with the idea of launching a central bank digital currency (CBDC) in addition to states that have already taken major steps to roll out a CBDC. Unlike years before, 2023 saw most states adopt a more cautious approach to conversations about central bank digital currencies.
Tanzania mentioned that it is conducting research that will lead to a final decision on CBDCs. This is an interesting development because the East African country had announced in 2021 that it would roll out a CBDC.
Ghana, one of the pioneers of CBDCs globally, also mentioned that it is being patient with its CBDC rollout to ensure that it fits the financial landscape. Ghana is developing an approach that ensures that the central bank does not stifle innovation and disrupt the financial system in a way that harms existing companies. The Bank of Ghana hinted at this approach at Africa Money and DeFi Summit West Africa 2023 in Accra, Ghana, with the launch of the e-cedi Hackathon. The central bank launched the program to encourage innovators to build important financial infrastructure with the e-cedi. The Bank of Ghana has claimed that it intends to play the role of an issuer and leave the application of the CBDC in the hands of other industry players.
Nigeria, a pacesetter in the CBDC world, continues to work towards the adoption of the eNaira. As of April 2023, official numbers released by the Governor of the Central Bank of Nigeria (CBN) claim that Nigerians have opened around 13 million e-wallets. The CBN has announced multiple updates to how the eNaira works to boost more adoption. In June, the CBN announced that the naira could be used for receiving payments from the diaspora. This was done to capture part of Nigeria’s $20.13 billion remittance market. The eNaira was also updated to support NFC technology to make payments easier for users. The eNaira is yet to capture a huge chunk of the Nigerian market despite several attempts by the CBN to promote the CBDC.
The biggest highlight for most people in the African cryptocurrency industry is the positive regulatory sentiments in some of the biggest markets on the continent. Regulations have been a major concern as innovators have had to walk on eggshells to avoid problems with regulators. At the same time, a majority of the general public has stayed clear of cryptocurrencies due to directives from regulators. Major global changes in the space and the new regulatory environment on the continent create a conducive environment for the significant adoption of cryptocurrencies in the new year.
Article written by Elisha Owusu Akyaw (GhCryptoGuy).
Join us at Africa Tech Summit Nairobi 2024 to hear from key experts on the expected trends in crypto for the next year
