Current financial, social, and economic conditions in Africa have contributed to the surging popularity of cryptocurrencies on the continent.
For the over-the-counter (OTC) crypto trading platform Paxful, African customers account for almost $7.5 million in transactions per month. Interestingly, half of these crypto enthusiasts are under 30-years-old and either have a college degree or are studying towards post-secondary qualifications.
Peer-to-Peer Financial Revolution
Ray Youssef, co-founder and CEO of Paxful, recently spoke with Finance Magnates and detailed why he believes that cryptocurrencies like Bitcoin are the key to empowering some of the world’s most financially alienated populations. Generally speaking, according to Youssef, interest in digital currencies is spurred by lower fees, increased transaction speed, safety, and currency stability.
“We are on the verge of the peer-to-peer financial revolution and it is being led by Africa. When it comes to innovation in financial services, in many ways, Africa has an advantage over the so-called ‘developed markets’; the continent has an expanding middle-class that has already embraced innovation in banking.”
Paxful was born when Youssef and his business partner, Artur Schaback, decided to turn their homegrown OTC Bitcoin exchange operation into an official company.
“It was technically the same as LocalBitcoins, which is a solicit service and an escrow service. It wasn’t local–there were no local trades allowed. It was like ‘GlobalBitcoins.’ We focused on gift cards and helping the unbanked.”
Youssef explained that his ‘a-ha moment’ for Paxful came when he fielded a call from a woman who was trying to use her last $20 to buy Bitcoin. Without a bank account or credit cards, Youssef navigated her through the process of purchasing a gift card and locating a trader who would accept a gift card trade for the cryptocurrency.
“I walked her through the whole transaction. That was a real eye-opener for me,” Youssef explained. “You know, us crypto-geeks think ‘oh, Bitcoin is so easy.’ But–first of all–getting your first Bitcoin as someone who has no bank account was impossible back then…Coinbase isn’t going to help out someone like that.”
Underbanked in Africa
There are several reasons why Africans are increasingly turning to cryptocurrencies. The first reason is in relation to financial conditions on the continent, where many countries (such as Zimbabwe, South Sudan, and Nigeria) are suffering from rampant inflation. Facing this inflation, cryptocurrencies — with their decentralized method of operation — have become real-world alternatives to fiat currencies that have been de-railed due to disastrous central banking policies.
Youssef made a point to discuss how Africa’s financial woes hit its underbanked population particularly hard: “We saw that yeah, the unbanked in America have it rough. But if you’re unbanked outside of America, it’s even worse, because you’re completely segregated from the world economy.”
The second reason is the increasing use of mobiles and other computing technology within the continent, which has helped its population become comfortable with cryptocurrency-related technology. In Africa, much like the rest of the world, new businesses that use blockchain are emerging all the time. Kenya-based BitPesa, for example, is a payment platform and money transfer service that works with 60 banks across the continent and has seven mobile wallets on its platform.
The third factor is the threat of government regulation, which has rocked cryptocurrency markets this year, is (presently) fairly low in Africa. While governments and agencies have warned about the dangers of investing in cryptocurrencies, regulators in African countries have, for the most part, taken a hands-off approach to trading at exchanges.
“The people of Africa were educating us. It really wasn’t just Bitcoin and Paxful–it was peer-to-peer finance. These folks were finding ways around all their barriers–whether foreign or domestic–using peer-to-peer finance… The same thing that Uber did for transportation and Airbnb did for hospitality, peer-to-peer financial marketplaces are doing for finance,” Youssef said.
Featured image from Shutterstock.