Innovative progress has brought new methods of digital transformation and financial service delivery. With the growth of Internet connectivity in Sub-Saharan Africa, emerging technologies such as blockchain and cryptocurrencies have the potential to promote financial inclusion. Blockchain is a technology that supports cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. The emergence of cryptocurrencies in Africa is particularly exciting because they provide Africans in cash and the informal economy with opportunities to participate in an alternative financial infrastructure. Many traditional financial infrastructures in Africa are often affected by high volatility and ineffective governance. Blockchain financial technology supports alternative financial infrastructure and improves currency stability and effective governance through a decentralized digital financial system.
Exploring the landscape of African digital currencies, sub-Saharan Africa has one of the highest remittance rates in the world. In 2019, 3.6% of sub-Saharan Africa’s gross domestic product (GDP) came from personal remittances, three times the world average. However, the region also has the largest unbanked population in the world, with only 42.6% of the population aged 15 and over having accounts with financial institutions. Given that most of the remittances on the African continent are peer-to-peer transfers, cryptocurrency has the potential to revolutionize remittances between Africa and the rest of the world. Due to advanced blockchain technology, cryptocurrency-based remittances will lead to faster transfers, fewer logistical restrictions, and lower transaction costs. Although remittances cannot be considered a form of financial inclusion, their potential application in the digital currency infrastructure can lead to a more inclusive financial infrastructure.
In fact, in August 2020, Sub-Saharan Africa traded $ 18.3 million of the total global bitcoin transactions with a volume of $ 95 million in a week per second to North America alone ($ 28.7 million), the second highest in the global volume of Bitcoin transactions. Although some people believe that due to the impact of the Covid-19 lockdown on the local economy and the need to protect against local currency volatility, the volume of Bitcoin transactions in Sub-Saharan Africa has increased significantly, but Bitcoin.com analysis shows that 86.3% of the volume of transactions comes entirely from the main economies of the African continent: Nigeria, Kenya and South Africa. Compared to the weekly average mobile currency transaction volume in Sub-Saharan Africa of roughly $ 457 million, Bitcoin’s transaction volume looks depressing. However, it is worth noting that since its debut in Kenya in 2007, the MPesa mobile money model has been copied by more than 140 mobile money services worldwide. Mobile money itself has made a positive contribution to the financial inclusion of the Africa by realizing person-to-person and person-to-business digital transactions and obtaining savings, credit and investment services through mobile phones.
However, it is not without challenges, including high transaction fees and costs associated with interoperability and regulatory gaps. At the same time, research shows that women are less likely to use mobile apps for financial transactions due to gender bias in digital financial services (DFS). At the same time, intercontinental capital flows are dominated by foreign currencies, because Africa’s desire for a single currency is often weakened by changes in the stability, convertibility, and control of the national currency.
Although these problems can be solved by linking unstable national currencies with more stable international currencies, the solution is fraught with structural deficits, as evidenced by the West African CFA franc pegged to the euro (Eco). Therefore, it can be said that the digital currency is positioned as more attractive and accessible.