The African Blockchain Revolution: Empowering the Marginalised and Unbanked
Leading authorities in blockchain, crypto and regulation attended the Blockchain Africa Conference in JHB, South Africa, marking another exciting chapter in the continent’s digital journal.
Johannesburg, 22 March 2023 – They came from around the world to gather at the Blockchain Africa Conference 2023 and tell the story of an African economic revolution. The continent boasts the youngest population on the globe and has a peer-to-peer mobile payments industry that predates the Satoshi Nakamoto white paper. Africa is fertile ground for the blockchain industry to grow, but it has been slowed by regulations.
With the Blockchain Africa Conference 2023 happening the week after the Silicon Valley Bank collapse, which affected the stability of the world’s most widely used stablecoin, USDC, the conversations naturally revolved around how the collapse happened.
“The banking collapse is a great case study that makes an argument for custodianship,” said Rene Reinsberg, Co-Founder of Celo and President at the Celo Foundation. “We’re very early in our understanding of the opportunity we have here.”
This opportunity is realising one of the promises of Web3, which is supposed to be the internet of ownership. Circle, the company behind USDC, did its due diligence and diversified its asset holdings that underpinned the dollar value of the stablecoin. But as much as 10 percent of those assets were held at Silicon Valley Bank and Circle had no access to those funds when the bank closed.
What that did to USDC was depeg it from its dollar value by the corresponding 10 percent.
Africans and other citizens of developing countries that cannot easily convert their currencies to US dollars use stablecoins like USDC as a protocol to on-ramp to the crypto market with common currency. Naturally, any instability in stablecoins would cause concern.
“The protocol never got hacked,” explained Julien Bouteloup, Founder of Stake Capital Group. “USDC collapsed because of traditional finance.”
Stablecoins were the big story on the first day of the conference and it echoed the challenges and opportunities that still exist within the African market for blockchain technology.
According to the World Bank, about 57 percent of Africans are unbanked, meaning they do not have access to formal financial services such as bank accounts, credit cards, loans, or insurance. This limits their ability to save, invest, borrow, or send money across borders.
Blockchain technology can provide alternative ways for people to access financial services without intermediaries or high fees. For example, cryptocurrencies can enable peer-to-peer payments and remittances; digital wallets can store value and identity; smart contracts can facilitate lending and borrowing; decentralised applications (DApps) can offer crucial financial services.
“As the first bank to incorporate traditional and crypto banking, Xapo Private Bank is a global pioneer and, as such, it’s essential that we stay at the forefront of blockchain trends in Africa, which is why we became one of the sponsors of BAC 2023,” says Seamus Rocca, Xapo Private Bank CEO.
“We believe the African banking sector is ripe for digital disruption as many people look towards future-centric offshore banking that incorporates the crypto world.”
Rocca closed a frantic first day with a fireside chat which addressed the crypto industry’s challenges head on, positioning the Xapo model as a viable bridge between the worlds of crypto and traditional banking.
Regulation augmenting utility
For all the utility of crypto that was illustrated on day one – specifically when CryptoConvert Founder, Carel van Wyk, demonstrated the real-world Lightning Network bitcoin payments happening at Pick ‘n Pay stores in South Africa – come risks that regulators need to cover for.
“Whether we intervene too early or too late, we’re still seen as the villain,” lamented South African Reserve Bank Senior Fintech Analyst Gerhard van Deventer when reflecting on the balancing act the central banks need to do with emerging technologies.
He was referring to some of the customer safety challenges Southern Mastercard Director of Cyber and Intelligence Solutions Robert Brine spoke of: people want the same convenience that they have currently with traditional finance.
“While the Silicon Valley Bank situation strengthens bitcoin’s appeal as a decentralised store of value, custody is the big question now,” explained Luno Africa General Manager, Marius Reitz. “Can you trust the institution you’re holding your assets with?”
It’s this central concern that drives African wealth to crypto because it provides a better option as a store of wealth than the volatile currencies of many African nations. Ratings downgrades and currency devaluing is a massive accelerator of the flight to safety and the collapse of one of the world’s major crypto exchanges, FTX, has also eroded trust in the exchanges as custodians of these funds.
This makes banks like Xapo, which began as a bitcoin vault, and secure wallet services like Cobo, hot commodities to secure digital assets.
“We believe in a world where customers are their own custodians and have developed a suite of services to help recover keys and add more trust, and flexibility in wallet storage,” noted Junde Yu, Head of Global Sales at Cobo.
The speed of technology innovation is outpacing regulation across the globe, but the problem is compounded in Africa where citizens face many more economic challenges. New solutions being built by the blockchain industry are calling out for policy makers to clear a path to the end consumer.
Blockchain Africa Conference 2023 was a coming-of-age story for the continent’s crypto economy. Recent crises have forced a departure from the familiar “build fast and break things” sentiment around novel technology and started conversations about responsibility and utility. Regulators and innovators are now coming together to build a better future for the continent.