Disclosure: The opinions expressed here are solely those of the author and do not reflect the views and opinions of crypto.news’ editorial team.
As cryptocurrency moves from a specialized interest to a vital financial instrument, we’re beginning to recognize its potential to alter established global economic systems.
Amid rising tensions and significant shifts, the world’s superpowers are competing for security, wealth, and influence. From the use of sanctions and asset seizures to the embrace of Bitcoin (BTC) as legal currency and the increasing acceptance of cryptocurrency for international trade, the financial landscape is evolving rapidly, never to revert to its original state.
Often, in times of socio-economic upheaval, there lies an opportunity for innovation. El Salvador’s decision to recognize Bitcoin as legal tender exemplifies this trend, and in China’s Greater Bay area, under the web3 initiative, we see the birth of a new financial ecosystem.
Notably, while significant transformations are also occurring across Africa, the global community remains largely oblivious. For illustration, Africa’s share of global blockchain venture investment was merely 1.3% in 2023 and just 0.6% in the first half of 2024. In stark contrast, the US claimed an impressive 47% of the global blockchain VC allocation. While it’s important to consider the economies’ sizes—Africa accounts for about 3% of global GDP compared to 25% for the US—the narrative of under-investment in Africa persists.
As robust regulatory frameworks emerge on the continent, should Africa become the prime focus for venture capitalists aiming to leverage the long-term blockchain potential?
Blockchain-driven economic progress across Africa
The intricate challenges, diversity, and opportunities within many African economies offer a ripe environment for crypto-based innovation.
The fundamental principles of blockchain—efficiency, transparency, and disintermediation—serve as powerful instruments for tackling some of the continent’s most pressing issues. Blockchain holds the promise to supersede outdated systems and overcome the infrastructural obstacles that have historically hindered Africa’s progress.
The potential transformational effects of blockchain are particularly pronounced within the financial services sector.
A considerable portion of the population remains unbanked or underbanked, and cryptocurrencies are playing a crucial role in bridging this divide. They stimulate grassroots economic activities while enabling informal sectors to engage with the formal economy. Consequently, this integration enhances access to credit, improves business operations, and fosters economic resilience.
Traditional financial institutions and fintech companies are increasingly offering cryptocurrency-related services, relying on crypto exchanges for liquidity and infrastructure. If this trend continues, millions in Sub-Saharan Africa may soon enjoy easier access to stablecoins like USD Coin (USDC), allowing them to save in more robust currencies than are typically accessible locally. The implications of this shift are profound.
Igniting startup innovation
Innovative startups across the continent are tirelessly working to harness the full potential of cryptocurrency while addressing the challenges hindering its widespread adoption. However, scaling these initiatives remains a significant hurdle in the absence of sufficient venture capital.
The journey we’ve undertaken at VALR exemplifies how venture capital can positively influence not only Africa’s crypto landscape but also its broader economy.
Achieving Africa’s largest crypto venture capital raise has permitted VALR to invest significantly in industry-leading technologies, which are now available to over 1,000 corporate clients and more than 800,000 retail customers globally, with many major clients located outside Africa. Our experience demonstrates that startups with roots in Africa can compete on the world stage. With appropriate financial support, more African blockchain initiatives could contribute to local economies while sharing their knowledge globally.
The significance of regulatory clarity
Although the potential for blockchain and cryptocurrency in Africa is immense, regulatory ambiguity has undeniably served as a substantial obstacle to increased VC investments on the continent.
However, this is not a trend that applies universally. South Africa, in particular, has adopted a proactive and collaborative stance towards the regulation of this sector. With a clear regulatory framework established, South Africa boasts over 100 licensed cryptocurrency enterprises. Even before these licenses were issued, regulatory clarity had already positively influenced investor confidence. By 2023, South Africa captured 21% of all blockchain venture funding in Africa.
The evidence is clear: African nations that adopt progressive and transparent regulations regarding crypto transactions are enjoying substantial rewards across all sectors of economic activity. Licensed cryptocurrency companies in South Africa are generating considerable tax income and creating job opportunities both within Africa and internationally. The remote-first nature of blockchain firms offers a valuable export potential, showcasing South African technological and financial service expertise to global markets.
For Africa to amplify its share of global blockchain venture funding—and boost innovators—more jurisdictions (not exclusively African) should take cues from South Africa. Establishing clear, forward-thinking regulations is essential to foster an environment where blockchain can flourish.
The way forward: Seizing the crypto opportunity
The unique challenges and dynamics of Africa mean the continent stands to gain more from blockchain innovation than any other region globally. Yet, the current VC investment levels do not reflect this potential.
Venture capitalists should not disregard Africa in favor of more developed markets like the US. Despite the hurdles, there is immense opportunity to invest in blockchain projects that could significantly alter the continent’s growth landscape while yielding returns.
Simultaneously, African regulators must embrace the crypto opportunity instead of resisting it. Many local currencies, such as the Nigerian Naira, are losing their value and may become worthless. Cryptocurrency is not a threat but rather a genuine opportunity for African countries to secure a stronger position in the global economic rankings—akin to the situation in El Salvador.
By fostering a clear and supportive regulatory environment, African nations can attract the venture capital required to scale blockchain innovations, create jobs, and ultimately drive economic growth across the continent.
