Bitcoin in 2022: Important Trends From Emerging Markets
More support for crypto from investors can send a positive message to many African countries.
This research was sponsored by Luno, a platform that allows users to buy, save and manage cryptocurrencies.
Bitcoin (BTC), ether (ETH), and the entire world of digital assets performed pretty well during the emergence of the COVID-19 pandemic. This same asset world that attracted a host of industries in 2021 is now wrestling to accentuate the reasons that previously allowed the market capitalization to rise beyond the $3 trillion mark, before retreating back below the $2 trillion mark.
Do Kwon’s Terra Luna debacle has added more insult to injury. But I believe such failures should be expected in emerging industries to serve as a control experiment for more robust innovations, which will help drive the industry forward.
This piece will try to redirect your attention from matters making hits on the international front by updating you on events of interest from emerging economies.
Funding for African blockchain startups has grown by 1,000%
A new report from Marcus Sotiriou, an analyst at UK-based digital asset broker GlobalBlock, has shown that venture funding for African cryptocurrency startups has grown 11x in 2022, so far. The report indicates that African blockchain startups racked in $91 million in Q1 2022 alone, a 10x increase when compared with the first quarter of the previous year.
Among those actively investing in African blockchain projects, there is Swiss-based firm Crypto Valley Venture Capital (CVVC). The firm launched an early-stage blockchain fund, with the sole objective to support 100 startups from Africa in the next four years, and has already invested in 12 blockchain projects.
Sotiriou further stressed in a meeting with Quantum Economics that the mass capital flow into the blockchain space of Africa is because the total number of the unbanked on the continent is rather very high. Furthermore, blockchain has the potential to restore trust in Africa’s financial system because of the tech’s proof of ownership concept.
The emerging bitcoin ecosystem in Sub-Saharan Africa
The Central African Republic (CAR) leads Africa on the blockchain adoption front. The landlocked nation shares borders with Chad, the Democratic Republic of Congo, Cameroon, and Sudan. The CAR’s bitcoin story may spur further adoption by the neighbors, especially if the country is on the trajectory of development as expected.
The CAR is also looking to launch Africa’s foremost crypto investment hub dubbed The Sango Project. Sango represents a legal center for crypto-related businesses with economic policies that will exempt people from income and corporate tax. The project intends to make the Island of Sango the first crypto economic zone in Africa and the first island in the metaverse backed by reality.
Let’s now move to Nigeria, where the Security and Exchange Commission (SEC) has published rules to guide the issuance, custody, and exchange of digital and virtual assets.
Per the definition proposed by the SEC, a digital asset “means a digital token that represents assets such as a debt or equity claim on the issuer.” In contrast, virtual assets refer to the digital representation of value that can be transferred, traded digitally, and used for payment and investment.
Per the regulations, digital asset players are digital asset offering platforms (DAOPs), digital asset exchanges (DAX), digital asset custodians (DACs), and virtual asset service providers (VASPs).
The issuance of regulations to govern the cryptocurrency ecosystem in Nigeria may be seen as a testimony to the fact that the Nigerian government is about to backtrack on its hard stance on crypto for the good of its teeming youth, who are innovating in the space.
In Uganda, the Bank of Uganda indicated that it is ready to test crypto businesses in a regulatory sandbox. This is, according to a circular dated June 1, 2022, to the Blockchain Association of Uganda.
A regulatory sandbox is a framework set up for the live testing of new products or services in a controlled environment.
The sandbox method is mostly used by fintech startups. They have become common within the financial sector of Africa even though it continues to experience changes affecting the industry.
The National Bank of Ethiopia, or the central bank of Ethiopia, is warning citizens to put a stop to trading using digital currencies like bitcoin. Earlier in June, the bank stated that cryptocurrency activities in the country are illegal and are being used to champion money laundering schemes in the country.
A report entitled Africa’s Urbanization Dynamics 2022 by the African Development Bank Group has concluded that the ban placed on Twitter and the restrictions on cryptocurrency trading may have affected foreign direct investment within the Nigerian fintech space.
Sotiriou made it clear to Quantum Economics that more support for crypto from investors will send a positive message to many African countries to foster such innovations as part of their financial architecture.
Ghana’s CBDC pilot
The offline version of the digital version of the Ghanaian cedi, eCedi, has been tested in the Western North region of Ghana, Sefwi Asafo. Ernest Addison, the governor of the Bank of Ghana, said that the feedback from the public is positive, indicating that the country is well-prepared for a nationwide rollout within the shortest possible time. Addison further elaborated:
“There has been a pilot carried out in different parts of the country, and the feedback I have gotten is that people have been quite enthusiastic about having the opportunity to be part of the pilot and even gone out of their way to reload the CBDC using their resources to be able to carry out transactions.”
Meanwhile, the Bank of Ghana has granted the customers of CalBank, Vodafone Cash, and the IT consortium the opportunity to help pilot the online version of the eCedi, which will take place in Accra in the Greater Accra region and Tarkwa in the Western region only.
“Those platforms will open to every licensed entity to integrate soon — and a version will be available in a sandbox for tech startups to test in the future,” Addison explained.
When Sotiriou was asked whether Africa needed bitcoin or a CBDC, he responded by saying CBDCs were inevitable and that they will end up making bitcoin popular, which will drive crypto adoption in the long run.
Events within the crypto space in the first half of the year may have a tremendous effect: investors are beginning to recognize the potential of the industry and, with massive awareness through continual sponsored education campaigns, blockchain could become the key to the economic freedom that the continent is seeking.
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This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.
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