How Is Bitcoin Used In Africa?

Following are some categories and examples of how bitcoin is used by those on the continent of Africa.

[Updated: 9 December 2022]

Everyday Use

There’s a growing number of people who simply use bitcoin as a substitute for their local currency or as a replacement to PayPal and other such fiat financial apps.

With Lightning network ⚡, payments are instant and fees are trivial, so sending bitcoin via Lighting is becoming common.

Add to that any phone (including feature phones) in a number of African countries can use the USSD-based Machankura8333 bitcoin wallet to send and receive bitcoin.

Machankura8333 USSD-based bitcoin wallet

Speculation — Bitcoin investment, “crypto trading”, ICOs, DeFi, security tokens, etc.

Though bitcoin is used for speculation universally throughout the world, it hits different in Africa. There are huge numbers of youth, including university graduates, who simply cannot find employment in their country. Those with the means, especially those who studied economics, finance or tech, take up speculation in the “crypto” space to either try to supplement whatever income they do have, or as a substitute for “employment”. This remains today the number one activity involving bitcoin and “crypto” on the continent.

Store of value / Savings

Many countries in Africa have seen the value of their local (fiat) currency lose value relative to the U.S. dollar, and that is while the dollar itself is losing purchasing power due to inflation. Over a longer timeframe, bitcoin is seen as a superior store of value relative to fiat currencies. In the near-term, the bitcoin exchange rate can be volatile. The 2022 bear market selloff has produced loss of purchasing power for many, but the flip side of that means new opportunity to begin saving in bitcoin with a lesser risk of downside exchange rate risk.

Freelance / remote work / Microtasks

Similar to the category above (speculation), many skilled Africans find they can earn (or earn at a higher rate) by working remotely for companies abroad — generally as freelancers (e.g., software, data entry, copywriting, etc.)

Until recently, receiving payment for these individuals was either incredibly difficult (e.g., PayPal didn’t support many African countries), or incredibly expensive (e.g., remittance to Africa has the highest fees (and/or the worst exchange rates) of any other region in the world.

Remittance Cost By Global Region

Freelancers have embraced bitcoin for the payment method as it doesn’t have those downsides — albeit most freelancing platforms (e.g., Upwork) refuse to support any cryptocurrencies.

Related: How PayPal & the UK Government are nudging Kenyan Online Workers to Bitcoin

There is a category of freelancing called microtasks, which attract many in Africa as a method to earn. For example, Microlancer.io

Sportsbetting

Along the same lines as speculation and freelancing as a substitute (or supplement) to traditional employment, Sports betting also is a method many pursue to earn money.

“The state of the Kenyan economy also plays a huge role in luring more people to sports betting. Kenya has a youth bulge which the existing industry is failing to accommodate. The result is that many young people are left jobless with nothing to sustain them. In order, to earn some money they resort to gambling. Kenya’s high unemployment rates, especially in relation to the young adults, is one of the reasons why sports betting is rising month on month in the country.”

Source: The rise of sports betting in Kenya

In 2022, Kenyan rapper, and #Bitcoin enthusiast King Kaka became a Global Ambassador for Sportsbet.io.

Related: Gamblers Like Me: The Dark Side of Sports Betting

Specifics:

• Regulated in Kenya, and accepts bitcoin: 22Bet Kenya
• Outside Kenya: Bodog, Betonline, 5Dimes, Intertops, Nitrogen Sports, Sportsbet, among many others.

Crypto exchange arbitrage

There are frequently arbitrage opportunities such that a cryptocurrency trader can earn some money taking advantage of these through trades.

For instance, let’s say the best ask (SELL offer) price on a P2P trading exchange is an 8% premium above spot. But let’s say that trader has access to buy bitcoin at the global spot price. In that scenario, the trader can net about 5% or more on that trade, after all fees are considered. So that’s an example of a trader earning money by simply making (or taking) arbitrage opportunities. Volumes on P2P exchanges in Nigeria, Kenya, South Africa, and Ghana are disproportionately very high relative to per-capita levels in most other countries — indicating that a good chunk of the volume truly could be attributed to arbitrage trading.

A similarly “unique to Africa” type of trade is gift card trading. There are a couple reasons. Because of capital controls in Nigeria, most $NGN bank debit cards cannot be used to make purchases from retailers around the world. So to buy a video game online, or to buy computer equipment from Japan (e.g., from Ratuken), or whatever, the buyer in Nigeria can be shut out from the buying process. At least, that was the way before bitcoin could be used to buy a gift card for any of these e-commerce merchant sites. So of course, there is local demand within Nigeria for these prepaid gift cards used to make purchases. There’s also a supply within Nigeria — as there’s usually no ID necessary to purchase a gift card in most countries (e.g., U.S.) — something the African diaspora are are often unable or unwilling to provide at the local setting (e.g., at a grocery store where the prepaid gift cards are sold).

So the prepaid gift card has become a commonly used payment method when sending a remittance. A person in the U.S. can go to a retailer like Walgreens, buy a $250 iTunes gift card (or whatever amount, whatever store), and send the code (and receipt) to the family member in Nigeria (as an example). That recipient of the gift card in Nigeria then trades the card for NGN (at a moderate discount). Remember (from above) the haircut that those performing remittance must take when using the official rate published by the central bank? Well, selling prepaid gift cards that are received is one way to bypass traditional remittance methods and keep most of the value, without really having to know much about bitcoin, at all.

Forex / Daytrading

Day trading and forex are another category in which bitcoin is used, for the common underlying reason—it is a substitute (or supplement to) traditional employment. Before bitcoin, daytraders in much of Africa were having to use fiat wallets such as Skrill or Neteller when depositing and/or withdrawing funds from the FX brokers.

There are many Forex brokers now supporting deposit & withdraw of funds via bitcoin.

Play-to-Earn (P2E)

Play-to-Earn is an emerging online gaming industry that rewards players with cryptocurrency for their success in-game. More accurately, this would be labeled “Pay-to-Play-to-Earn”, as many require financial investment or in-game purchases in order to then earn. Unfortunately, sometimes the efforts result in financial loss rather than income — as was the outcome for most Axie Inifity “players”. Most P2E services have their own cryptocurrency / token (e.g., Axie Infinity), but some bitcoin-based ones (e.g., Lightnite) do exist. There are also more traditional online games like CS:Go in which earnings in bitcoin are possible (when using a gaming wallet like ZBD Infuse). Another related term is “Gamefi”, and ultimately P2E can become a subset of the Metaverse.

Scams (Ponzi / Pyramid schemes, Cloud mining, etc.)

Scams often targets victims in developing countries, as regulations in the finance / investment space are not always solid and/or enforcement is oftentimes lagging. Some examples of scams exposed:

• BitClub Network (cloud mining, failed)
• Dunamiscoins (Uganda, failed)
• Velox 10 (Failed)
• Onecoin (Failed)
• MMM (Uganda, Nigeria, failed)
• Nurucoin (Kenya, failed)
• Mirror Trading International (MTI) (Failed)
• Bitstream Circle (Failed)
• Crowd1 (Exposed, but still active)
• Praetorian Group International (PGI) (Active)
• SuperLife Worldwide (Active)

General warning: How to Identify Cryptocurrency Scams

Unbanked / insufficiently banked / Undocumented

A Kenyan had received some digital currency from an “airdrop” and asked me to assist with converting that into local currency (Kenyan shillings). In attempting to walk this person through setting up an account on an exchange, I was shocked to learn that this person had never obtained a national ID, nor a driver’s license, nonetheless a passport. I was then even more shocked to learn that man didn’t even know his actual birth date — only the year he was born, and where (in the family home). There was never a birth certificate issued.

Getting either a bank account or a centralized bitcoin exchange account would be quite difficulty without an ID. But having no access to a bank account wasn’t a bother for him. He used a phone registered in a family member’s name, and he could receive and send m-Pesa (mobile money) using that. To him, mobile money was an adequate substitute for a bank account.

But mobile money is (generally) used domestically only — though there are now some networks that can do transfers across borders and networks (though not to every country nor to every mobile money network).

Bitcoin and/or stablecoins work well then as a complement to mobile money for the “unbanked” — as a store of value, and as a medium of exchange. The unbanked generally have not widely embraced bitcoin, but the numbers of unbanked in Sub-Saharan Africa are huge. With Machankura8333 having introduced their USSD-based bitcoin wallet in a number of African countries, any phone (including feature phones) can now receive and send bitcoin in those countries.

When other contributing factors occur (e.g., rapid devaluation of fiat, implementation of new identity and/or KYC campaigns, currency demonetisation, exclusivity of payment method, etc.) adoption of bitcoin and other cryptocurrencies accelerates.

For instance, in the previous category (“scams”), no cash or mobile money was accepted (to avoid immediate troubles with the regulator). The victims would need to buy bitcoin with cash or mobile money, and then deposit the bitcoin in order to send “investment funds” to the service (in what would ultimately be exposed as a scam).

Cross-border supplier payments

Of the 55 countries in Africa (as counted by the African Union), 46 are considered to be in Sub-Saharan Africa. Many of these are small countries or countries that do not have modern banking and financial networks. And paying a supplier across a nation’s border can aggravate the situation as that requires that a payment settles in two separate, essentially obsolete and/or corrupt banking networks and financial organizations.

The problems that occur range from there resulting in multiple days being required for settlement, to the cost being obscenely high. These costs are high for various reasons, but these include how ultimately each payment first goes to a correspondent bank (part of NY Fed, to convert to dollars), then there is another a transfer to the destination bank (after being converted from dollars).

Bitcoin and stablecoins used for making cross-border vendor (supplier) payments is occurring with growing frequency.

Examples:

Strike has introduced Send Globally, which permits payment to a mobile money account or bank account in the countries where their “last mile” delivery partner, Bitnob, operates (currently Nigeria, Ghana and Kenya).

AZA Finance (the part that came from BitPesa, at least) changed its focus from retail finance to primarily servicing the B2B and B2B2C cross-border supplier payments segment:

Many vendors in China (e.g., those who sell through Alibaba) are either preferring or requiring bitcoin (or a stablecoin, such as Tether CNHT) as the payment method. Or they require Alipay, which can be acquired by traded for using bitcoin on via P2P exchanges, and other methods. This article on Alibaba doesn’t have any reference to bitcoin or stablecoins but does give a picture of how African businesses import from China. [Update: China is promoting the use of their Digital Yuan CBDC on apps like WeChat, and restricting (or completely banning) the use of cryptocurrencies.]

And there are niche vendors, such as BeForward, which sells cars from Japan.

Cross-border remittance / solo-hawaladar

This is the holy grail for the diaspora who send remittances back home …

1. Send bitcoin to an exchange
2. As soon as the bitcoin transaction confirms, exchange automatically sends local currency (fiat) to the remittance recipient’s bank account

That’s it. No manual withdrawal. No nonsense. And this exists today, with SendCash.Africa, and perhaps others. But this is available only in a few countries.

There’s also the concept of a “three-way remittance” that the diaspora perform, using bitcoin.

1. Guest worker in U.K. (for example) sends bitcoin to a P2P exchange
2. Guest worker opens a trade to SELL bitcoin, for payment via mobile money (fiat) in the remittance recipient’s country.
3. Buyer of the bitcoin sends mobile money (fiat) payment to the specified remittance recipient.
4. Remittance recipient notifies Guest worker in U.K that the mobile money payment was received.
5. Guest worker releases bitcoin to the buyer.

Some P2P exchanges prohibit “third party payments” like this. But with Non-KYC P2P exchanges (e.g., LocalCoinSwap, RoboSats, HodlHodl, Peach App, Bisq and others) this restriction either doesn’t exist or cannot be enforced (because the exchange can’t know that the seller of the bitcoin isn’t going to be the person whose mobile number was given for where the mobile money payment was to be sent).

Hawala is what’s categorized as an “informal value transfer system” (IVTS) because it is a money transfer service that doesn’t actually transfer funds (at least, not immediately). But bitcoin disintermediates hawala. A person can provide a remittance service without a hawaladar on each of the two sides.

Or there’s simply two traders who cooperate to essentially provide a money transfer service. Example, Trader in Cape Town accepts cash ($ZAR) from remittance sender, then sends bitcoin to the partner trader in Zimbabwe. Trader in Harare (Zimbabwe) sees the bitcoin arrive and dispenses cash ($ZWL) to the remittance recipient.

Foreign currency conversion

Tourists and merchants often times are not able to obtain a good exchange rate when buying the local fiat currency, significantly because they are trying to do so not at the nation’s financial centers but instead at the border city (e..g, for merchants traveling to buy goods to bring back), or at the travel destination (e.g., for tourists, the nearest bank to where the hotel is located).

This juicy premium attracts competition from individuals who provide foreign currency conversion, informally (i.e., unlicensed). Increasingly, bitcoin and stablecoins are accepted by independent foreign currency dealers, who are known to the hotel concierge or are found by the tourists as these traders have offers listed on the P2P trading platforms. Bitcoin ATMs would also serve this segment well, however there’s barely more than a dozen bitcoin ATMs on the entire continent, and many are bitcoin vending machines only (i.e., not 2-way, which also dispense cash).

In countries with a central bank currency that is rapidly losing value, there is a formally published exchange rate, but then there might be an informally recognized “parallel market” with a different rate, … also known as the “street rate”, or the “black market rate”.

Bitcoin and stablecoins are used for this “parallel market” currency conversion frequently enough that governments have begun to crack down on this. This scenario has mostly occurred outside of Africa (e.g., Venezuela, Argentina, Turkey, Iran, Lebanon) but certainly there are some countries in Africa with a black market premium (e.g., Nigeria, Zimbabwe, Ethiopia, Sudan, Egypt), with Nigeria being an example with a high level of bitcoin usage as well as a high black market premium (e.g., 50%).

Expats, Returning diaspora, and Emigration from U.S. by African Americans

During the Coronavirus pandemic there was a high number of workers located outside of their home country that were encouraged to (or forced to) return to their home country. These are people who might already have, as African diaspora, been using bitcoin for sending remittance. Or they simply already had investment in bitcoin, or they speculated and traded as a side-hustle.

Or they continue to have financial obligations yet back in the country where they were employed and find that bitcoin works as remittance back to their guest country just as well.

Whatever the reason, this movement of people back to their home country in Africa has increased significantly the volume of bitcoin activity on the continent — especially for those who still have a bank account in the country where they were a guest worker (from which they can use with an exchange to buy and/or sell bitcoin).

Similarly, there is still a high number of western “expats” (another term for diaspora) who either work, live, or volunteer in many African countries. Many of them arrive with bitcoin, or buy bitcoin using funds from their bank account back home.

Additionally, even before the recently heightened racial tensions in the U.S., there was already started a movement for “Repatriating to Africa”:

Examples:

• Repatriate to Ghana (and Year of Return)
• Akon’s Akoin smart cities — Mwale (Kenya), Akon City (Senegal)
• Rwanda
• FillmoeAfrica (Kenya)

Here are a few examples of those I personally have met first-hand (i.e., anecdotal evidence).

• A gentleman who is retired military (U.S.), living in Africa for half of each year due to the lower cost of living.
• Some retired Black pensioners (European citizens) wintering in Africa, buying property and starting businesses. They all owned and used bitcoin and stablecoins, while in country.

And, there’s this other space to watch, though there’s almost nothing occurring currently. With the rising bitcoin exchange rate, wealth is accumulating among bitcoiners, and there continues talk of building some citadels (as has been discussed nearly since the beginning of bitcoin time)!

Anecdotal evidence: this bitcoiner has been “scouting” for a good location for a bitcoin citadel:

• Found a perfect Bitcoin Citadel location
• This is Zanzibar, such paradise!

And that’s not the only person considering an African location, it’s a recurring theme … though this one is probably not-so-serious:

Where these citadels will be located will mostly vary based on regulations and culture — though some countries will act to purposely make themselves more attractive as a destination for bitcoiners traveling and/or relocating. Could the Central African Republic (CAR), which has made bitcoin “legal tender” become home to one or more citadels? Quite possibly, one day!

Offshore banking / Swiss bank account in your pocket

There is a pattern of storing funds out of the prying eyes of the government (whether licit or not). The “old way” of stashing money offshore didn’t work so well … see Panama papers.

So bitcoin and stablecoins are being used as an alternative to having an offshore bank account. How much of this is occurring, well there’s really little to measure (being a pseudonymous payment method) that will help tell how much, at least with any degree of certainty.

However there’s a clue when we see prices on P2P exchanges in Kenya, for example, all spike at the same time (e.g., rise to 8% above spot, for instance). That gives us a pretty good hint that multiple traders are doing the buying and selling to a larger buyer and that demand is vacuuming up nearly every last bitcoin that is for sale within the country. The chart below is from just one P2P exchange, but when there are spikes, they oftentimes are also occurring on other P2P exchanges at the same time.

Trading Level Above Global Spot Price — via Useful Tulips

The recent addition of a number of exchanges to the market (e.g., Bitnob now operating in Nigeria, Ghana and Kenya), liquidity has improved and these premiums either have shrunk, or no longer exist. But on the P2P platforms, these opportunities may persist yet, but to a lesser degree.

e-Commerce and retail / point-of-sale

This is still a nascent category today, but is growing. For those holding bitcoin and planning to spend from those funds, there is an incentive to spend in bitcoin rather than first “cash out” into fiat and then spend in fiat.

Examples of those with bitcoin to spend:

• Freelancers and expats who earn in bitcoin
• Remittance recipients (who receive in bitcoin)
• Investors/speculators with bitcoin gains
• Tourists (who may find bitcoin easier to obtain than local fiat)

With bitcoin on Lightning network ⚡ maturing as a payment method, expect the various lists of where bitcoin is accepted for payment to see a dramatic increase in the number of locations.

• Betty’s Place (Kenya)
• Cookswell Jikos (Nairobi, Kenya, ships globally)
• Mwacheezy Collection (Kenya)
• Health Land Spa (Nairobi, Kenya)
• Legibra (Nairobi, Kenya)
• Nuria Store (Nairobi, Kenya)
• FonBnk — Airtime (Kenya)
• Coral Rock Hotel (Zanzibar, Tanzania)
• Blessing Safaris (Arusha, Tanzania)
• Luno’s Merchant Directory (South Africa)
• Bitrefill — bill payment, and prepaid airtime (all countries)

And, of course, there are youth buying weed (and other stuff) via darknet markets. Yes, this occurs even in the world’s poorest countries. Along those lines, there are people in Africa selling on dark markets as well (e.g., certain cosmetics that are banned from import in most African countries, and conflict minerals).

NFTs

There is an emerging space for artists of all mediums to earn from their work, and some creatives in Africa have found great success.

For example, this news article describes how a 19 year old from Zimbabwe has earned thousands of dollars in revenue from his art depicting celebrities. His art is sold on NFT markets, and he has even received praise from multiple celebrities depicted in the various art pieces, include Drake and Lil Wayne. The 2022 “crypto winter”, however, has certainly proven that there’s not universal success in NFTs and opportunities can disappear.

Microfinance / lending

Back in the bad old days of bitcoin lending a half decade ago, unsecured bitcoin lending was a thing. Many in Africa were borrowers. Of course, borrowing using a hyper-deflating digital currency is probably a bad idea (narrator: indeed, it was a bad idea), and most loans went into default resulting in most unsecured bitcoin lending platforms shutting down. However, alternative approaches including collateralized lending (borrowing against your bitcoin deposited with the lender), “DeFi”, and more, this category exists once again.

Currently operating microfinance / lending:

• Branch, Tala, M-Shwari (Safaricom) and a bunch of others offer unsecured (or undercollateralized) “digital loans”. While “digital loans” itself has nothing to do with bitcoin, it shows the demand for these “digital loan” products. Some day it is very likely unsecured lending using DeFi (stablecoin) lenders will emerge and compete in this space. Especially if regulatory pressure limits the existing supply.
• BitMinutes (targeting Nigeria)
• IBM & Twiga, microfinancing (for vendors in the food supply chain)
• Hodl Hodl P2P lending (borrow stablecoins using bitcoin for collateral)
• As tokenized equity or tokenized “revenue sharing” catches on, bitcoin and stablecoins will be the channel used for those buying or selling these tokens.

Charitable and NGOs

These next links are not related to bitcoin, but essentially find that Kenya is ground-zero proving that a specific genre of stablecoin CICs can not just gain mass adoption but can provide wide benefit to the community as well.

• Grassroots Economics (e.g., Sarafu, a Community Inclusion Currency (CIC) ecosystem)
• Kenya Red Cross (Community Inclusion Currency)

And here are some other uses where bitcoin is accepted for donation. I have no knowledge of the volume in donations that occurs using these, but wanted to share in case they are of interest to you.

• GiveDirectly (UBI experiment in Kenya)
• The Water Project
• Develop Africa
• Over and Above Africa
• Africa Development Promis
• Solar Charity
• Period Poverty

Blockchain Organizations

• Melanin Solar

Other

I’m sure there is a good handful or two more categories of activity that are not listed here. Like how in a region where utility services (e.g., electricity, water) are currently primarily dispensed through meters fed with digital prepaid tokens that are purchased with mobile money or a bank transfer. Something like that makes perfect sense to also support purchase of the digital token using bitcoin, or for the token to be blockchain based to begin with.

There likely other uses I either haven’t seen myself or know almost nothing about, but I can imagine they occur — eSports (again, as a way to earn some income), monetized content (e.g., Publish0x), and more.

Contact

For suggestions, corrections or additions, feel free to send a direct message to @KenyaCoin on Twitter, or to @KenyaCoin@BitcoinHackers.org using Mastodon.