The striking global events of 2022 led by the Ukraine crisis and inflation jolted Africa, where I have visited and closely watched over the past seven years. The biggest change to the world economy since the 2008 financial crisis makes African daily lives tougher, but the continent is still enthusiastic about its future.

The collapse of FTX shook the world’s crypto community including that of Africa. This year, the fall of three US banks that funded Web3 players in the continent sent another shockwave to the community. But the continent remains resilient to these shocks, and we should closely watch these three areas for expected growth.

1. Stablecoin Is Default for Crossborder Payment

Africa is the place where peer-to-peer (P2P) trading of crypto assets is thriving. P2P is used for cross-border payments and settlements due to strict capital controls and crypto regulations in the region.

Since last year, the rapid depreciation of local currencies against the US dollar and rampant inflation have increased demand for US dollars, while market fragmentation has resulted in insufficient foreign exchange liquidity to meet this demand, further increasing the demand for P2P.

Over the past five years, cryptocurrency exchanges and crypto asset application businesses have emerged, and now more crypto trading and payment services are expected to penetrate the public.

With such an economic backdrop, the market is expected to see a further expansion of stablecoin options with lower volatility (such as USD backed USDA) in 2023. The clear advantages such as low transaction costs, preservation of currency value, and the quick and error-free transactions, and the use of stablecoins in crypto rails for cross-border payments will become a commonplace.

2. NFTs Have Potential to Solve Africa’s Problems

Africa is a continent of diversity in art. Along with the cryptocurrency adoption in Africa growing 1,200% in a year, Africa has witnessed the rise of NFT artworks in various areas such as art, music, fashion and real estate.

The median age of Africa is still below 20 years old. This is a population that loves to catch up with the recent technologies, it has realized that minting NFTs and turning their works into NFTs is not really complicated.

In April 2022, a Ghanaian group led by Benjamin Aidoo sold the viral coffin dance as an NFT for 372 ETH (equivalent to more than $1 million) and another successful selling example in Nigeria, a digital artist Victor Ehikamenor sold his vibrant artworks for $100,000.

In South Africa, Momint hosted Africa’s largest NFT auction to provide great opportunities to connect African local artists with international art collectors. High adoption rate of mobile money, like Kenya’s M-Pesa, can accelerate this trend. A project in Kenya, HoneyCoin, allows wallet users to purchase NTFs via M-Pesa.

NFTs can help land registry issues. It remains a huge difficulty to identify land ownership in some areas in Africa because of less functioning paper-based land management systems. NFTs verifying ownership of the lands streamline cumbersome real estate transactions, and bring about reduction in unnecessary conflicts over lands. NFTs have more potential in Africa to solve locally embedded historical land issues.

3. Blockchain Permeates Social Infrastructure

(Lalibera, a northern town of Ethiopia / Photo by Unsplash)

In the past few years, there has been an increase in blockchain projects by African governments. In particular, blockchain is being implemented in the areas of national IDs and digital infrastructure, according to a recent Emurgo Africa report.

In Sub-Saharan Africa, ID infrastructure has not yet been established, and it opens economic and social opportunities for underserved populations in the countries.

For example, the use of decentralized national ID and tracking schemes in agricultural input subsidy programs and unconditional cash transfer programs can prevent subsidy fraud and provide financial inclusion opportunities for farmers and marginalized households.

IOG partnered with the Ethiopian government implemented a blockchain-based national student and teacher ID and achievement record system that digitally verifies grades, skills, and work and enables remote monitoring of performance. In 2023, the distributed digital ID solution will create tamper-proof records for over 3,500 schools, 5 million students, and 750,000 teachers in Ethiopia.

The lD infrastructure is also the first step to begin collecting credential data to provide the unbanked and underbanked with financial services. The World Bank estimates that up to 65% of adults in sub-Saharan Africa do not have bank accounts.

There are 49 million MSMEs (micro, small and medium enterprises) in Africa with $52.5 billion in financial needs, of which more than 80% ($42.2 billion) are unmet. Studies have proven that financial inclusion can increase GDP by 30%.

DeFi service, which potentially reduces the high interest rates of micro finance (as high as 85% according to the World Bank), can be widely adopted in coming years by putting in place the ID infrastructure and the integration of DeFi with traditional finance.

In 2023, we are expecting to witness more African governments implementing blockchain for their national ID and digital infrastructures.

Shogo Ishida: Co-CEO and director of EMURGO Middle East & Africa (MEA), which was launched in 2021 as a part of EMURGO’s initial $100 million Cardano ecosystem investment vehicle. Ishida has over 15 years of experience in venture capital, and is responsible for the investment decision for the EMURGO MEA as an investment committee member. EMURGO MEA has invested in over 35 companies in the Middle East and Africa.

–Edited by Faustine Ngila