Africa Takes The Lead On Digital Assets

Can digital assets and DLT do for capital market inclusion what mobile money did for payments and banking inclusion in Africa?

• As per the Chainalysis report, the value of Africa’s crypto currency market has grown by 1200% in last year. In addition, the region also has some of the highest grassroots adoption in the world. Kenya, Nigeria, South Africa and Tanzania feature in the top 20 of Global Crypto Adoption Index.

• In last 4 years, 8 African countries have launched initiatives to establish CBDC (Central Bank Digital Currency) in their markets. South Africa has set up the Intergovernmental Fintech Working Group (IFWG) comprising regulators and market players to promote DLT-driven innovation in financial markets. The IFWG has already completed two projects.

• As per Briter Bridges report, investments in tech start-ups across Africa doubled in 2021 reaching USD 5 billion. Investment in African fintech increased 9 times in last 5 years. Fintech also emerged as a preferred sector for global investors in recent “World to Africa Survey” conducted by Standard Bank.

A couple of decades ago, several African economies jump-started the mobile banking revolution offering millions of Africans access to easier and cheaper money transfers. Today, central bank digital currencies (CBDCs) – a digital equivalent of a country’s fiat currency – could promote greater financial inclusion in underbanked societies across developing markets. Which is why a number of African economies are trialling CBDCs. The use of CBDCs, together with stable coins (i.e., a privately issued crypto-currency underpinned by a reserve asset such as fiat money, a tangible asset, or a commodity) could reduce friction in cross-border payment and securities settlement processes. This will generate cost efficiencies and mitigate risks.

Africa’s reputation as a disruptor was cemented during the mobile banking revolution. The question now is whether the continent will be equally as disruptive with digital assets.

Adrien Treccani CEO and Founder METACO

Digital assets are generating interest in Africa. Tokenised securities, which are traded and settled on a distributed ledger technology (DLT) could bring enormous benefits to Africa – not least by democratising the investment process. By fractionalising conventional assets (e.g., equities, bonds, private market instruments such as private debt) into bite-sized, digital units, the cost of investing will decrease. This will allow retail clients to construct their own tailored investment portfolios, but at much lower cost. By enabling greater retail participation in capital markets, liquidity across Africa will increase.

Hari Chaitanya

Head: Custody & Investor Services Africa Regions, Corporate & Investment Banking Standard Bank