While cryptocurrency is gaining traction with users across the world, several governments are still contemplating whether it should be legalised. Countries in Africa, however, seem to be warming up to the idea of digital currency with the Central African Republic adopting Bitcoin as an official currency, late last month. With this, it became the second country in the world and the first in Africa to do so. The only other country that uses Bitcoin as legal tender is El Salvador. Following the Central African Republic, Uganda is also now mulling the idea of a “central bank digital currency”, pointing at a steadily growing interest in cryptocurrency in the continent.
Speaking about Uganda's interest in cryptocurrency, Andrew Kawere, Bank of Uganda's director for national payments told Reuters that the Bank of Uganda was conducting preliminary research to determine if a central bank digital currency should be explored, and what policy goals it would address.
While Uganda is still toying with the idea, Nigeria's central bank had barred local banks from working with cryptocurrencies last year. “Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges are prohibited,” a directive by the Central Bank of Nigeria in February 2021 said.
Instead, it went on to launch its own digital currency. In October 2021 Nigeria became the first country in Africa to introduce a digital currency named eNaira. Speaking about the same, Nigerian President Muhammadu Buhari had said in a televised speech that over the next 10 years, the adoption of the central bank's digital currency and its underlying blockchain technology, may boost Nigeria's gross domestic product by $29 billion.
Data, too, points to an increased interest in cryptocurrency in African countries. As per a report by blockchain data platform Chainalysis, Africa's cryptocurrency market grew by over 1,200 percent in a year between 2020 and 2021. The report stated that though Africa had a small cryptocurrency economy, with $105.6 billion worth of cryptocurrency received between July 2020 and June 2021, it was also “one of the most dynamic and exciting”.
Additionally, the report also stated that some of the highest grassroots adoptions in the world are seen in Africa, with Kenya, Nigeria, South Africa, and Tanzania making it to the top 20 of our Global Crypto Adoption Index. However, low Internet penetration in several African countries could prove to be a roadblock to the large-scale adoption of cryptocurrency in parts of the continent.