Africa fell in love with crypto. Now, it’s complicated

Chiamaka, a former product manager at a Nigerian cryptocurrency startup, has sworn off digital currencies. The 22-year-old has weathered a layoff and lost savings worth 4,603,500 naira ($9,900) after the collapse of FTX in November 2022. She now works for a corporate finance company in Lagos, earning a salary that is 45% lower than her previous job.

“I used to be bullish on crypto because I believed it could liberate Africans financially,” Chiamaka, who asked to be identified by a pseudonym as she was concerned about breaching her contract with her current employer, told Rest of World. “Instead, it has managed to do the opposite so far … at least to me and a few of my friends.”

Chiamaka is among the tens of millions of Africans who bought into the cryptocurrency frenzy over the last few years. According to one estimate in mid-2022, around 53 million Africans owned crypto — 16.5% of the total global crypto users. Nigeria led with over 22 million users, ranking fourth globally. Blockchain startups and businesses on the continent raised $474 million in 2022, a 429% increase from the previous year, according to the African Blockchain Report. Young African creatives also became major proponents of non-fungible tokens (NFTs), taking inspiration from pop culture and the continent’s history. Several decentralized autonomous organizations (DAOs), touted as the next big thing, emerged across Africa.

Now, however, much of this buzz seems to be a thing of the past. “People sparingly talk about NFTs and DAOs,” Olabinjo Adeniran, a marketing manager in the blockchain industry, told Rest of World. “You can’t just draw a monkey and sell it for a thousand dollars anymore … As for DAOs, many had no use case. The obsession with launching tokens makes them fall under the speculative side of crypto, which is dead.”

Several crypto-related startups across the African continent have been struggling to survive.

In 2023 alone, a lack of funds has led to the acquisition of at least one Nigerian crypto exchange company, while another crypto payment company has shut down. In November 2022, Nestcoin, a Nigerian crypto venture studio, laid off around 30 employees after $4 million in operational capital was reportedly held by FTX. In January, crypto exchange Luno, founded in South Africa but headquartered in London, cut 35% of its global workforce of 950 employees, citing slow revenue growth. Pan-African fintech company Chipper Cash reportedly laid off a third of its employees in February. Earlier this month, Paxful, a U.S.-registered crypto exchange with over 1.5 million Nigerian users, suspended its marketplace due to “key staff departures” and “regulatory challenges in the industry.”

Several of these startups have run into trouble because of the skepticism triggered by FTX’s collapse, Barakat Olatinwo, a crypto marketing consultant, told Rest of World. “It has reduced the trust level of users in the sector,” she said.

“You could be in Kenya building a healthy product, and your potential user wakes up to the news of an FTX crash. To them, that’s a crypto problem.”

“You could be in Kenya building a healthy product, and your potential user wakes up to the news of an FTX crash. To them, that’s a crypto problem,” Michael Kimani, founder of the Blockchain Association of Kenya, told Rest of World. FTX’s fallout is also causing more regulatory pushback globally, he added.

On January 31, the acting governor of the National Bank of Rwanda sent a letter indicating concerns about the trading of crypto, which is unregulated in the country. It also forbade the country’s financial services providers from engaging in “any crypto-related activities until a regulatory framework has been put in place.” More than a week later, LocalBitcoins, a popular exchange founded in Finland but operating in Rwanda, shut down. “Most crypto traded in Rwanda was from [peer-to-peer] exchanges … so the closures have definitely impacted crypto activities in the country,” Jefferson Rumanyika, founder of Kigali-based market intelligence platform African Crypto Research, told Rest of World. “As a consequence, you will notice the number of people Googling crypto in Rwanda has waned.”

In South Africa, the crypto hype and consumer trust are fading away. Still, the government’s decision to classify digital currency assets as financial products to regulate them has helped curtail a drastic drop in interest, Nzwisisa Chidembo, founder of Riskbloq, a South African blockchain analytics platform, told Rest of World.

Some industry stakeholders believe crypto is too important to just be a bubble in Africa, and that the current troubles aren’t unique to this industry.

“Every sector is currently struggling to raise [funds] because of the drop in venture capital dollars,” Barbara Iyayi, CEO of Unicorn Growth Capital, a venture capital firm that invests in crypto startups, told Rest of World.

Samuel Akpan, a public relations officer at ConsenSys, one of the world’s largest blockchain software developers, believes the African crypto story has only just begun. “If there’s anything that’s dead in this space, it’s the noise due to the surge of speculative tokens … Now is the time for innovators to build,” he told Rest of World.

Atsu Davoh, CEO of Ghanaian fintech company Bitsika, told Rest of World several African crypto startups still seem to be doing well, and that stablecoins are a great alternative to Africa’s cross-border remittance restrictions. “[They] will most likely gain more prominence as dollars become scarce for outflow transactions across the continent,” Davoh said.  

Mohamed Taysir, co-founder and CEO of Egypt’s Singularity Finance, believes the trend of crypto startups closing down is driving attention away from the promise of quick money to more “beneficial use cases of blockchain.”

However, convincing more Africans to embrace cryptocurrencies is a different story.

Adepoju Adebowale, a 27-year-old crypto enthusiast from Nigeria, told Rest of World he once believed Africa and crypto were the perfect couple. However, the events of the last few months have forced him to change his mind. He said his crypto investments grew from 70,000 naira ($152) to 3 million naira ($6,514.23) within six months in 2021. Now, Adebowale has lost almost all of that money. “I have abandoned the 50,000 naira worth of coins left in Binance since last year, and won’t be checking until — if it ever happens — the value goes up for me to make something close to my capital,” he said.