Bull run in Africa’s blockchain investment continues
What you need to know:
- As Africa's crypto adoption numbers continue to break records, startups in the space are attracting ever-more funding.
- Cryptocurrency payment value in Africa surged by 1,200 percent to 105.6 billion US dollars in June 2021 from July 2020.
The fundraising boom in Africa's crypto space shows no sign of abating.
Venture Capital (VC) flows into crypto ventures in the first half of 2022 surpassed the total for all of 2021 - 127 million US dollars - reports show.
In the first quarter of 2022 alone, 91 million US dollars was raised, with this fundraising streak spilling over into the second quarter which saw four fundraising rounds deliver another 213 million US dollars.
The Seychelles-based startup, KuCoin in May raised a record-shattering 150 million US dollars in a pre-Series B funding round, pushing its valuation to 10 billion US dollars, not only delivering Africa’s first blockchain "mega deal", but also its first blockchain unicorn as well as the continent’s first 'decacorn.'
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Mara, a Pan-African crypto exchange platform, raised 23 million US dollars, while Jambo, a Congo-based startup, raised 30 million dollars and Nigerian startup, Afriex raised 10 million dollars during the second quarter of 2022.
The funds raised and disclosed so far in this space stand at 304 million US dollars, more than double the 127 million US dollars raised for the whole of last year.
Cryptocurrency payment value in Africa surged by 1,200 percent to 105.6 billion US dollars in June 2021 from July 2020, according to data from blockchain data platform, Chainalysis.
However, despite the continued investment into the crypto ecosystem in Africa, the continent accounted for just 0.5 per cent of total global blockchain funding, offering plenty more upside to potential investors.
“Although Africa’s blockchain and cryptocurrency funding numbers are still small compared to other regions, they are certainly growing,” according to The African Blockchain Report 2021.
The report, published by Crypto Valley Venture Capital (CV VC) and Standard Bank, shows a 1,668 per cent year-on-year first-quarter growth in funding - rising from 5.1 million US dollars in 2021 to 91 million US dollars in Q1, 2022.
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In 2021, Nigeria, Kenya and South Africa – three of the ‘big four’ startup ecosystems along with Egypt - bagged most of the venture dollar inflows in the crypto space, and together with Seychelles, accounted for 122 million US dollars.
Nigeria topped the 2021 list, raising 49.6 million US dollars followed by Seychelles (33.8 million), showing the island nation was already punching above its weight considering it does not even feature in the top 100 in Global Startup ecosystems.
Kenya (20 million US dollars) and South Africa (18.8 million) finished third and fourth in 2021, respectively.
Even Cameroon (4.1 million US dollars) and Burkina Faso (300,000) raised more than Egypt’s 200,000 US dollars. Ghana's crypto space attracted 125,000 US dollars.
Historically high crypto adoption rates on the continent are being fuelled by an increased interest in regulated digital currencies from central banks as well as the urgent need to include unbanked populations - all making blockchain startups attractive to investors.
“The lack of common legacy financial systems and an enormous population, primarily unbanked, all contribute to the popularity and growth of cryptocurrencies on the continent,” said the authors of the report.
From peer-to-peer (P2P) payments facilitating trade in informal and small business ventures as well as opportunities to lower the considerable costs of logistics and remittances on the continent, the report showed Africa is openly embracing blockchain to revolutionize finance and trade and to bolster financial inclusivity.
“Countries like South Africa, Kenya, Nigeria, and Ghana have seen a rapid uptake of crypto assets to access more efficient payment trails provided by blockchain networks and yield returns on income with assets like Bitcoin or stablecoins pegged to the value of the US dollar,” said Standard Bank, Blockchain Research Institute Africa Regional Director, Ian Putter.
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A sustained rise in investment inflows, the sealing of Africa’s first mega blockchain fundraising deal and the birth of a 'decacorn' have all raised prospects for even bigger deals - and more 'unicorns' - in the coming few years.
“We expect to see these begin to emerge within the next 2 to 3 years,” the report said.
A joint report by Boston Consulting Group (BCG), Bitget, and Foresight Ventures projects further significant growth in Africa’s crypto trade thanks to another factor altogether - the opportunities for crypto-linked derivatives trade.
The report sees a rise in derivative trading in South Africa and Nigeria - but with a caveat.
“We expect strong growth in crypto adoption in Africa. However, derivatives may lag given their limited use in traditional markets,” said the report.
The report titled “What Does the Future Hold for Crypto Exchanges?” shows the global crypto trade stood at 54 trillion US dollars in 2021.