Block CEO Jack Dorsey and his top brass descended on Accra for the inaugural Africa Bitcoin Conference in December to talk about one of the most potentially disruptive and transformative alternatives to the continent’s existing financial system: bitcoin.
Since its inception in 2008, this unfamiliar form of money has alternatively been disdained as an absurdly complex toy for libertarian techies, a legalized form of gambling, a speculative bet to get rich quick, and a vehicle for criminals and fraudsters to obscure the origins of their ill-begotten gains.
But this parallel financial system can also serve a tangible social good, offering an onramp to the financial system for people who would otherwise be left out. In countries where the vast majority of the population is unbanked, national currencies are no longer a safe store of value, remittances comprise a hefty portion of GDP, and international sanctions complicate connections to the global economy, a virtual currency that doesn’t require an intermediary to approve transactions can be a vital lifeline for survival.
As cryptocurrency continues to rise in prominence and becomes a growing flashpoint for regulators, Dorsey and his deputies are providing an essential counter-narrative: Bitcoin brings financial power to people who would otherwise have none.
“It doesn’t matter to me if the price goes down or up, because I can still use bitcoin as a vehicle to move money around the world instantaneously,” said Mike Brock, the CEO of TBD at Block, a unit which focuses on cryptocurrency and decentralized finance.
“I can exchange dollars for bitcoin and then bitcoin for Brazilian rial. There is a market for bitcoin in every corner of the world today,” continued Brock.
A broken financial system
Moving money in Africa is an expensive and complicated process.
Commercial bank branch access is limited, especially for people living in remote and rural areas. Digital banking options are also limited. Tack on rampant hyperinflation, widespread government corruption, and capital controls trapping domestic cash in banks, and money can stop making sense altogether.
“If someone wants to move money to the country next door, normally, you’d have to fill up a suitcase full of cash and move it over the border,” explains Ray Youssef, CEO of Paxful.
Part of the problem stems from the continent’s quasi-colonial payment framework, in which roughly 80% of cross-border payments originating from African banks are processed offshore, mostly in the U.S. or Europe. That translates to higher costs and processing times that are sometimes measured in weeks.
Then there’s mobile money, which has been around since the early 2000s. Think of it like an electronic wallet tied to a phone number that does not require a smartphone or data to operate. Users can pay bills and shop with their phone through SMS texting, instead of having to rely on traditional banking options.
Africa’s mobile money transactions rose 39% to more than $700 billion in 2021, according to data from the GSM Association, a non-profit representing mobile network operators worldwide. World Bank data shows that account ownership at a financial institution — or via a mobile money service provider — has more than doubled in the last decade, rising to 55% of adults in Sub-Saharan Africa.
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