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Feeling the pulse of Bitcoin in Africa
Staking ban?, Interview with Africa’s biggest crypto exchange, Bitcoin experienced in Township, why the west doesn’t need to teach Africa about Bitcoin, Africa Alpha
Let’s gooo 🎢 What to expect:
Knowledge-Level : 🟢 Beginner| 🟡 Advanced | 🔵 Expert
Market Update: Staking ban? What sounds negative is actually rather positive 🟡
Talking to Africa’s biggest crypto exchange 🟢
Podcast of the Week 🟡
A future beyond township poverty: hope rests on Bitcoin 🟢
The western world doesn’t need to teach Africa about Bitcoin! 🟢
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🟡 Market Update: Staking ban? What sounds negative is actually rather positive
written by Pascal Hügli
Since our last market update, Bitcoin has not managed to break the $24k barrier. Rather, over the past two weeks, the $22.5 barrier has been tested on the downside time and time again. After this support level was held several times, it was now breached the day before yesterday:
The catalyst for this was a rumor from Brian Armstrong, which finally came true. The CEO of the largest US crypto exchange Coinbase announced on his Twitter account that the SEC apparently wants to abolish crypto-staking in the US for private customers. This would affect all Proof-of-stake blockchains – most notably Ethereum, which switched to the PoS consensus mechanism just last September.
With this tweet, Armstrong triggered the crypto Twitter community. Several other crypto connoisseurs and influencers also began tweeting that they had heard similar things:
And then the coup actually manifested: The news broke that the other major US crypto exchange, Kraken, announced that it was shutting down its staking offering. This was because the US Securities and Exchange Commission (SEC) had the crypto exchange pay $30 million in fines, citing securities law violations as the reason. For many, this news was doubly disturbing: on the one hand, the crypto world received confirmation that the US regulator would indeed take action against staking offerings by centralized players. And secondly, the Kraken case can be interpreted in such a way that coins of PoS blockchains are probably really to be classified as securities according to the SEC.
Thus, it was only logical that the price of crypto assets would drop in the wake of this news. While some were already proclaiming the end of PoS coins (above all the Bitcoin maximalists), others tried to provide clarity. For example, Jesse Powell, CEO of Kraken, did clarify the following: Kraken is “only” discontinuing its staking offering for U.S. customers, clients in other jurisdictions would not be affected.
In any case, the crypto community felt betrayed once more by Gary Gensler, the SEC chairman. Thus, many wondered if the SEC really has the consumer's best interest in mind and really wants to protect them:
Some even spoke of a “regulatory-industrial” U.S. complex in the U.S. that would drive crypto users into the clutches of FTX or dubious vehicles such as ETNs and trusts (above all GBTC), while at the same time refusing to grant a license to good players with good products. Yet again, such action seems to only serve Wall Street and its incumbents.
And yes, it is completely understandable that such decisions of a regulator result in indignation and outrage. After all, many crypto enthusiasts simply want to bring about a better world. However, one must not completely forget that from a traditional (read “old-word”) perspective, the SEC's approach is not all “wrong”. For example, it has the mandate to identify products that are yield products after all and thus need to be regulated as securities. And yes, as it turns out, this really seems to be the case with certain staking products.
This can only mean: We have once again reached the heart of the matter in this discussion: Where there exist promises of returns by central third parties, the “chosen” guardians of the traditional world order must also become active in accordance with their mandate and mission. This makes it all the more important from a crypto perspective to build products and solutions that no longer have these “old” points of attack at all. Because only then there is nothing to regulate because there is nothing to regulate!
At Insight DeFi, we hope (and believe) that we are on this path with Bitcoin and crypto development in the long term. In the short term, however, decisions such as those made by the SEC naturally create uncertainty and therefore insecurity.
And it is precisely this that then translates into market uncertainty and causes prices to tumble. In view of the current situation, investors might indeed be better advised to exercise some caution—especially because further “enforcement” by the US regulator is to be expected over the next few weeks. A legitimate question is whether Bitcoin – as a standalone asset – can benefit in price from a major staking crackdown. After all, Bitcoin is not based on Proof-of-stake and could therefore serve as a crypto haven in the event of further bad news.
As always, we can only speculate about future price movements. We want to end on the following two concluding remarks: First, with respect to the U.S., it could very well be that such decisions will push you into crypto extinction. If offering staking services to institutional investors in the U.S. is really made more difficult in the long term, these firms will look for alternatives. However, this is exactly what would then lead some players to go offshore again and increase the risks for US customers – this is what happened with FTX. Once again, the US consumer would not really be the one benefiting….
And secondly, a ban on US staking service providers would significantly decentralize the staking landscape, especially Ethereum, since the largest ETH staking providers are in the US today. However, a decentralized Ether would ultimately be a better ETH. And yes, this actually makes the news, which sounds ominous today, seem positive from a long-term perspective. This is similar to what happened in China in the summer of 2021: the China bitcoin mining ban hurt the industry in the short term, but turned out to be positive in the medium term.
🟡 Talking to Africa’s biggest crypto exchange
Interview with Christo de Wit
As of 2021, about two-thirds of the adult population in Africa are unbanked, meaning they do not have access to formal financial services such as savings or checking accounts, loans, and insurance. And those people that do have access to a bank account still don’t use it (underbanked), mainly because using it is too expensive.
Financial services can be very expensive, especially for low-income individuals and small businesses. High-interest rates on loans, charges for using ATMs, or other non-transparent fees for opening and maintaining accounts contribute to the high levels of unbanked and underbanked individuals in Africa.
To change this, today’s biggest crypto exchange in South Africa, Luno, set out to change this. Their goal has been to empower a billion people across the world and particularly in Africa by upgrading them to a more open, efficient, and inclusive financial system. Insight DeFi sat down with Christo de Wit, country manager for South Africa at Luno, to get some insights into the African market.
Thanks for meeting us, Christo. Online, we read that Luno has a vision of onboarding a billion people onto a more open, efficient, and inclusive financial system. How is it going?
Since its inception, Luno has come a long way. Today, we mainly operate across 3 African countries with the biggest markets being Nigeria, Uganda, and South Africa. Currently, we serve a global client base of approximately 11 million, with most of our users located in South Africa. However, the adoption of cryptocurrencies is still largely confined to the higher end of the economic spectrum – even in South Africa, which is the most developed nation on the continent. The shift towards mass market adoption has yet to occur.
What are the greatest impediments to advanced crypto adoption?
One of them is the lack of education, which is why it is a key focus in all the markets we operate in. Through community outreach and education programs, such as our “Bitcoin Pioneers” or “Luno Educators” program, we aim to bring awareness and understanding of cryptocurrencies to local communities.
What does this exactly look like?
For example, we identify influential leaders within communities and provide them with necessary training on cryptocurrency, including how it works, the benefits, and warning signs. Our goal is to empower these leaders to continue spreading knowledge and education within their communities. After all, effective communication and localization are very important. Let alone in South Africa, there are 11 official languages. So, to ensure wider accessibility and relevance, educational content must be tailored to our target audience, not just in language, but also in terms of content localization – something that is on our roadmap for 2023.
We feel the importance of education cannot be understated, especially in Africa, where the poor are an easy target for scammers because of their knowledge gap and desperation.
In the case of South Africa, we have been observing that scammers are utilizing small regional radio stations as a platform for their scams, often going unnoticed due to being broadcast in local languages. Oftentimes, the stations themselves are desperate for advertising money, which is why they do not have strict policies regarding what content they allow to be advertised.
Is anyone doing anything about this?
To address this issue, together with the advertising regulatory board, we and others have helped put in place a mandate that guides crypto ads in South Africa to warn potential buyers about the risks involved. Luno has been instrumental in leading this project in partnership with other crypto players in South Africa, working together to bring more responsibility to the industry and raise standards.
Is crypto regulated in South Africa?
Cryptocurrencies have officially been treated as a regulated financial product since last year. As part of this regulation, companies operating in the crypto industry are required to comply with anti-money laundering and terrorism funding regulations and submit reports to regulatory bodies. The licensing process for crypto companies in South Africa is set to open in June of this year, and we at Luno have been preparing for it.
What about other African countries?
The degree of government regulations varies across African countries. In Kenya, for instance, the government has taken a firm stance against crypto, while in Nigeria, the market has been thriving, but tighter regulations now require companies to apply for the necessary licenses.
And what’s the general governmental attitude all across Africa like?
It is not possible to give a definite answer as different African countries choose different approaches. There are positive cases to point out though: For example, the Namibian government sent their delegates to attend a crypto conference last year, demonstrating the increasing appetite and interest in the subject. Namibia has even announced that Bitcoin can be accepted as payment. This highlights the growing adoption of cryptocurrencies in the region. In Africa, there is a strong desire to move away from an unregulated environment and establish a more regulated and controlled space for cryptocurrencies.
What role does regulation have to play in crypto?
The importance of regulation in the crypto industry cannot be overstated. It's a delicate balance between promoting the innovation and potential of cryptocurrencies like Bitcoin and other blockchains and ensuring the protection of customers and their money. For this reason, applying regulation to decentralized base-layer technologies like Bitcoin and other blockchains will be a challenge. However, for centralized entities that hold customer or business funds in custody, proper regulations should absolutely be applied.
When it comes to crypto use cases, the use of digital payments appears to be a suitable fit for the African continent. Has this been gaining traction?
Speaking for South Africa, the adoption of cryptocurrency as a means of payment is still in its early stages in the country, with limited acceptance and usage thus far. However, there have been recent developments, such as the integration of Bitcoin lightning payments with Pick n Pay, one of the largest retailers in South Africa. This integration was led by a former Luno co-founder and has opened the door for a potential use case for cryptocurrency beyond just speculation and investment.
Is the payment use case something Luno is actively pursuing?
Luno is actively working on innovative solutions, however, we believe that the market is not yet ready for widespread adoption. Our priority is to educate the public on the benefits of using a safe, reliable, and trustworthy platform for cryptocurrency transactions. Among all crypto players on the continent, we take compliance and fintech regulations very seriously.
What is Luno currently focused on?
Our brand messaging emphasizes responsible and long-term investment, rather than quick wins. We offer localized solutions, with the ability to transact in South African Rand. Among the several competitors that exist today, we were the first crypto company in the country. Our goal is to establish a solid base of crypto users, starting with the economically advanced segments, before gradually expanding to the middle class. This is when we anticipate broader mass-market adoption.
So, at the moment your main offering is crypto trading?
As the crypto industry continues to evolve, many businesses are caught up in the hype surrounding various trends and offerings. However, at Luno, we take a measured and focused approach to our offerings. We currently offer a carefully selected list of only 10 coins and have a rigorous evaluation process in place for selecting new coin additions.
What does this evaluation process look like?
Our team is made up of various crypto experts, and they base their evaluation process on two key factors. Firstly, we assess the potential value of the coin to our marketplace. Secondly, we evaluate the level of adoption and the trustworthiness of the coin. We aim to provide a user-friendly platform that is easily understandable for those who are new to investing in cryptocurrency. To ensure this, we deliberately avoid things like meme coins or any other coins that lack real-world use cases in our view. This slow and steady approach to crypto adoption is critical, as it allows us to grow in tandem with the market.
Sarcastically asked, is Luno currently relying on the speculative aspect of crypto to subsidize education efforts that hopefully lead to a more real-world cryptocurrency adoption?
Yes, this is a fair way to put it. As of now, there is a cyclicality to our business model. As a crypto exchange born and bred in Africa, we have experienced various crypto cycles since 2013 and have emerged stronger each time.
The same goes for the crypto world, right?
Of course. Every bull market has a peak, but each subsequent bear market has a higher plateau, indicating the increasing growth that is happening over time. This is no different here in Africa, and we are quite certain that this will continue to be true in the future and growth will continuously happen in such a wave-type manner.
Last question: Is it more likely that crypto is driving the revolution in Africa, or will African adoption be the crucial factor that brings the crypto revolution to its fruition?
That is the big question – I certainly feel African adoption will be a driving force to bring the crypto revolution to fruition. After all, the impact crypto and blockchain can have on Africa is vast and promising. The continent faces many economic challenges, including weak local currencies and high volatility, making crypto an attractive alternative. Additionally, the remittance industry could greatly benefit from a safe, reliable, and cost-effective way for people to send money across borders. This continent is full of opportunities.
About Christo de Wit:
Christo de Wit is Luno’s South Africa country manager. De Wit hails from South Africa but brings years of experience in global businesses, having served leadership roles at True Money, a fintech unicorn with more than 65 000 agents across six countries. Christo is building on the growth of Luno by raising awareness about crypto as a long-term investment.
Luno is a global cryptocurrency investment app on a mission to put the power of crypto in everyone’s hands. Since its founding in 2013, Luno has grown to be operating in more than 40 countries across Europe, Africa, Asia, and Australia.
🟡 Podcast of the Week
written and seen by Pascal Hügli
This “Crypto Market Survival Guide caught our eye. The crypto dude doing the video might be a little bit on a rant but still, the pieces of advice he is dropping can be considered alpha. Worth to listen in.
🟢 A future beyond township poverty: hope rests on Bitcoin
written by Pascal Hügli
Small but mighty – that's how the Bitcoin Ekasi project in Mossel Bay, South Africa, can be described in one sentence. The aid project did not start out as a Bitcoin project, but as a Surfer Kids program: children from the townships (South African slums) are to be taught how to surf in order to give them a zest for life and perhaps even a perspective.
To get the surfing program off its hinges, the venture was combined with an ongoing tourism business. However, instead of chauffeuring tourists through the townships in buses and evoking a sort of alienating feeling of visiting a zoo, tourists, and township children were brought together directly.
This idea turned out to be a success. Today, dozens of children are taught to surf every day. And those whose talent is evident at an early age are even given special training with the hopes to get them to national surfing competitions. From a township to becoming a national champion, that would be a story!
Unpleasant legacy of Apartheid
By bringing together tourists (predominantly white) and the township kids (exclusively of black African descent), the walls between black and white that still exist in South Africa are to be torn down. Although Apartheid has been long gone, its repercussions can still be felt.
For the black population in particular, it is difficult to escape the stifled poverty conditions. During the apartheid regime, these were cemented for decades. As a matter of fact, townships are an unpleasant legacy of Apartheid. They were created because the black population was allowed to work in the city during Apartheid, but not to live there. The dark-skinned people were kept at a distance and thus deported to areas adjacent to the city.
Exclusion, also in terms of finances
Anyone walking through the townships today does not get the feeling that they would evoke a sense of hope or a positive mood of new beginnings. Unemployment is crushingly high, and the question is not how high the average wage is within a township, but rather whether there is work and thus a wage at all for the people living there.
Townships are also often cut off from the traditional financial system. Many do not host any branches of banks, making it difficult for residents to access traditional banking services. Due to low or even no incomes, township people are hardly attractive to traditional banks as customers. Consequently, access to loans, savings accounts, and other financial products are also a rarity.
All this means that people living in the townships have hardly any prospects and, it seems, lose the motivation to want to improve their own lives on their own. It is a vicious circle that is difficult to break.
Mindsets are changing – thanks to Bitcoin
For years, the aid project in Mossel Bay has been struggling with precisely this problem. Because of entrenched beliefs and ways of thinking, achieving any sustainable change has been extremely challenging.
Bitcoin has brought new hope in this regard. The cryptocurrency brings momentum and impact that are difficult to teach to people, especially those from the townships. For example, the sole belief that making provisions and saving can be a potent key to self-help and poverty alleviation is difficult to convey in conversations and training.
From the viewpoint of a person, it is much more effective to experience the benefits of it firsthand. And this is where Bitcoin helps. Bitcoin is new money that rewards saving and thus can encourage low time preference. Those who stick with it for more than one cycle will experience the euphoria firsthand when the bull market resumes and get caught up in the “number-go-up” technology. The cryptocurrency acts like a positive mind virus that can bring about a lasting change of heart.
The coolest Ekasi ever?
This is the reason the Bitcoin Ekasi project has not slowed down in recent months. On the contrary: utilizing donations as efficiently as possible, Bitcoin training has been ramped up to make the technology familiar to more and more people in the townships.
Meanwhile, 11 stores have been equipped with a setup, so they are now able to receive Bitcoin Lightning payments. From food to gasoline to even haircuts, everything can be paid for with Bitcoin. In addition, township residents can also have the tin walls of their shacks painted with logos from Bitcoin companies; in return, they receive a steady income paid out in Bitcoin through the Lightning network. They can then save this or spend it at one of the 11 businesses. The goal here is to promote a Bitcoin-based circular economy.
As it stands, Bitcoin Ekasi in Mossel Bay is not just a township, but one of the hippest and most forward-looking townships around. The word “Ekasi” comes from the Xhosa language and means “at home” or “in the village” and thus stands for the term “township”. But the word “Ekasi” is intentionally meant to be coined as a positive alternative to that. And yes, we truly think the Bitcoin Ekasi lives up to its name.
What the using of Bitcoin in the township looks like in a very practical sense, you can see in your video:
🟢 The western world doesn’t need to teach Africa about Bitcoin!
written by Joël Kai Lenz
These past couple of weeks have been filled with Bitcoin news out of Africa, whether that be news out of Nigeria with twice as high Bitcoin prices and news of a cash shortage with ATMs or the introduction of Lightning payment providers in South Africa.
Bitcoin Twitter was raging, and you were reading ‘Bitcoin fixes this’ everywhere. All these news have one thing in common: They distort the image of Bitcoin’s adoption in Africa by putting it on a pedestal above all else.
Let me be clear: I’m not stating that Bitcoin is seeing no adoption in Africa. Quite the opposite; it’s actually one of the biggest Bitcoin markets in the world. What is different is how they approach other cultures. They’re not as obnoxious as we are in the West. People in Africa do have other worries than constantly tweeting, “Bitcoin fixes this.”
The issue with telling people what to do
The biggest issue in the West is how we force our opinions and ways of doing business onto other cultures. Especially if this other culture is in Africa or Asia. It’s ironic because you’re always hearing how open the western world is. Still, if you take a sneak peek behind the curtains, you get to see what Westerns really do: forcing ideologies on other people.
Whether you're working on Bitcoin education, business development, or technology adoption, you should never force anyone to do something. People will always fall back into fight mode if they’re forced into something. Not a great place to start and build trust.
So many articles in Bitcoin publications praise the adoption and how most of Africa chooses Bitcoin over altcoins. Combine that with posts from influencers who claim to only see Bitcoin maxis in Africa. However, if you touch base in Africa and test these claims against reality in real life, you realize that we’re a long way away from this reality.
Want to have some proof: See and read for yourself:
There might be a few hotspots where the interest in Bitcoin is high, but if you expand and start looking into more rural areas, you’ll see a lack of interest. Arguably this is due to missing resources like access to the internet or smartphones and not to a lack of interest.
Bitcoin has a massive confirmation bias. Just because one project aims to solve a particular problem doesn’t mean that there are thousands of them. And just because that company happens to question the status quo in an African country doesn’t mean that everyone suddenly thinks like this.
We in the West need to stop cherry-picking. Instead of highlighting clichés, focus on what people are currently building and how merchants are adopting, and focus more on the signal and less on the noise.
How Bitcoin is really doing in Africa
To not fall victim to my own criticism, I was reaching out to some of my Twitter friends in Africa to get first-hand information. The first one who answered instantly was Mary.
Mary is African but wasn’t born there. She moved back when she was in her teens and had the chance to see the development with her own eyes. The biggest issue in her eyes is how the West portrays Africa as an underdeveloped, poor, and often corrupt continent. Mary started out, by mentioning a few things she is upset about:
“Although there are areas where we face those things, the media hardly shows the great sides of Africa, like our innovation, rich natural resources, incredible and diverse culture, creativity, human capital, and hospitable nature of the people.
As someone who is African but wasn’t born in Africa and moved to Africa in my teens, I have had the possibility to see what’s happening on the ground and live among the people. One of the things that jumped out at me was how many people in the West are being misled about what Africa is like. Think about it – if you have lived in Africa long enough, you’d understand why Africans do so well in their field when they go to developed countries – There’s something here that people are overlooking.
That’s one of the reasons why it’s so crucial for Africans to tell their stories of how things are really like in Africa from an objective standpoint.”
Further, Mary explained how Africans could do better as well. Because, just like in the West, there are still many problems the African Bitcoin community needs to fix. However, many people are using Bitcoin or are interested in it. It’s just that last step people still need to take to fully dive into Bitcoin.
Their major issue is creating awareness to the point where people accept Bitcoin as part of their lives. If business owners accept Bitcoin, more people will be inclined to use it to buy things. Currently, they don’t get to see this because very few businesses are accepting Bitcoin. Another point she thinks is holding Bitcoin back is government policy. There are some African countries where bitcoin is not accepted at all. When government policies are not favorable, it is difficult, if not impossible, to easily access bitcoin.
Nigeria is an excellent example of this. The Central Bank of Nigeria issued what was popularly called “the crypto ban.” The central bank prohibited banks from facilitating crypto-related transactions. Sadly, Bitcoin was affected by this. But this did not stop Nigerians from finding a way around this to still have access. Nigerians made use of P2P transactions to buy Bitcoin. Despite the ”crypto ban,” Nigerians are still finding a way around it.
How can we in the West help out?
I also asked Mary what we in the West could do to help. Like every Bitcoiner, she didn’t hold back and also had some great points. In her eyes, the overall goal of every Bitcoiner is hyperbitcoinization. Therefore, we need to be more vocal about Bitcoin educators in Africa and help them with global recognition, whether with tags on Twitter or connecting influential individuals in the West with said educators in Africa.
Another thing is to support Bitcoin capacity building in the space among Africans. Supporting projects or initiatives geared towards helping and encouraging builders in Africa. Qala has been helping in educating Africans to be lightning network engineers. Next to that, there are a lot of talented Africans in the Bitcoin community as well. Instead of hiring another developer in the West, why not reach out to someone in Africa?
The best way to experience these cultures is to spend some time there. Mary stated that many African Bitcoin conferences are happening later this year. Since Bitcoin is for everyone worldwide, Bitcoiners need to see and hear about what’s happening in Africa from Africans. Invite African Bitcoiners to panels and showcase what they’re working on. Let people know what’s happening in the Bitcoin community in Africa!
With that in mind, instead of retweeting the next “Bitcoin fixes this” tweet, make sure to research what’s going on. Make sure to visit some African conferences and, most importantly, reach out to African Bitcoiners. They’re the ones orange-pilling their continent and most qualified to tell you how things are evolving.
Joël Kai Lenz works as a content writer supporting companies in the London Fintech and Bitcoin scene. His core task is to educate newcomers through newsletters, blogs, and articles. Since January 2023, he is also the co-host of the podcast “Rabbit Hole Stories”, in which he takes a close look at the latest Bitcoin events and projects.
🟢 Africa Alpha
written by Pascal Hügli
You want to stay up-to-date on what is happening in regard to crypto in Africa?
For one, they also had a very enlightening Twitter post and article about why the widely shared news about Bitcoin trading at a premium in Nigeria was not really accurate:
The content does not constitute an individual investment recommendation or an invitation to buy or sell crypto assets. Insight DeFi disclaims any liability as a result of actions based on the contents of the newsletter. The Insight DeFi team holds some of the crypot assets featured in this newsletter in their private portfolios.
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