Coinbase, a titan in the world of cryptocurrency exchanges, has announced a major expansion into Africa, covering 20 countries across the continent. This robust initiative, in partnership with Yellow Card, a leading African stablecoin exchange, is set to improve blockchain’s position in the country’s emerging economies. This collaboration signifies a shift in financial accessibility, offering millions of users access to the US Dollar Coin (USDC) and triggering faster, more economical transactions through Coinbase’s decentralized Layer 2 (L2) platform, Base.
Coinbase Enhances Africa’s Crypto Adoption
This expansion brings a new excitement among crypto enthusiasts in Africa as approximately half of the continent’s population will soon have the ability to purchase USDC directly via the Coinbase Wallet app. The launch is slated for February and is a direct response to the financial challenges faced by the African market, which is high inflation and a heavy reliance on remittances.
The move is particularly impactful in countries like Nigeria and South Africa, where cryptocurrency use is surging, with 47% and 22% of adults, respectively, involved in crypto as of 2022. The introduction of USDC on Base is expected to offer a stable and efficient alternative to volatile traditional fiat currencies, plagued by high transaction fees.
The partnership between Coinbase and Yellow Card is set to revolutionize remittances and commerce across the continent. Remittances, which can constitute up to 20% of GDP in many developing countries, will now be subject to a maximum fee of 2%, a significant reduction from the traditional 3% to 6% fees, and will be processed in minutes or seconds, not days.
This is an advantage for small and medium enterprises (SMEs), which make up a substantial portion of the global economy but often struggle in African and other emerging markets due to barriers in accessing USD and Euro accounts. By facilitating access to USDC, these enterprises can effectively connect to the global financial system.
Coinbase’s Vision Of “Go Broad, Go Deep”
Coinbase’s “Go Broad, Go Deep” strategy reflects a comprehensive plan for compliant international expansion. The “Go Broad” element aims to facilitate market entry in regions with limited economic freedom. In contrast, the “Go Deep” aspect involves detailed engagement with local payment regulators in more developed markets.
Africa, with its young demographic, is poised to lead the blockchain technology. The majority of global crypto owners are under 34 years old, indicating a generational shift toward digital currency adoption. Young Africans, familiar with mobile technology, are likely to prefer the benefits of cryptocurrencies—such as speed, reach, and autonomy—over traditional banking systems.
Africa is rapidly growing in the crypto market but remains small, with peak transactions reaching $20 billion monthly in mid-2021. Kenya, Nigeria, and South Africa lead in user numbers. Despite crypto’s use in commercial payments, its volatility challenges its role as a reliable store of value.
Policy concerns include the potential use of cryptocurrencies for illegal fund transfers and bypassing capital outflow regulations. Their widespread adoption could destabilize monetary policy and financial stability. The Central African Republic’s recent adoption of Bitcoin as legal tender, following El Salvador, conflicts with the Economic and Monetary Community of Central Africa (CEMAC) regulations.
Last month, the Central Bank of Nigeria (CBN) reversed its ban on cryptocurrency transactions, acknowledging the need to regulate the sector due to global trends. This change comes after the CBN’s initial prohibition in February 2021, which aimed to prevent money laundering and terrorism financing.
Following this, Nigeria’s Securities and Exchange Commission (SEC) introduced regulations for digital assets in May, indicating an attempt to balance between a total ban and unregulated usage of crypto assets.
