Strategic investment: VCs are missing out on Africa’s blockchain boom

As crypto continues to transition from a niche interest to an important financial tool, we’re starting to see the potential for how it could help reshape traditional global economic hierarchies. 

Tensions are running high, and tectonic shifts are already underway as we see the world’s great superpowers vie for security, prosperity, and influence. From sanctions, seizures, and the general weaponization of financial infrastructure to the legalization of Bitcoin (BTC) and the acceptance of crypto for global trade settlement, the world’s financial system is changing as we speak, and it will never be the same again. 

As is often the case, amidst such socio-economic unrest and uncertainty, there is the opportunity to create something new. El Salvador’s adoption of Bitcoin as legal tender is the clearest example of this, but even in China’s Greater Bay area, under the banner of web3, we’re seeing the emergence of a new financial paradigm. 

Interestingly, while equally impactful transformations are happening across the African continent, the world is barely paying attention. As a case in point, in terms of attracting venture capital, Africa’s share of global blockchain venture funding was just 1.3% in 2023 and only 0.6% during the first half of 2024. By contrast, the US—where it reins Wells notices—secured a whopping 47% of the global blockchain VC pie. Of course, the size of economies should be factored in here, but with African nations representing roughly 3% of global GDP and the US around 25%, the picture of under-investment in Africa remains true. 

As sound regulatory frameworks continue to develop across the continent, should Africa be at the top of the list for VCs seeking to capitalize on the long-term blockchain opportunity?

Blockchain-powered economic advancement across Africa

The complexity, diversity, and often innate challenges faced by many African economies make them a fertile ground for crypto-backed innovation.

The core tenets of blockchain—efficiency, transparency, and disintermediation—are powerful tools for addressing some of these challenges. Blockchain provides a unique opportunity to leapfrog legacy systems and bypass the infrastructure inefficiencies that have held the continent back in many ways. 

The potentially revolutionary impact of blockchain can be felt particularly keenly in the financial services industry. 

Many individuals and businesses are unbanked and underbanked across the continent, and cryptocurrencies are increasingly bridging the gap. It helps to drive grassroots economic activity while providing a link for informal sectors to integrate into the formal economy. The result of this is better access to credit, improved business practices, and enhanced economic stability.

Traditional financial service providers, as well as fintechs themselves, are also increasingly seeking to provide crypto services to their customers, turning to crypto exchanges to provide liquidity and infrastructure. If we extrapolate the trend, it won’t be long until millions of people across Sub-Saharan Africa will have easier access to stablecoins such as USD Coin (USDC), enabling them to save in a currency stronger than what’s generally available locally. The impact cannot be underestimated. 

Powering start-up innovation 

Across the continent, innovative start-ups are working hard to leverage the full potential of crypto and to address some of the challenges holding back its broader adoption. However, scaling these solutions remains a significant challenge without adequate venture capital.

The journey we have been on at VALR is just one example of how venture capital can have a positive influence not only on Africa’s crypto landscape but also on the broader economy. 

Securing Africa’s largest-ever crypto VC-raise has enabled VALR to invest heavily in industry-leading technologies that are now offered to over 1,000 corporate clients as well as over 800,000 retail customers worldwide, with some of our biggest clients located outside of Africa. Our experience is a testament to how start-ups that begin who start their journey in Africa can compete on the global stage. With the right financial backing, more African blockchain projects can help contribute to local economies while also sharing their expertise with the world.  

The importance of regulatory clarity

While the potential for blockchain and crypto in Africa is vast, regulatory uncertainty has undoubtedly been a significant barrier to greater VC funding across the continent.

But this is not a universal trend. South Africa, in particular, has taken a proactive and collaborative approach to regulating the sector. With a clear regulatory framework in place, South Africa has over 100 licensed crypto companies. Even before the licenses were granted, regulatory clarity was a positive driver for investor sentiment. In 2023, South Africa secured 21% of all blockchain venture funding in Africa. 

It is clear that the African countries that are embracing crypto with forward-looking and clear regulations are reaping the rewards at all levels of economic activity. South Africa’s licensed crypto companies, for example, are generating significant tax revenue and providing employment opportunities not only within Africa but across the world. The remote-first ethos of blockchain companies is creating a valuable export opportunity, opening up South African technological innovation and financial services expertise to a global audience.

For Africa to increase its share of global blockchain venture funding—and supercharge innovators—more jurisdictions (and not just African ones) would need to follow South Africa’s lead. Clear, forward-looking regulations are essential for creating an environment where blockchain can thrive.

The path forward: Embracing the crypto opportunity

Africa’s challenges and complexities mean that it has more to benefit from blockchain innovation than any other continent globally. Yet the level of VC funding doesn’t yet match the opportunity.

VCs should not overlook the African continent in favor of more developed markets such as the US. Despite challenges, there is vast potential to invest in blockchain projects that could transform the continent’s growth trajectory while delivering returns.

At the same time, African regulators will need to embrace the crypto opportunity rather than resist it. Undoubtedly, many of the local currencies, such as the Nigerian Naira, are falling out of favor and will likely end up worthless. Crypto is not a threat but a real opportunity for African countries to gain a stronger foothold in the rankings of global economies—not all too dissimilar from El Salvador.  

By providing a clear and supportive regulatory environment, African nations can attract the venture capital needed to scale blockchain innovations, create jobs, and ultimately propel economic advancement across the continent.

Ben Caselin

Ben Caselin is chief marketing officer at VALR, the Pantera-backed crypto exchange. Headquartered in Johannesburg and the largest exchange by trade volume on the African continent, VALR serves over 1,000 corporate and professional investors and more than 800,000 traders worldwide. Drawing on years of experience in the digital asset space, mainly in Hong Kong and the United Arab Emirates, focusing primarily on driving the adoption of Bitcoin in emerging markets, Caselin is frequently cited and published in top-tier media and an avid speaker at global conferences.