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Decentralised Finance and Cryptocurrency Activity in Africa

In: The New Digital Era: Digitalisation, Emerging Risks and Opportunities

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  • Peterson K. Ozili

Abstract

Objective:Recently, there has been an increase in the use of cryptocurrency, decentralised finance (DeFi) applications and DeFi services in several countries. These innovations facilitate the delivery of financial services using smart contracts. DeFi encompasses all financial services that are built on public blockchains, based on open protocols and removes intermediaries from the financial intermediation process. There is significant cryptocurrency activity in Africa while DeFi developments are relatively new and unpopular in the African continent. This chapter introduces DeFi in Africa. It presents some statistics and data on DeFi in Africa. Thereafter, the potential benefits, challenges and regulatory issues associated with DeFi in Africa are presented. Method:This study used literature reviews and external data sources to show the benefits and advantages of DeFi . Findings:The findings show that there is low interest in DeFi in Africa. Some benefits of DeFi to African countries include increased liquidity for many small- and medium-scale enterprises (SMEs), new opportunities to raise additional capital to fund capital-intensive activities, usher in an era of smart contracts that are negotiated bilaterally without needing an intermediary, encourage peer-to-peer trade between economic agents in several African countries, enhance the efficiency of the Pan-African Payment Settlement System and encourage more trade between individuals and corporations under the African Continental Free Trade Agreement, among others. Originality:This is the first chapter to examine DeFi in Africa.

Suggested Citation

  • Peterson K. Ozili, 2022. "Decentralised Finance and Cryptocurrency Activity in Africa," Contemporary Studies in Economic and Financial Analysis, in: The New Digital Era: Digitalisation, Emerging Risks and Opportunities, volume 109, pages 3-11, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:csefzz:s1569-37592022000109a001
    DOI: 10.1108/S1569-37592022000109A001
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    References listed on IDEAS

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    1. Chen, Yan & Bellavitis, Cristiano, 2020. "Blockchain disruption and decentralized finance: The rise of decentralized business models," Journal of Business Venturing Insights, Elsevier, vol. 13(C).
    2. Peterson K. Ozili, 2018. "Impact of digital finance on financial inclusion and stability," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(4), pages 329-340, December.
    3. Ozili, Peterson Kitakogelu, 2018. "Impact of Digital Finance on Financial Inclusion and Stability," MPRA Paper 84771, University Library of Munich, Germany.
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    Cited by:

    1. Ghaemi Asl, Mahdi & Ben Jabeur, Sami, 2024. "Tail connectedness of DeFi and CeFi with accessible banking pillars: Unveiling novel insights through wavelet and quantile cross-spectral coherence analyses," International Review of Financial Analysis, Elsevier, vol. 95(PB).

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    More about this item

    Keywords

    Decentralised finance; cryptocurrencies; bitcoin; blockchain; central bank digital currency crypto technologies; Africa;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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