Ep 72: Digital Assets in Africa - Heterogeneity and Opportunity

I think, you know, And I will get to answering the question in terms of infrastructure at the end of this.

But I think we need to, you know, take a step back when we consider what is the potential for digital assets in Africa.

or in any emerging markets, really, which is a very different context and environment to, I think, what we're seeing in the UK, the EU, and the US at the moment, where often the conversation is more about What problem are we trying to solve with these things? Are they a solution in search of a problem? You know, we can see the benefits of tokenization, but we've already got fairly efficient financial markets.

So what is going to be the big thing that unlocks investment in bringing the next stage of tokenized financial markets into existence? Whereas in an early conversation that Kofi and I had, You know, I got very excited because some of the things that he's using digital assets and stablecoins in use cases and real world applications are very much about solving existing market access challenges and problems and using them to unlock access to capital for investment or to unlock, you know, routes to payment for investment as well.

And so this is kind of flipping the typical narrative that we have in its head.

These are not solutions in search of a problem.

These are assets that can be dropped into real world problems and situations today to create solutions.

And so therefore, I'd kind of reframe your question around what do we need in terms of infrastructure to how can this become useful infrastructure for the future that can add genuine economic value to the jurisdictions that are suffering from these market access challenges right now.

I love that.

And I think that's a really good way to set the scene for us, Jana.

And I think the more interesting story now is what gets built after adoption.

So maybe we can shift gears a bit into DeFi.

So what is the impact of DeFi on the African digital asset market? Do you consider that Africa is ready for the pace of innovation in decentralized finance as well?

Okay, so I'm going to come in at this point.

So that's a very interesting question, and it's a question that we've had on so many levels, from the market's perspective, from the regulator perspective, from, in general, just like the bandage going around.

So DeFi is typically very unstructured, unstructured in the sense that innovations are not really, typically, regulation is not the first thing that comes to mind when you're thinking about it.

You're thinking about, like, I have a need and I want to get it done.

But the good thing about it is that, funny enough, Africa is one of the most unstructured markets in the world, whereby it requires a lot of structure.

So we see a lot of DeFi apps which have some quite a volume from the African market, but it's typically with very basic stuff, like very basic swaps, not too complex derivatives or stuff like that, because at the same time, there's also a lot of risk aversion in terms of losing capital and all those things.

So, standardly, that's what I would say is the interface with DeFi.

On the regulation side of things, I think the very nature of DeFi makes it hard to be regulated.

We just have to have that as a foundation.

It's meant to be technology that is... allows finance in a very borderless way, right? So, as of now, most of the regulators didn't really add a lot of DeFi frameworks into their laws.

They have given some room for it to maybe sandboxing or to like, you know, if you have some innovative product, you can bring it on or something of that sort.

In the standard categories, they don't seem to exist across the market.