In 2024, Africa’s participation in global blockchain deals has significantly grown, underscoring the continent’s emerging influence in the global blockchain industry.

In H1 2024, Africa recorded its highest-ever share of blockchain venture capital (VC) rounds, reaching 1.8% of the global deal count, an increase from 1.3% in 2023, according to a new report by CV VC, a Swiss blockchain VC firm.

The “African Blockchain Report 2024”, released on July 16, 2024 in partnership with the pan-African bank Absa Group, examines funding activity in Africa and highlights emerging investment trends. The report reveals that not only is Africa increasing in prominence in the global blockchain industry, but that the sector is also becoming increasingly prominent in the continent’s VC landscape.

In H1 2024, blockchain venture funding accounted for 6.4% of venture funding and 12.5% of total deals in Africa, representing an all-time high in deal share. In comparison, blockchain funding made up only 3.5% of all venture funding and 5.9% of total deals globally. This disparity suggests a greater regional focus on blockchain solutions in Africa.

Investment shifts

The African blockchain landscape saw notable shifts in investment in 2023 and H1 2024, with more flows going towards startups in the verticals of blockchain networks (45.9%), and gaming, non-fungible tokens (NFTs) and the metaverse (18.1%). Decentralized finance (DeFi) maintained traction, accounting for 18.2% of blockchain venture funding in 2023 and H1 2024, though the segment has lost some momentum this year.

According to the report, these trends highlights investor confidence in foundational blockchain technologies and innovative financial solutions, highlighting Africa’s strategic pivot towards sectors that promise to redefine and drive future growth. This focused investment approach affirms the region’s emerging role on the global blockchain stage, it says.

Blockchain funding declines amid economic headwinds

Despite the positive trends, the blockchain sector in Africa wasn’t immune to the economic headwinds in H1 2024. African blockchain startups secured a total of US$34.7 million across 12 deals, representing a 9% increase in the number of deals but a notable 70% decrease in funding compared to H1 2023.

Globally, blockchain VC funding totaled US$5.74 billion across 678 deals, marking a 9% year-over-year (YoY) decline in funding and a 14% YoY decline in the number of deals.

Leading countries and biggest blockchain deals

In Africa, Seychelles continued to take the lead, accounting for 44.3% (US$15 million) of blockchain VC funding in H1 2024. Seychelles is followed by Nigeria with a 37.6% share (US$13 million), and South Africa with a 17.3% share (US$6 million).

The largest VC rounds in the period were secured by Zone Payment Network (US$8.5 million), NFTfi (US$6 million), ELFi (US$5 million) and Azuro (US$3.5 million):

• Zone Payment Network operates a regulated blockchain network that enables payments and issuance of digital currencies. Founded in 2022 and headquartered in Nigeria, the company aims to connect every monetary store of value using blockchain and create one global network to pay anyone through any means and in any currency.
• NFTfi is a peer-to-peer platform that lets NFT holders and liquidity providers connect via permissionless smart contract infrastructure. The company, founded in 2017 and based in South Africa, allows users to put their NFT assets up as collateral for a loan, or offer loans to other users on their NFTs.
• ELFi is a decentralized derivatives trading platform that focuses on delivering top-notch trading functionalities. Founded in 2023 and headquartered in Seychelles, the company offers a suite of advanced trading functionalities that cater to both retail and institutional investors.
• Finally, Azuro is a decentralized autonomous organization committed to democratizing and innovating in predictions. Founded in 2021 and headquartered in Seychelles, the company utilizes smart contracts to create a decentralized prediction protocol.

Regulatory progress

Africa’s dynamic blockchain ecosystem is evolving alongside regulatory advancements. While many jurisdictions in the continent remain cautious, more and more governments are shifting their positions from banning cryptocurrencies towards establishing regulatory frameworks:

• Nigeria lifted its ban on crypto in December 2023 and released in March 2024 new draft guidelines to license, register and screen digital and virtual assets service providers;
• Namibia passed in June 2023 a new bill to legalize and establish regulations for virtual assets;
• Morocco completed last year the draft of a new bill to regulate cryptocurrencies; and
• Kenya is working on a regulatory and monitoring framework for the use of virtual assets and for providers of virtual asset services.

Absa Group executives Nkahiseng Ralepeli and Robyn Lawson highlighted the importance of robust regulatory frameworks in Africa’s burgeoning crypto market, emphasizing the role of recent regulatory developments in South Africa in not only fostering growth and innovation, but also ensuring market stability and protecting consumers.

South Africa stands out as a pioneer in crypto regulation in Africa. Currently, nearly 10% of South Africans own cryptocurrencies, data from the country’s Financial Sector Conduct Authority (FSCA) reveal, a figure which the agency expects will surge to 43% by 2030. This significant growth trajectory underscores the urgent need for a robust regulatory framework to support stable market expansion and protect consumers, the executives state.

In 2022, South Africa officially classified crypto assets as financial products, mandating businesses offering financial services related to crypto assets to apply for a license with the FSCA. As of June 2024, over 130 crypto providers had received approval.

Featured image credit: edited from freepik