Unlocking Financial Freedom? How Nuud Money wants to empower Southern Africans through Cryptocurrency

When I joined Mpumelelo Ndamane on the Google Meet call, we exchanged pleasantries and talked for about 10-15 minutes to establish some familiarity with one another. The Nuud Money CEO who is based in Jo’Burg as it has come to be known was quite eager to get to know about me and Zimbabwe and so…

When I joined Mpumelelo Ndamane on the Google Meet call, we exchanged pleasantries and talked for about 10-15 minutes to establish some familiarity with one another. The Nuud Money CEO who is based in Jo’Burg as it has come to be known was quite eager to get to know about me and Zimbabwe and so I indulged him. 

I explained to Mpumelelo how Zimbabwe has essentially two major cities and how Harare is more akin to Jo’Burg – breakneck pace, the great things and the not-so-great things that come with living in what has effectively become the centre of Zimbabwean commerce. 

Our conversation took a darker tone as I tried to paint a picture of the tribal divide that has also come to define the relationship of Harare and Bulawayo along with the loaded history that informed that… It was pretty random that I was sharing all this detail when it in fact had nothing directly to do with our conversation but this is where we found ourselves. 

In hindsight, I feel that our “little chat” before getting into the actual business of our meeting was foreshadowing as tribes and divisions were going to remain a focal point of our discussion. You see, Mpumelelo and I were on this call to talk about cryptocurrency. I might not have to state it plainly, but over the last decade, there have come to be two (or three) tribes in crypto. A tribe that heavily supports and embraces cryptocurrency, another that is firmly against digital currencies, (along with one that hasn’t fully grasped what cryptocurrency is and have been scared away by the technical knowledge required to dip one’s toes in that world)…

Mpumelelo’s, startup Nuud Money is rolling out a cryptocurrency wallet and is looking to appeal to crypto enthusiasts and the uninitiated initially and working towards convincing those against digital currencies along the way. Their initial target markets will include South Africa, Malawi, Zambia, and Zimbabwe.

Over the next few years, our core focus will be ensuring the transfer and usage of digital assets is far much easier for the millions of young professionals across Zimbabwe, Zambia, South Africa and Malawi.

Mpumelelo Ndamane – Nuud Money CEO

Responding to why these particular countries, the Nuud money chief executive expressed that Malawi, Zambia and Zimbabwe needed the product the most because of their “well-documented currency instability issues.”

A snapshot of these issues can be found from Economist Steve Hanke’s Currency Watchlist which has all 3 SADC countries among the 15 most inflationary countries. The Zambian Kwacha has depreciated by 30.83% since January 2023 and Malawi’s Kwacha and the Zimbabwean dollar have depreciated by 38.54% and 92% respectively during the same period of time.

One of the key points Mpumelelo made in regard to Nuud, was having an option that allows people to opt-in or out of the current financial system. The name Nuud is meant to capture how people deserve “financial products that fit them just like their skin.” The cryptocurrency world has been notorious for its high entry barriers which include education, usability and volatility.

For Nuud Money one of their core aims is to lower the entry point by removing high-sounding jargon from the world of digital currencies. “One of the problems we’ve seen in the markets we want to roll out in is that the space is jargon-filled,” says Mpumelelo. This is a fair assessment, especially regarding Nuud’s initial markets. How are people from the four countries who all have financial literacy rates estimated to be below 50% supposed to be able to understand concepts like decentralization, blockchain and the flurry of terms that inundate potential crypto adopters? This high barrier to entry and sophistication is one of the reasons why Crypto has also become an avenue for scammers – 2023 saw nearly $2 billion lost to crypto scams.

Given that Nuud Money’s initial target consumers are “young professionals”, the crypto startup won’t face this problem in its severest form since the baseline for them is people who are already employed and have a degree of financial literacy.

What’s the state of Crypto in the countries Nuud Money is targeting?

Nuud’s home market – South Africa has been one of the most progressive crypto markets in Africa with the digital assets being used as a combination of investment assets and hedges against inflation. One of the reasons cited for South Africa’s progress in this regard has been the lack of hostility from the government.

In markets with no regulatory bans, we tend to see the industry develop more responsibly as the market operates above the ground, with more productive interaction between regulators and exchanges. But bans aren’t stopping people from wanting crypto. The crypto industry will continue to grow with or without regulation. It is just in everyone’s interest that there is some pragmatic regulation in place that protects consumers and creates a safer operating environment for all.

It’s no surprise then that South Africa ranked 31st (out of 155 countries) globally and 5th on the continent in the latest Crypto adoption index published by Chanalysis.

Overal Index Ranking (out of 155)Centralized service value received rankingRetail centralized service value received rankingP2P exchange trade volume rankingDeFi value received rankingRetail deFi value received ranking
South Africa312122254545
Centralized service value received – ranks each country by total cryptocurrency activity occurring on centralized crypto exchanges, and weight the rankings to favour countries where that amount is more significant based on the wealth of the average person in that country.

Retail centralized service value received – measure the activity of non-professional, individual cryptocurrency users at centralized services, based on how much cryptocurrency they’re transacting compared to the wealth of the average person.

Peer-to-peer (P2P) exchange trade volume – ranks countries by their P2P trade volume and weight it to favour countries with lower PPP per capita and fewer internet users, the goal being to highlight countries where more residents are putting a larger share of their overall wealth into P2P cryptocurrency transactions.

DeFi value received – ranks countries by their DeFi transaction volume, and weight the rankings to favor countries with lower PPP per capita.

Retail deFi value received – ranks each country by DeFi transaction volume carried out in retail-sized transfers, weighted to favor countries with lower PPP per capita

Historically, Malawi, Zambia and Zimbabwe haven’t been so luck though it seems time are starting to change. The three rank 91st, 120th and 103rd respectively on the Crypto Adoption Index and there will be a host of issues for those coming into these markets to navigate. 

None of the three countries have moved to regulate cryptocurrency. In the case of Zimbabwe, there was a period of well-documented hostility between the government and local cryptocurrency players. Back in 2018, the central bank went as far as banning local exchanges and freezing the bank accounts of Golix – the most popular local crypto exchange at the time. More recently there have been signs of the government softening on the hardline stance. In 2021, Zimbabwe’s finance minister Mthuli Ncube noted digital currency’s potential to “lower charges for diaspora remittances”. Malawi’s central bank also claimed they were looking into regulating cryptocurrencies but have been quiet on that front for a while.

Zambia is the only country that seems to be prioritising regulation of the digital currencies with their technology minister Felix Mutati confirming to Reuters that regulatory tests would be completed by the midway point of 2023, though no update has been issue since. Prior to this – the Zambian central bank had previously warned citizens against crypto use, though they didn’t go as far as classifying the technology as outlawed. 

When I put the issue of regulation forward to Mpumelelo – he indicated that Nuud Money was pro-regulation. This position checks out with the communication on their website:

At Nuud Money, our customers and building great products come first. The Regulation will ensure that all bad actors, singers and mimers in the industry are uprooted and face the appropriate consequences – we are all tired of crypto scams.  Regulation will help our industry grow, it will help our industry build trust with you and help you know who you can trust and who you should not.

Mpumelelo Ndamane| Nuud Money CEO

From the data gathered by Chainalysis (table above) we can infer the following. All of these four markets rank in the top third for P2P trade volumes which suggests the main utility of crypto thus far has been in money transfers – the space in which Nuud money wants to operate. 

South Africa does well in other use-cases as well but the three other markets struggle quite a bit showing that crypto activity hasn’t broken into the mainstream. There’s low retail activity completed via cryptocurrency in these regions – which could also be a reflection of the poor financial infrastructure and low internet access currently plaguing most of Sub-Saharan Africa. That South Africa does well in this regard aligns well with the fact that they have the most developed financial infrastructure on the continent along with relatively high internet access which allows people to go beyond using crypto merely as a store of value.

Mpumelelo acknowledged that this would be a big issue. He was also careful to make it clear that their desire to initially roll-out Nuud Money to young professionals was because they were taking into mind the fact that this is the group where they would be most likely to find success in the short-term as they have the internet-savviness required to grasp crypto, are already working and would be open to the idea of change.

Without regulatory approval growth of cryptocurrencies will be stunted as consumers don’t feel safe to transact. Formal retailers will also be wary to adopt technology that is illegal or in a regulatory grey-area which further discourages growth. It means until the central banks in this region show

Because of the divisive nature of cryptocurrency’s 14-year run, we tend to forget that there have been some positives and real utility to cryptocurrency. In the 2023 Geography of Cryptocurrency Report by Chainalysis, one of the use cases for cryptocurrency gaining in popularity is international money transfers. Because SWIFT transactions take as long as three days to settle and sending payments to regions like Asia and Africa can be difficult, crypto is turning into an alternative.

Given that Nuud Money is looking to facilitate crypto transfers their offering will align with people looking to adopt digital assets as a guard against inflation. This has been cited as one of the main motivators for adoption in the Sub-Saharan region.

Why the disproportionate uptake of Bitcoin? It may be that Sub-Saharan Africa residents are turning to so-called digital gold for an alternative store of value. Many countries in the region have struggled with rising inflation and debt, making cryptocurrency an attractive means of storing value, preserving savings, and attaining greater financial freedom.

2023 Geography of Cryptocurrency Report by Chainalysis

There has also been progress on the regulatory front. In South Africa for instance – the Financial Sector Conduct Authority (FSCA) announced a licensing regime for cryptocurrency businesses and declared that crypto assets are financial products. This helped remove the gray area around digital assets along with increasing investor confidence.

The tide on regulation may be shifting with some of the countries that lead in tech in the region starting to change their tune. Kenya’s Central Bank in early 2023, proposed a bill advocating for a consistent securities definition of digital currencies and diligent recordkeeping by licensed crypto traders. Nigeria also approved a national blockchain policy. 

These are all changes from governments that were quite hostile to digital currencies just a few years ago, so there’s reason to believe other countries in the region may follow suit. Ultimately though government approval will be a big adoption motivator and it seems some of those effects are already on display:

Researchers also seem to agree with Nuud Money in that the need for digital assets is more urgent on the continent than elsewhere:

While residents of wealthier nations may buy and sell more cryptocurrency than those of emerging markets, the latter has a greater day-to-day need for cryptocurrency, very much in line with the original vision for Bitcoin and the sector at large.

2023 Geography of Cryptocurrency Report by Chainalysis

Nuud money will have their work cut-out for them given that beyond South Africa, the other markets they are rolling out their crypto wallet in don’t rank too highly across Chainalysis’ index trying to measure crypto adoption (refer to table below). Their CEO understands the uphill task they have but believes the fight will be won through sincere problem solving that harks back to the early days of cryptocurrencies. As we prepared to part from our call, Mpumelelo raised a poignant point regarding why cryptocurrencies came into existence in the first place. “There’s not much we can do to change people’s minds except going back to what the industry started out as. The initial idea was to truly help people live financial lives that are free of the control of central banks which have lost our trust over time. Giving people the choice to opt-in or opt-out. The only way to win the trust of the public is to do things the right way.”

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