Sub-Saharan Africa, a region often overlooked in global financial narratives, has quietly emerged as a hotbed for cryptocurrency adoption. While dwarfed in overall transaction volume by wealthier regions, the continent punches above its weight in enthusiasm. Nigeria, a perennial leader, holds its global number two spot in crypto adoption, flanked by Kenya, Ethiopia, and South Africa all comfortably within the top 30 worldwide. A not-insignificant $125 billion in on-chain value flowed into the region in the past year alone, a healthy 7.5 billion uptick from the year before, suggesting a market brimming with potential, at least on the surface.
Yet, scratch beneath the veneer of impressive adoption statistics, and a far less rosy picture emerges: the nascent African crypto startup scene is facing a brutal reckoning. A string of high-profile collapses, funding droughts, and dashed promises are leaving gaping holes in the optimistic narrative, prompting questions about the sustainability and, frankly, the naiveté of some of the sector’s early pioneers.
Take VIBRA, for example. Launched in 2021 with a laudable aim to become the Pan-African peer-to-peer crypto platform, it boasted a $6 million seed round backed by credible venture capital firms. Lateral Frontiers VC, CRE Venture Capital, Musha Ventures, and even Dragonfly Capital — names that lend an air of serious intent. However, like so many startups before it, VIBRA couldn’t even clear the two-year failure hurdle, shuttering operations across its Nigerian, Kenyan, and Ghanaian markets with barely a whimper. While management mumbled about a “strategic pivot,” disillusioned employees snorted at the notion, suggesting the pivot was less strategic, more… stationary. Co-founder Vincent Li, also of Web3 accelerator Adaverse, initially hinted at a Nigeria-only closure, a face-saving measure that quickly crumbled under the weight of reality.
VIBRA’s mission, to “promote the widespread adoption of digital assets and blockchain technologies in Africa,” sounds suitably grand. Their #VIBRAinClass initiative, paying experts to educate Africans about blockchain (tutors earning up to $400 a class, students a generous ₦1,000 per session), initially appeared innovative. However, the reality of incentivized customer acquisition, a popular but often financially precarious strategy in the crypto world, proved brutally expensive. As one former employee wryly observed, “Nigerians are very crypto-curious… and are willing to try new ways to earn money, but they also have huge expectations of crypto companies.” These expectations, it seems, extend beyond mere financial returns, encompassing a certain performative display of success. “You need to be able to fly ten people out to Dubai to impress them,” the ex-employee quipped, highlighting the somewhat… demanding nature of the aspirational African crypto consumer.
Pillow, a Singaporean startup that dipped its toes into the Nigerian and Ghanaian markets with promises of crypto-powered savings and investments, also recently pulled the plug. Citing the “existing regulatory environment and its influence on the connected financial infrastructure,” Pillow, which had raised a respectable $21 million from investors like Accel India and Quona Capital, sent a mass in-app message to its 75,000 users across 60 countries, urging them to withdraw funds with haste. A deadline of July 31st, 2023 was set, the app slated for Play Store oblivion, and bank withdrawals abruptly halted, leaving users in a predictably anxious scramble. Just months prior, Pillow was actively advertising job openings — a stark reminder of the whiplash speed at which fortunes can reverse in the volatile crypto seas. While the founders remained publicly silent, the closure underlines the Sisyphean task of navigating the global patchwork of crypto regulations, a task particularly daunting for startups in emerging markets.
Nigeria’s regulatory environment, under the watchful eye of the Securities Exchange Commission, presents a particularly formidable regulatory headwind in Africa. In a characteristically nuanced approach, the SEC has, at times, floated the idea of permitting tokenized coin offerings, provided they rigorously exclude the very crypto assets these startups are built upon, favoring instead the reassuringly familiar embrace of traditional assets. Although the ban on crypto transactions was recently lifted, crypto exchanges remain in regulatory purgatory, constantly battling intense scrutiny from the Central Bank of Nigeria (CBN), which, in 2021, effectively slammed the door on crypto transactions by instructing commercial lenders to cease facilitating them. This regulatory limbo makes operating a crypto exchange in Nigeria akin to navigating a minefield blindfolded.
VIBRA and Pillow are not isolated incidents. LazerPay, another Web3 African startup, succumbed to funding woes in April 2023. Bundle Africa, a social payments app with 50,000 monthly active users, 3 million transactions and a $50 million monthly volume, announced its imminent demise in September 2023, blaming a “shareholders’ decision to restructure.” While officially attributing the closure to a strategic shift towards their “Cashlink” payment solution, the writing was likely on the wall. Regulatory challenges in Nigeria, fierce competition, and the general chill of the crypto winter, compounded potentially by the FTX collapse, all conspired to clip Bundle Africa’s wings.
Then comes the dramatic tale of Mara. Born in the heady days of the 2021 crypto boom with the ambitious goal of “building Africa’s crypto economy,” Mara raised a staggering $23 million in May 2022, boasting investment from Alameda Research (pre-implosion, of course) and Coinbase Ventures, valuing the venture at a pre-money $70 million. On paper, the founding team — Chinyere ‘Chi’ Nnadi, Lucas Llinás Múnera, Kate Kallot, and Dearg OBartuin — looked formidable. Yet, just two years after the funding landed, Mara spectacularly imploded. The $23 million, according to reports, vanished with startling speed, unaccompanied by any discernible revenue. CEO Chinyere Nnadi, in a move that raised eyebrows (and potentially hackles), swiftly launched a new platform, Jara, while former co-founders whispered accusations of asset-shuffling and liability-dodging.
Reckless spending, it seems, was Mara’s Achilles’ heel. In 2022 alone, with zero revenue, the company burned through $15.9 million. Salaries, bonuses, and allowances alone consumed a mind-boggling $9.1 million for a 130-person team. High salaries were justified as necessary to “attract talent,” yet, in a classic case of startup hubris, this talent apparently “didn’t always deliver.” By the end of 2022, a mere $5 million remained in the coffers, prompting a desperate and ultimately futile fundraising scramble. Mara even claimed 4 million “verified users” for its wallet, a figure later alleged to be wildly inflated, fueled by fraudulent accounts gaming the referral program. Ultimately, Mara, facing vendor debts exceeding $3 million and a user base built on sand, simply ceased to exist. Investors, one imagines, are less than thrilled with their returns.
Patricia, another Africa-focused crypto player, established in 2017 and known for its sponsorship of the ubiquitous “Big Brother Naija” reality show, had also faced turbulent times. Claiming a $2 million loss due to a hack in May 2023 (a breach allegedly dating back to January 2022), Patricia left customers unable to access their funds, running into millions of Naira. The proposed solution — the launch of the “Patricia token” (PTK) to repay users — had been met with understandable skepticism and accusations of a potential exit scam. Customers, it seems, were not keen on exchanging their tangible Naira for the vaporous promise of a proprietary token, especially when it remains conspicuously absent from their balances.
Even Wala, a South African fintech startup with continental ambitions and its own cryptocurrency, Dala, met its demise in 2019. Despite securing over 150,000 users in Uganda and raising $1.2 million in a token sale, Wala succumbed to a toxic cocktail of infrastructure challenges, reward system abuse, and, ultimately, a crippling funding drought. Founder Tricia Martinez’s eight-month global investor pitching tour yielded nothing. “For whatever reason,” she lamented, “not many investors wanted to back a crypto company, let alone a startup focused on African markets.” This sentiment, echoing across the failed ventures, speaks volumes about the current investor climate, where the heady optimism of the crypto boom has given way to a more pragmatic, if not outright bearish, outlook.
The common threads weaving through these African crypto startup failures are stark, but chief among them include regulatory headwinds, and, crucially, a drying up of investor confidence in the sector, particularly in frontier markets.
However, beyond the convenient scapegoats of regulatory hurdles and market downturns, is a pattern of self-inflicted wounds. Financial imprudence sits at the heart of many collapses, exemplified by Mara’s lavish spending sprees before generating revenue, a testament to a misplaced focus on appearances over fiscal discipline. This is compounded by unsustainable business models and spending, often reliant on aggressive, costly customer acquisition tactics and fueled by the ephemeral promise of “crypto riches,” rather than robust, long-term value propositions. Moreover, a certain naiveté or over-optimism regarding market realities prevails, underestimating the complexities of navigating nascent regulatory landscapes, the infrastructure deficits on the continent, and the ever-present challenge of building genuine trust in a sector already battling reputational headwinds. Ultimately, these “biggest failures” are not simply external victims of circumstance, but rather stark embodiments of fundamental flaws in planning, execution, and a perhaps overly exuberant, and ultimately unsustainable, vision for African crypto’s rapid ascent.
While Africa’s appetite for crypto remains undeniable, the infrastructure, regulatory clarity, and, perhaps most importantly, the business models, are clearly still in dire need of refinement.
The “big holes” in Africa’s crypto dreams are not in adoption, but in the foundations upon which these dreams are being built. Unless a more realistic, sustainable, and, dare we say, less Dubai-centric approach is adopted, these early failures may prove to be more than just teething problems; they might be a harbinger of a deeper crypto winter for the continent’s ambitious, but perhaps overly exuberant, digital pioneers.