Yellow Card Raises $15M — But Binance Remains Top Dog in Africa
Image courtesy of Nupo Deyon Daniel on Unsplash.

Yellow Card Raises $15M — But Binance Remains Top Dog in Africa

Thanks to smartphones and cryptocurrencies, the unbanked in Africa have a chance at financial freedom.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Yellow Card’s expansion into Africa gives us a window into this growing crypto market. Remittances drive it and the calcified neglect of the traditional financial sector encourages its growth.

Crypto Race in Africa Is Heating Up

Africa continues to attract crypto investors as the market is yet to be fully explored. Thanks to ChainAnalysis Insights, we had already broken down Africa’s crypto adoption this month. Most notably, since last year, Africa’s crypto market has grown by $105.6 billion.

As the most populous African nation, Nigeria stands out in crypto adoption. If we compare Nigeria to Switzerland, with its renowned banking sector, one in three Nigerians have used cryptocurrencies as opposed to one in ten Swiss.

For this reason, Yellow Card opened its office in Nigeria three years ago, and has just announced the largest ever funding for an African crypto exchange.

Yellow Card: Competition Breakdown

Yesterday, Yellow Card announced its successful Series A funding round, worth $15 million. Although headquartered in Atlanta, Georgia, the five-year-old FinTech company spread its crypto trading services across 12 sub-Saharan nations, from South Africa to Nigeria.

  1. Botswana
  2. Cameroon
  3. DR-Congo
  4. Gabon
  5. Ghana
  6. Kenya
  7. Nigeria
  8. Rwanda
  9. South Africa
  10. Tanzania
  11. Uganda
  12. Zambia

Led by Chris Maurice, Yellow Card will have to deal with central banks of African nations that are rather hostile to the notion of Bitcoin undermining their own currency. Due to rampant inflation, Nigeria has become a test case for Bitcoin’s real-world use, despite the best efforts of the Central Bank of Nigeria (CBN) to curtail it.

Yellow Card’s funding was headed by Castle Island Ventures, Third Prime, and Valar Ventures. James Fitzgerald, the founding partner at Valar noted that $15 million will go a long way to expand Yellow Card’s market footprint.

“We believe in Yellow Card’s vision of a Pan-African cryptocurrency platform.”

However, according to the 2020 Geography of Crypto report, published by ChainAnalysis, Binance receives most of the crypto trading volume coming out of Africa. Adedeji Owonibi from Nigeria-based blockchain firm A&D Forensics explained Binance dominance as a case of being first and the most aggressive:

“When Binance came to Nigeria, it afforded the opportunity to many to buy and trade. I was able to perform fiat-crypto transactions I could never before. They have more liquidity than other exchanges within the region, recruit local community managers from the cryptocurrency communities in the region, and they provide free rewards to get new people to sign up.”

It looks as if Binance has all of its bases covered – liquidity, local recruitment, and sign-up rewards. In chart form, Binance dominance in Africa looks like this:

Top ten services responsible for crypto trading volume in Africa, image credit: ChainAnalysis’ 2020 Geography of Crypto

CEO of Yellow Card, Chris Maurice, first entered the crypto exchange market by selling Bitcoin at a markup on eBay, speaking on The Anita Posch Show, Maurice said:

“We started selling Bitcoin on eBay and, that, that first week. We did over $40,000 in sales at a, at a 2% markup. And so, I mean, you know, I’m, I’m seeing stars at this point, right?”

Soon after, the business model didn’t pan out because he started receiving credit card chargebacks. With some alterations, and following a business meeting with a Nigerian native in Wells Fargo, Maurice understood the high fee remittance problem. This untapped market-led Yellow Card to its African expansion. However, there is another big remittance player in Africa already at play.

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Remittance on the Back of Paxful

According to previous reports from Paxful and ChainAnalysis, Paxful facilitates the largest share of individual transfers due to remittances – a major reason cryptocurrencies have become so popular in African countries. In 2020, the World Bank calculated the average cost of remittance at $200 to be 6.8%, while for sub-Saharan Africa it is at a high 9%.

Personal remittances as a percentage of GDP,; the average for sub-Saharan Africa is 2.4%, image credit: The World Bank

In contrast, transfers via borderless Bitcoin web wallets are a fraction of that cost if we take a look at Bitcoin transaction fees in USD over a three-year period.

During April 2021, BTC fees were unusually high due to network congestion, image credit: Ycharts.com

Accordingly, as a peer-to-peer (P2P) platform with the largest range of payment options, Paxful has spread out across the continent. In Nigeria alone, up to June 2021, Paxful generated $1.5 billion in trading volume. The same story unfolded in Egypt after a crackdown on crypto trading.

To add to the Yellow Card competition, as Chinese Huobi and OKEx are forced to cancel mainland accounts due to the latest crypto crackdown, they may begin to aggressively push in Africa as well.  

Interestingly, both Jack Dorsey’s Square and Coinbase Ventures participated in Yellow Card’s funding round, as well as BlockFi with its enticing APY interest rates. In turn, BlockFi is also the beneficiary of Coinbase Ventures investments.

Based on these intermingled investments, it seems the current strategy in this early stage of elevating Africa as a crypto marketplace is to build up the infrastructure first and worry about competition later. After Coinbase sold $2 billion worth in junk bonds, it can certainly afford to expand in emerging markets, counting on subsequent partnerships to gain a wider foothold.

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