Malawi is a small country in southeastern Africa, nestled between Mozambique, Zambia, and Tanzania. As of 2023, its population is estimated at 20.93 million, growing at an annual rate of 2.5%.
Despite implementing several economic and structural reforms, Malawi remains one of the poorest nations globally. Its economy largely relies on agriculture, which engages over 80% of the workforce.
Agriculture contributes around 37% to the country’s GDP, making it a significant sector. However, this also leaves the economy highly susceptible to external factors like climate shocks.
The main exports include tobacco, tea, sugar, apparel, cotton, nuts, pulses, sawn timber, natural rubber, coffee, spices, hides, and wooden furniture.
In January 2021, the government introduced the Malawi 2063 Vision, an ambitious plan to transform the nation into a self-sufficient, industrialized, and upper-middle-income country.
The strategy focuses on agricultural commercialization, industrialization, and urban development. However, the economic situation remains difficult.
A severe drought in 2024 worsened existing macroeconomic issues, leading to poor harvests and soaring food prices.
“October in Southern Africa marks the start of the lean season, and each month is expected to be worse than the previous one until harvests next year in March and April. Crops have failed, livestock have perished, and children are lucky to receive one meal per day.”
Food insecurity continues to be a significant barrier to reducing poverty, with about 71% of the population living in extreme poverty. Furthermore, economic growth has been erratic over the past five years, fluctuating between less than 1% and up to 5%.
The country’s slow and unstable growth is influenced by several factors. These factors include fiscal mismanagement, inadequate infrastructure, limited road networks, energy shortages, corruption, and climate-related challenges.
Currently, around 51% of Malawians live below the poverty line, with 21% experiencing extreme poverty. The situation is expected to worsen due to the lingering effects of the global COVID-19 pandemic, high inflation, and disruptions in global supply chains driven by external conflicts.
Current State of Crypto Adoption in Malawi
Source: Pexels
The Reserve Bank of Malawi (RBM) has made it clear that cryptocurrencies, such as Bitcoin, Litecoin, and Ripple, are not recognized as legal tender in the country. The central bank has also advised against using digital currencies as a replacement for the Malawian kwacha.
Furthermore, it noted that these assets remain illegal for transactions within Malawi. Additionally, the RBM has cautioned potential users about the risks, urging them to be wary of crypto firms, entrepreneurs, and advisors, many of whom may lack credibility.
Additionally, Malawi does not have any legally registered cryptocurrency exchanges, making trading activities largely unregulated.
“RBM bears the exclusive mandate to issue legal tender, thus, bank notes and coins in Malawi, and to date, has not issued any form of cryptocurrency. The general public is encouraged to fully understand and be aware of the risks associated with the use of cryptocurrencies and similar online trading schemes, which include money laundering, vulnerability to cybercrimes, hacking and other fraudulent activities.”
The lack of registered crypto exchanges complicates matters, making it challenging to prosecute fraudulent activities. Nevertheless, the bank acknowledges blockchain’s potential and is actively monitoring developments in the industry to assess whether regulatory intervention may be necessary.
The RBM’s governor also highlighted that while blockchain is an innovative and versatile technology, its benefits extend far beyond cryptocurrencies alone. However, the bank emphasized that it does not endorse or permit any foreign investments in cryptocurrency.
Amid increasing pressure from organizations like the ICT Association of Malawi and the Economic Association of Malawi, the RBM is re-evaluating the legal standing of cryptocurrencies. An RBM ethics and compliance official noted that a complete ban could drive cryptocurrency trading underground.
Thus, this would further complicate efforts to prevent money laundering due to the difficulty of tracking these transactions.
RBM’s general counsel and bank secretary, George Chioza, however, mentioned that they are currently engaging with various stakeholders to assess the way forward on cryptocurrency use in the country and will announce a decision soon.
“At the moment, Malawi is really on the borderline. We have not said yes or no but we know there is cryptocurrency. Take caution when you are dealing in these currencies.”
Interestingly, the popularity of cryptocurrencies in Malawi has been steadily rising, especially since the start of the COVID-19 pandemic. This surge comes as the pandemic added further strain to the country's already fragile economy.
Projections indicate that the number of cryptocurrency users in Malawi could reach approximately 214,900 by 2025. The user penetration rate is expected to hover around 1.00% in 2024, with a slight decrease to 0.98% by 2025.
Despite the lack of regulatory approval, platforms like YellowCard have reported significant user engagement, with around 30,000 registered users in Malawi as of 2023. Thus, crypto trading in Malawi continues largely at users' own risk, with the central bank urging the public to be aware of the associated risks.
Key Drivers of Crypto Adoption in Malawi
Source: Pexels
Several factors are contributing to the growing adoption of cryptocurrencies in Malawi, despite regulatory challenges.
These include:
Economic Instability
One factor driving crypto adoption in Malawi is economic instability. Malawi's economy has faced numerous challenges, including high inflation, fluctuating currency values, and a lack of stable financial systems.
The Malawian Kwacha has seen its value erode over time, which has made many people lose confidence in the national currency. In such an environment, people often turn to alternatives to safeguard their wealth.
Thus, cryptocurrencies are seen as a hedge against inflation and a store of value that is not dependent on the local currency.
Peer-to-Peer (P2P) Trading Platforms
Another overlooked factor is the growing availability of peer-to-peer (P2P) trading platforms. These platforms allow individuals to buy and sell cryptocurrencies directly with each other, bypassing traditional financial institutions.
In Malawi, P2P platforms like YellowCard have gained popularity, offering a safe way to trade crypto without relying on banks.
This ease of access and reduced reliance on centralized exchanges has made crypto trading more accessible to a larger portion of the population.
Aftermath of COVID-19
The COVID-19 pandemic has played a pivotal role in accelerating cryptocurrency adoption in Malawi. Like many other countries, Malawi's economy was significantly affected by the pandemic.
The economic downturn, combined with the closure of businesses and loss of jobs, led people to explore alternative sources of income.
Cryptocurrencies provided an accessible way for individuals to engage in financial activities. This served as a good alternative as there was no need for physical interaction, which was crucial during lockdowns.
Moreover, the global economic instability caused by the pandemic, including inflation and the disruption of supply chains, has led many to turn to cryptocurrencies as a potential store of value.
Limited Access to Traditional Investment Options
Many Malawians lack access to conventional investment opportunities such as the stock market or real estate. This lack of access is mostly due to financial barriers, lack of education, and limited resources.
Crypto provides a relatively low-cost entry point for investment, especially for younger people who are tech-savvy and looking for new ways to grow their wealth.
The decentralized nature of cryptocurrencies also appeals to those who want more control over their financial assets.
Challenges to Crypto Adoption in Malawi
While cryptocurrencies have gained popularity globally, their adoption in Malawi faces several challenges that go beyond just regulatory issues.
Here are some key factors that often get overlooked when discussing the barriers to widespread crypto use in the country.
Regulatory Uncertainty
One of the most significant hurdles to crypto adoption in Malawi is the lack of clear regulation. The Reserve Bank of Malawi (RBM) has made it clear that cryptocurrencies are not considered legal tender. It also warned against using them as a substitute for the local currency.
However, this leaves a lot of uncertainty for those looking to invest in or use crypto. Without a regulatory framework, people are left exposed to risks like fraud and scams, as there are no official channels for trading or investment protection.
Infrastructure and Access Issues
For cryptocurrencies to be adopted, there needs to be access to reliable internet and digital infrastructure. Unfortunately, internet connectivity in Malawi remains inconsistent, particularly in rural areas.
The cost of smartphones and data plans also limits access to cryptocurrency platforms. Many people simply don’t have the means to participate in the digital economy, which hinders the overall adoption of cryptocurrencies.
Limited Support for Local Currency Integration
Another barrier to adoption is the lack of integration between cryptocurrencies and Malawi’s local currency, the kwacha. Many local businesses and merchants are unwilling to accept crypto as a form of payment due to several warnings from the RBM.
Without the ability to easily convert digital currencies into local currency or use them for everyday transactions, cryptocurrencies remain somewhat impractical for many Malawians.
Security Concerns
With the rise of online fraud and cybercrime, security is a major concern for anyone considering cryptocurrency in Malawi.
Since there are no registered exchanges in the country, crypto users often have to rely on international platforms, which can be risky. The absence of consumer protection laws increases the likelihood of individuals being scammed or losing their investments.
Furthermore, the irreversible nature of cryptocurrency transactions means that once money is lost, it cannot easily be recovered.
Socioeconomic Factors
Malawi is one of the poorest countries in the world, with over 71% of the population living in extreme poverty. For most Malawians, basic survival needs to take priority over financial speculation or investment.
The idea of investing in cryptocurrencies may seem distant or unnecessary when many are focused on more immediate concerns, such as food security and access to healthcare. In this context, crypto adoption may not be seen as a viable solution for improving livelihoods.
Potential Benefits of Crypto Adoption in Malawi
Source: Pexels
Adopting cryptocurrency in Malawi could offer several potential benefits, especially considering its economic landscape and challenges. Here are some of the key advantages:
Financial Inclusion
Malawi has a large unbanked population, with many people lacking access to traditional banking services. Cryptocurrencies could provide an alternative financial system for those without access to banks, enabling them to participate in the digital economy.
With just a smartphone and internet connection, individuals can send and receive payments, save money, and even access microloans.
Lower Transaction Costs
Traditional banking and remittance services often come with high fees, especially for cross-border transactions. Cryptocurrencies can facilitate cheaper and faster payments, which is particularly beneficial for Malawians who rely on remittances from abroad.
By reducing transaction costs, crypto can increase the amount of money that ends up in the hands of recipients, boosting their purchasing power.
Economic Empowerment and Access to Global Markets
Cryptocurrencies can open up new economic opportunities for Malawians, particularly in rural areas where access to financial services is limited. Small businesses, freelancers, and entrepreneurs can leverage crypto to tap into the global market.
Additionally, they can also receive payments in digital currencies, and engage in e-commerce without needing a traditional bank account.
Hedge Against Inflation and Currency Depreciation
Malawi's economy is susceptible to inflation and currency volatility, which can erode the value of savings. Cryptocurrencies like Bitcoin, known for their deflationary nature, could serve as an alternative store of value.
While cryptocurrencies are also volatile, they provide an additional option for preserving wealth outside the local currency system.
Boost to Remittances and International Trade
Malawi benefits significantly from remittances, which constitute a substantial portion of household incomes. Crypto adoption could streamline remittance flows, making it easier and cheaper for the diaspora to send money back home.
Additionally, businesses involved in international trade can use cryptocurrencies to circumvent issues related to foreign exchange shortages and high conversion fees.
Recommendations and the Future of Crypto Adoption in Malawi
Source: Pexels
As cryptocurrency adoption continues to rise globally, Malawi stands at a crossroads regarding its legal status and future regulation. While the Reserve Bank of Malawi (RBM) has placed restrictions on crypto use, there is no denying the growing interest in digital currencies.
Looking ahead, there are several key recommendations and factors to consider to better navigate the future of crypto adoption in Malawi.
Regulatory Clarity and Framework Development
One of the most important steps Malawi should take is to develop a clear regulatory framework for cryptocurrency use. This would provide much-needed guidance for users and investors, reducing uncertainty and risk.
Currently, without legal protections or a framework, people engaging in crypto trading do so at their own risk. A regulated environment would not only encourage safer investments but also allow the government to control and monitor the market.
The RBM and other relevant authorities should work together with global experts to create a balanced approach that supports innovation while protecting consumers.
Addressing Infrastructure Challenges
For cryptocurrencies to thrive in Malawi, there needs to be improvement in the country’s digital infrastructure. This includes reliable internet access, mobile network coverage, and digital payment systems.
In rural areas, where the majority of the population resides, access to these services remains limited. The government should collaborate with telecommunications providers and fintech companies to improve the digital infrastructure. This collaboration will enable more people to access and use crypto platforms safely.
Blockchain Technology Beyond Cryptocurrencies
Malawi should also look beyond cryptocurrencies and explore the broader potential of blockchain technology. Blockchain has numerous applications that can benefit sectors such as agriculture, healthcare, and government services.
For example, blockchain can be used to enhance transparency in supply chains, improve data security, and reduce corruption.
Economic Diversification
While cryptocurrencies and blockchain offer new opportunities, they should not overshadow the need for Malawi to diversify its economy. Over-reliance on agriculture and traditional sectors has kept the country vulnerable to external shocks.
Embracing digital assets should be part of a broader strategy to modernize the economy and create new industries. By fostering innovation and technology adoption, Malawi can attract investment and increase its resilience to economic challenges.
Tracking and Taxation
Malawi needs a comprehensive framework for tracking cryptocurrency transactions, particularly for tax purposes. As crypto adoption grows, ensuring that transactions are recorded and taxed appropriately will help fund public services and contribute to the national economy.
This could involve creating a digital wallet registry where people can report their crypto holdings. Having a taxation system in place will also reduce the risk of cryptocurrencies being used for illegal activities such as money laundering or tax evasion.
Conclusion
The path forward for crypto adoption in Malawi is one that must be navigated with caution, but also with an eye on the potential for growth and innovation.
While cryptocurrencies offer exciting opportunities, such as financial inclusion and access to new technologies, they also come with risks that need to be carefully managed.
Moreover, as Malawi continues to explore the benefits of blockchain beyond cryptocurrency, it’s important to focus on its application in areas like agriculture, healthcare, and government services. By embracing this, Malawi can open new avenues for innovation that will benefit both the economy and society.
