How Unified Blockchain Standards Can Help Africa
11.02.2018

The African Digital Asset Framework today officially kicks off a planned multi-year effort to establish unified standards for blockchain development in Africa and beyond. The project aims to build a compliance-focused, cross-border blockchain that will link together both African nations and Africans living abroad, easing everything from international payments to investment.

Africa has been a significant focus for blockchain evangelists over the years. Because many nations on the continent have limited financial infrastructure or fragile currencies, advocates have argued that the continent can use cryptocurrency and other blockchain tools to “leapfrog” beyond the current state of infrastructure in the developed world. Reality has begun to catch up with that rhetoric: the Africa-focused mobile-payments service BitPesa, for instance, may be the best example of a practical, widely-used blockchain service anywhere on the planet.

But, according to ADAF cofounder Marvin Coleby, African governments haven’t yet established and coordinated clear guidelines that would unlock blockchain’s full potential to smooth transactions across borders. “You can open up a crypto exchange in Uganda now,” he says, “But someone in South Africa or the Bahamas or Canada can’t participate.” He mentions the Bahamas and Canada because ADAF also wants to connect African emigrants and people of African descent to trade and investment with the continent, hopefully benefiting all sides with increased pan-African commerce.

ADAF’s founding member organizations include Coleby’s blockchain-backed impact-investing firm Raise, blockchain accelerator Kotani, and alba.one, a software developer. The ADAF effort is also backed by ambassadors from the African Union (AU), the African Development Bank, and states and tribes across the continent, who advise ADAF while acting as liaisons with their home organizations. Those include Moctar Yedaly, who has headed the AU’s Information Society Division since 2008.

“We literally are aiming to build regulatory and technical standards for a pan-African economy,” says Coleby. “We’re not in the position to release a token and figure it out later.”

Based in Nairobi, Coleby is particularly excited about the potential for investment instruments issued on the blockchain. In Africa, he says, most local stock markets are illiquid and isolated from each other, limiting broad investment in African growth. Coleby hopes ADAF will incorporate standards for debt assets and commodities on the blockchain, in addition to equity in companies. Blockchain-backed identity solutions, which could in turn solve regional problems with land titling, are another major target for standardization under ADAF. All of those solutions could eventually open up opportunities for small investors and entrepreneurs, and help unlock dormant resources.

In the long run, ADAF wants to make things easy for African startups and governments by building a blockchain that embeds compliance with financial regulations across varied jurisdictions. “What we’re attempting is to essentially embed regulations that exist into the actual code itself,” says Coleby. “Which means that when I build on top of this, I’ve become compliant. If we don’t do this, we’ll end up with a bunch of silos, and digital assets don’t know that borders exist.”

That’s a challenging proposition, as it requires either close enforcement of consistent KYC identity standards for ADAF users, or some sort of geolocation element to track a user’s jurisdiction, not to mention the ability to shift blockchain rules as regulations change, and somehow account for failed states like Somalia. Despite that challenge, the implicit message is that a pan-African blockchain platform can create value and provide needed services without the regulatory arbitrage—that is, lawbreaking—that has played a major role in the growth of blockchain in the developed world.

The same implicit message is baked into the structure of ADAF’s rollout. Establishing workable technical and regulatory standards for an entire continent inevitably involves many stakeholders, and for now, the main work will be hosting discussions and listening to input. By spring of 2019, Coleby says ADAF will have a “Github-style repository” for mediating and refining proposals, with a distributed ledger based on those processes launching by the end of 2019. That’s an intense timetable by traditional development standards, but still more realistic than some of the hype that has dominated the blockchain space.

“We literally are aiming to build regulatory and technical standards for a pan-African economy,” says Coleby. “We’re not in the position to release a token and figure it out later.”

Nairobi street scene: Nahashon Diaz