#68 - What Trump 2.0 Could Mean for African Fintech

An aggressive stance on deregulation and crypto must be balanced against a future Chinese global financial system

Illustrated by Mary Mogoi - Website

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Introduction

The fall of the Berlin Wall in 1989 marked a turning point in global politics, solidifying America’s position as the dominant world power. In Africa, the consequences started being felt far and wide. Given that the spectre of communism had been defeated, America could aggressively impose itself on the world. In South Africa, the pressure on the Apartheid regime led to Nelson Mandela being released from prison, in Kenya the ruling government succumbed to the clamour for multi-party elections in 1992. In Nigeria, an unsuccessful Third Republic was formed in 1993 but it later led to the formation of a Fourth Republic in 1999 with Obasanjo at the helm. Changes were a foot in most other countries and unfortunately countries like Rwanda, Burundi, Sierra Leone and Liberia did not manage these transitions properly. Whether for better or worse, the 1990s reshaped Africa, setting the stage for its current economic and political landscape.

This historical context underscores how geopolitical shifts shape African economies. For instance, Nigeria’s Fourth Republic catalyzed a banking boom in the 2000s, while Kenya’s move to multiparty elections enabled the Kibaki administration’s reforms, which fostered the M-Pesa revolution.

Trump 2.0 is a different beast. Some liken it to Steve Jobs coming back to Apple. The second time round, there’s clarity of thought and purpose, you know where all the booby traps are and you’re unapologetic about who you will work with and who will have to drop off. Regardless of one’s opinions about him, it's almost impossible to come to the conclusion that he will definitely effect some change whether good or bad. Those changes could have far reaching implications for African countries again, good or bad.

Unlike the 90s, the global geopolitical dynamics are different. The world of 2025 has China as a serious player in the World Order. Unlike the USSR, China has a large economy, accounting for 20% of global GDP. Moreover, they are a scientific and trade powerhouse. They’re the world's manufacturer and the largest trade partner to effectively every country. Scientifically, they lead in scientific patents across almost all major disciplines. The recent launch of Deepsek, an open-source AI model that is at par or even better than some of the leading American frontier models is a perfect example. It cost a fraction of the cost to build and invalidated all the assumptions that were being made about America’s lead in AI.

In short, an aggressive and competent Trump 2.0 but with China acting as the bulwark. The article will try to flesh out Trump’s key policy thrust and its impact on four areas, Crypto in Africa, Regulation and Compliance, Remittances and Trade and VC Investments into the Continent.

Overall Policy Thrust

Trump’s financial policies can be summed up as deregulation-focused and crypto-friendly. On deregulation, leaders such as Jamie Dimon have come out strongly in the past against what the banking industry perceives as regulatory overreach. In October 2024, Jamie Dimon said that it’s time for banks to fight back against regulators. He actually said that

"I have been told by people at the Fed, know that because of what you have said and what you wrote about, you know they are coming after you… We are suing our regulators over and over and over because things are becoming unfair and unjust, and they are hurting companies, a lot of these rules are hurting lower-paid individuals,” - Jamie Dimon

These comments rhyme with interviews given by Marc Andreesen and others about regulatory excesses including de-banking. President Trump has campaigned on a deregulation platform stating that for every regulation imposed, he will repeal 10 as president. Whilst the Banking and Fintech industry may be excited about this, so far there are no specifics on what exactly will happen. One area to look at for clues could be the incoming Department of Government Efficiency (DOGE) that will be led by Elon Musk. It could be that Trump rolls up his deregulation efforts under DOGE and they map out the specifics.

If this is the case, expect Musk to utilise his often-cited first principles approach to financial regulation. This could mean a significant simplification of rules following his mantra that “Laws should be long enough to cover the subject, but short enough to be understandable by a normal person who is expected to follow them”. This could mean more sensible approaches to bank regulation specifically around capital and its relationship to risk and things like KYC and AML. Ultimately, it's reasonable to expect rules that make bank formation easier and that enable onboarding of customers to be more seamless. One could scoff and say “Musk doesn’t understand the complexities of finance”. Nonetheless, one doesn’t achieve what he’s been able to achieve by being reckless. If there’s one person who has shown the competence to successfully execute complex projects, it's Musk.

On Crypto, the best place to look at the recent executive order. The order is called the “Executive Order to Establish United States Leadership in Digital Financial Technology” and can be read here. The key elements of the executive order are;

1. The establishment of a presidential working group on Digital Assets Markets;

2. This working group will work on a federal regulatory framework governing digital assets including stablecoins and evaluating the creation of a strategic national digital assets stockpile;

3. The working group will be led by David Sacks, a well known Silicon Valley investor who’s invested in companies such as Solana;

4. Interestingly, the Executive Order prohibits agencies from undertaking any action to establish, issue, or promote central bank digital currencies (CBDCs).

The executive order is crypto friendly and is a big coup for the American crypto lobby.

How these policies will trickle down to the rest of the world is simply how other policies have managed to become de rigueur globally. This will be achieved through papers by the Fed and the Bank For International Settlements, it will be embedded in investment proposals by the IFC just the way ESG was driven. Blog posts, interviews and other forms of thought leadership will also form part of the narrative. Remember, humans think through stories rather than through facts. Such principles will be spread across the world. The easiest place to look is the mushrooming of sustainability officers in Africa and the oft-cited statement by some business leaders in the continent that “every company is a climate company”. Soon, deregulation will be a career hack.

Impact on Crypto

Globally there’s an emerging consensus that digital assets and currencies are core to today’s digital first economy. Last week I wrote about tokenisation and it's clear to see that large players such as Blackrock, Goldman Sachs and JP Morgan are all actively exploring how to tokenise a whole raft of assets from ETFs, Stocks, Bonds and even bank deposits. The crypto community similarly believes in the promise of internet based money and a more robust, fair, equitable and transparent financial system. Trump’s executive order and his Crypto stance will have an impact on how crypto adoption happens globally and particularly in Africa. There are a number of things to consider all the same.

Source: Anna Moneymaker - President Trump and his Crypto Czar David Sacks after signing the Crypto Executive Order

Decentralised vs Centralised

This is going to be a big theme in the coming years. There are two schools of thought when it comes to digital, programmable money that can work with smart contracts. On one hand is a section of the crypto world that believes that technology can enable us to build a transparent and fair financial system. These are crypto-libertarians who feel that the financial system of the future should have little to no government control. On the other hand of the argument are traditional financial institutions such as global central banks and some traditional financial institutions. This section believes that you can enhance the benefits of digital money by ensuring there are stable and trusted intermediaries that help with consumer protection and trust.

There are two ways in which I look at this divide;

1. As an African, I’ve come to learn that technology is not a panacea to everything. Layering technology on top of corrupt people or institutions in fact only tends to accelerate perverse outcomes. It makes corrupt people more efficient. The best place to see this is in African elections that have gone digital, the game has changed from stuffing ballot boxes to hacking servers. This makes me naturally suspicious that you can solve trust through technology. It’s a perspective that is shared across the continent;

2. Additionally, the rest of the world does not care about Liberty and Freedom as much as America does. Most of the world has come to accept and sometimes even welcome the government playing a big role in their lives. Liberty and Freedom in my view are not extremely strong selling points in many parts of the world.

Why this matters is that a number of countries may be reluctant to accept a future vision of money where governments do not play an active role. America should have considered a more active role for the Digital Dollar rather than banning it wholesale and betting the farm on Stablecoins. Such a move leaves the door open to China and their Digital Yuan to play a more active role in the future of digital money. One thing to acknowledge is that in Africa and a number of other emerging markets, incumbents and large organisations play a major role in digital transformation. The digital Yuan with Chinese State backing is more palatable to a large organisation than a DeFi protocol. Having said that, we've recently seen players like Reliance Jio working with Polygon labs to expand DeFi use in India.

A Disingenuous Strategic Reserve

Trump’s Executive Order made mention of a Digital Asset Strategic Reserve, effectively a Bitcoin Reserve. I find this move not only disingenuous but it may expose emerging cracks in Trump’s techno-alliances. To begin with, it's hypocritical for an asset whose key selling point was that it was resistant to government control and overreach, to turn around and claim that the government should become its largest holder. This will present Trump’s government with a number of quandaries and in my view will likely not take off;

1. Operationally, a Bitcoin strategic reserve will likely look and work like quantitative easing. It will consist of government or central bank purchases of an asset from American owners of Bitcoin. For sure it will support the value of Bitcoin but it will discredit its philosophical roots;

2. As Nic Carter argues, a Bitcoin strategic reserve will signal to the rest of the world that the US government may be losing faith in the dollar, therefore accelerating an exit by global investors from the dollar. This is likely to have a negative impact on the US economy at large and the cost of capital for US businesses and individuals.

Ultimately, such a move is likely to make a dent in the US’ credibility potentially seeing a shift towards China as purveyors of sound policy. The crypto lobby will come face to face with realpolitik in the global arena.

The Digital Yuan and Global Trade

Whereas America has become a financialised economy, for most countries, trade and industry are still core growth drivers from both an aspirational and practical sense. To that extent, trade and industry will be the biggest drivers for payment systems adoption not only in Africa but in the global south. With that in mind, it’s impossible to ignore the Digital Yuan and its role in future trade. David Goldman, whose articles for Asia Times are a must read for those who want to understand Chinese tech, wrote a great piece about the Digital Yuan. His argument is simply that China is leading the world in a number of future industries such as EVs, Solar, Drones and e-commerce. With programmability a key plank of the digital Yuan, we could see a world where Chinese built IoT across ports, logistics and manufacturing enable payments based on smart contracts and IoT sensors. Think for instance of a future in which Africans can buy Chinese EVs for US$ 5,000 and order them directly from China with automated payments based on the Digital Yuan. Huawei sensors will track the movement of the car from a factory in China all the way to a port in Accra with payments being programmed based on specific milestones. This will all work under the existing Belt and Road Initiative.

David Goldman adds that such a system will likely collapse the existing dollar based trade system over time. Whilst this is speculative, Deepsek has shown us that China can execute at an extraordinary level and shouldn’t be taken lightly. America therefore has to play a key role in a future digital dollar or risk Africa shifting to a Digital Yuan based trading system. The larger point is that African trade with China is worth a shade under US$ 300 billion per annum compared to total remittances of US$ 50 billion. China has significant leverage in driving a future based on the Digital Yuan.

Regulation and Compliance in Banking and Fintech

A couple of events since the start of the century ushered in an era of compliance and regulation as a critical aspect of modern banking. 9-11 ushered in the 2001 Patriot Act which was the first salvo in the expansion of AML and KYC requirements across banks. It set out the importance of enhanced customer due diligence as a critical aspect of onboarding. This was taken a step further by the Global Financial Crisis which shifted the balance in banking away from the commercial teams to the compliance teams supported by more powerful regulatory bodies.

A key part of the global compliance movement relied on narratives and unwritten rules. Global Banks went from having at most 50 staff in compliance in the 80s to currently having in excess of 20,000 staff in compliance and regulatory functions. Banks in response to such a formidable force have played a more conservative role, shying away from business they would normally be doing. Recently Block and Klarna were fined US$ 80m and US$ 46 m respectively. It’s not that they enabled AML, rather their processes were not sufficiently pro-active in detecting money laundering. In such an environment where companies are afraid of their own shadows, the mere suspicion of risks makes banks averse to engaging in a number of industries. This was the thrust behind Operation Chokepoint led by Obama and recent attempts by US regulators to debank crypto.

In Africa this has had far reaching consequences from shutting down correspondent banking agreements, which we’ll speak to as well as large parts of the continent being shut out by Fintechs and payment companies. A move to deregulate is welcome and will involve the creation of a new lexicon. Whereas we’ve had “risk” and “suspicious activity” being part of the compliance lexicon, the new lexicon will be pro-business and have terms such as “giving customers the benefit of doubt”, “enabling inclusion” or “fostering a global financial system”. These terms will be used to nudge compliance teams to look the other way. I expect compliance to be a tough career choice.

The outcomes could include;

1. Less incidences of customer payouts being held by firms like Paypal;

2. More logical KYC requirements including tiered KYC for companies and individuals;

3. Global Fintechs such as Wise and Revolut expanding to Africa given the “lower compliance costs”

4. Friendlier licensing regimes for PSPs in the continent;

5. Potentially friendlier licensing for new banks;

Trade and Remittances

History of Correspondent Banking and Regulations;

The global compliance and regulatory tightening has also had an impact on correspondent banking in Africa particularly after the Global Financial Crisis. An AfDB study revealed that the number of African CBRs involving US dollar transactions decreased by 25% globally between 2011 and 2017, with all transactions dropping by 19% during the same period. Before the crisis, global banks like Citi were establishing accounts in countries like Liberia and Burundi, but this changed as compliance pressures grew. I experienced this firsthand while running a small bank in Burundi—European banks initially supported us with correspondent services, but many withdrew, leaving us to rely on a regional Kenyan bank through “nesting.” However, by 2014, even nesting became untenable as global banks clamped down on these practices, leaving us unable to process payments to markets like Europe and the US.

Impact on Trade and Payments;

The impact of the lack of correspondent access which in turn is a factor of heightened compliance had a number of adverse effects;

1. Data from the Centre for Economic Policy Research (CEPR) shows that “the likelihood that a firm continues to export declines by 5.2 percentage points in the short term and by 19.8 percentage points in the medium term (four years after the shock). At the intensive margin, four years after the event, the export revenues of affected firms are 57% lower than those of similar control firms.” I’ve seen this directly.

2. The decline in correspondent activity led to the rise of Fintech remittance networks that operate largely on bilateral agreements and away from traditional SWIFT networks;

3. The decline in small banks as only larger banks could support the compliance costs associated with sustaining correspondent relationships. In fact, the recent trend in larger banks capturing more market share in Africa can be partly attributed to the correspondent banking crisis.

4. A complete shutdown of some parts of the continent to global banking. Markets such as Malawi, Burundi, Liberia and Sierra Leone come to mind. It’s a case of “The strong do what they can and the weak suffer what they must” as the ancient Greek Historian Thucydides said.

How Deregulation can impact this

I anticipate significant deregulation under Trump with global banks and Fintechs not having to run away from their own shadows. It’s likely that there will be more regulatory clarity and less leeway for regulators to punish you for “not doing enough”. In such an environment, the natural outcome is global land grab. Some things to think about;

1. Global banks will likely go to their pre-2008 stance and open correspondent accounts across the world - Tier 3 banks will start to benefit by being able to offer competitive trade and payments businesses;

2. If this happens, the combination of correspondent access, ISO 20022 and SwiftGPI will enable small banks to offer competitive remittance propositions. For large sums e.g. US$ 5,000, speed is not the core concern and this is an area banks can do well;

3. Fintechs will expand payouts and pay-in businesses by tapping a number of markets in Africa. I see the likes of Wise and Revolut in particular expanding their business given that it will be cheaper to run from a compliance perspective. This will likely increase competition in the market;

4. If you believe that compliance and arbitrary regulations are a hindrance to the proper functioning of TradFi, then it stands to reason that an improvement could weaken some of the payment use cases for crypto and stablecoins in particular;

Investment Opportunities

Ultimately the mix of deregulation and pro-crypto policies could lead to more VC investments in Africa in the following spaces;

1. Payments infrastructure particularly enabling interoperability between crypto, stablecoins, CBDCs and existing forms of money;

2. Payment apps that assist with both custody and orchestration of crypto for business. This could be an app that enables people store stablecoins and use them for business payments - Already YellowCard does this but the market will be even larger;

3. Trade Payments platform that enables the interface between traditional finance and crypto. For instance, utilising digital assets as collateral for trade Letters of Credit;

4. Investments platforms that enable truly global access to tokenised assets and stablecoins for African investors;

5. Crypto native banks that run purely on DeFi principles such as yield farming - the kicker would be to provide intuitive on and off-ramps for local payments. This should be targeted specifically at younger generations;

6. A lighter regulatory approach could lead to banks being more comfortable with purely digital onboarding and KYC furthering the business case for providers such as SmileID and Onfido;

Some Closing Thoughts

I feel like Crypto and Deregulation are opposing forces in that deregulation could weaken the business case for Crypto. If traditional finance becomes easier and friendlier for everyone then why should people trip over themselves to onboard to crypto. This is particularly the case given the lack of a “libertarian” bias in most African countries. The only people who may end up being attracted to the anonymity of Crypto could be malicious actors and this could be a filtering mechanism for the industry at large.

The fundamental question is whether what is actually needed for the future of digital finance is a friendlier banking system rather than a shift to decentralised crypto. This seems to be the approach global central banks are taking, essentially focusing on payments innovation that all players can participate in. This is why the Central Bank of Brazil is launching Drex despite the success of Pix. In fact, Project Hamilton, a collaboration between the Federal Reserve Bank and MIT concluded by saying;

Select ideas from cryptography, distributed systems, and blockchain technology can provide unique functionality and robust performance. We suspect existing database and distributed systems technology is sufficient to provide a more traditional payment architecture for CBDC where one actor stores users' accounts, users cannot custody their own funds, and there is no transaction scripting functionality. We created a new design to offer both these features and new opportunities for different intermediary roles.

Effectively the Fed said that we can achieve the promise of crypto whilst retaining the trust of a Central Bank. It remains to be seen which of the two approaches will win. If I were a betting man, I’d put my money on the Central Bank led approach to take the lion's share of the market particularly when it comes to payments and banking.