The crypto community experienced its biggest boom in 2021. Several countries and industries have opened their doors to the digital revolution. As a result, multiple projects emerged from different parts of the world. Chainalysis released a report on how the crypto space fared on different continents. This article will focus on crypto adoption in Africa.
Chainalysis is one of the foremost software companies bringing the crypto community closer to governments and industries. The New York-based firm supplies blockchain data to several agencies and financial institutions. These organizations would make decisions based on the data supplied.
The Chainalysis Crypto Adoption Index offers a peculiar insight into the performance of the crypto world in several nations. The data from this report explains the global adoption of cryptocurrencies in 2021. Rather than focusing on crypto adoption by the higher classes and the wealthy, Chainalysis mirrors crypto adoption through the lenses of the regular man. According to the report, Vietnam, India, and Pakistan topped the charts for global crypto adoption. However, this article will focus mainly on the African continent.
How Did Crypto Adoption Fare in Africa?
Africa was the smallest crypto-economy studied by the software company. However, it boasted significant progress. The continent is the third fastest-growing crypto economy. Africa received $105.6 billion worth of cryptocurrency between July 2020 and June 2021. In addition, the continent witnessed over 1200% growth in the previous year. While other continents ranked higher in adoption ratings, Africa was home to some of the highest grassroots adoptions in the world.
African countries like Nigeria, South Africa, Kenya, and Tanzania made it the top 20 of the Chainalysis Global Adoption Index. This shows the massive attention and recognition of crypto in these regions. A huge chunk of the transaction volume in Africa came from retail-sized payments. This is 7% higher than the global average of 5.5 percent. These figures show that cryptocurrency adoption moved quickly at the grassroots level. Seemingly ordinary Africans showed high interest in the crypto market. Some users went on to build their portfolios to considerable levels.
P2P transfers gained significant popularity in Africa more than in any other region. P2P platforms did not only provide an in-road into the crypto space for most Africans; they became a tool for commercial transactions. For example, a high number of Africans utilized P2P platforms to send remittances. In addition, Africa witnessed about 96% transaction volume of cross-region transfers. This number exceeds the 78% of all other regions combined.
What Backed Crypto Growth in Africa?
Some African governments proposed certain policies that ought to have numbed the growth of cryptocurrency in the region. However, the African crypto community continued to soar in the face of seeming restrictions. In addition, the growth of P2P exchanges throughout the continent soared throughout last year. Furthermore, Kenya and Nigeria had the highest transaction volumes on P2P platforms.
P2P Bitcoin trade volumes in Sub-Saharan Africa were the highest in the world on global crypto platforms LocalBitcoins and Paxful. However, local exchanges such as Yellow Card and Busha gained significant traction last year. One reason for this surge is that most Africans turned to P2P platforms to navigate difficult policies. For example, Kenya and Nigeria made it difficult for people to send crypto from their bank accounts. In addition, the apex banking institutions in these nations blocked such transactions. As a result, P2P platforms were the only bailout for crypto enthusiasts in the region.
Africans also devised mediums of communication to carry out most P2P transactions. Rather than converse on formal channels, most Africans communicate on Whatsapp and Telegram. As a result, crypto users carry out a huge sum of transactions on these social media platforms. Artur Schaback, COO and co-founder of Paxful, also confirmed to Chainalysis that his platform witnessed 57% growth in Nigeria and 300% growth in Kenya. He reportedly said, “In many of these frontier markets, people can’t send money from their bank accounts to a centralized exchange, so they rely on P2P.”
Remittances in Africa
A large bulk of P2P transactions in Africa are used for remittances. According to the Chainalysis report, Nigeria accounts for a large part of the remittances in Sub-Saharan Africa. However, a large sum of the money moving to Africa comes from Europe and North America, but there are also cross-regional transfers. Cryptocurrency remittances in Africa will likely surge higher in the coming months. Certain policies limiting transfers set crypto payments as the only means to move funds without institutional hindrances.
Some Africans use crypto to pay for foreign goods and sell them abroad. According to Chainalysis, sending Bitcoin via a P2P exchange is the easiest option for most Nigerians to purchase goods. This is because transacting with fiat currency could be time-consuming as each person has to observe their regional policies.
Savings Play a Huge Role in African Crypto Adoption
In addition to transferring funds, most Africans utilize cryptocurrency as a means of saving. For instance, Nigerians constantly lament the naira’s weakness in relation to the dollar. This means a decline in their purchasing power. To navigate this, most Africans prefer to save in crypto.
Furthermore, different income groups in the African crypto community have differing views. Some high-income earners prefer Bitcoin investment. However, younger adopters gun for other stablecoins. As a result, the interest in digital currencies might spark some African governments to create their own central bank digital currencies (CBDCs). Nigeria already has plans for an e-naira. However, most Nigerian crypto users expressed negative views over such a move. Some expect the digital currency to share in the naira’s instability.
In conclusion, Africa has one of the highest crypto adoption rates of all the regions. The continent has a high rate of P2P activity. Most new adopters utilize cryptocurrency as a better alternative to their local currency. Furthermore, others see it as a way out of restrictive policies hindering remittance. However, all these factors spell a bright future for the African crypto community.
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