Cryptocurrency adoption rates in Africa have seen record-breaking growth in recent times and a few of these factors could be contributing to this growth.
Cryptocurrency adoption rates in the African region have seen record-breaking levels of growth in recent years. With a 1200% growth in crypto value for the region translating $105.6 billion dollars in crypto asset value for the period of July 2020 to June 2021, making it one the fastest-growing markets in terms of crypto adoption rates in the world. Yet, despite countries like Kenya, Nigeria, South Africa and Tanzania ranking amongst the top 20 on the Global Crypto Adoption Index, Africa remains the smallest cryptocurrency economy among all the regions studied by blockchain research and analytics firm Chainalysis.
Citizens of African countries have long suffered from the consequences of inadequate infrastructure among which is the lack of access to financial services. The mass appeal of cryptocurrency and the consequent surge in its use is therefore understandable as all it requires is the possession of a smartphone. In fact, in the study by Chainalysis, Africa is noted to have some of the highest grassroots adoption levels in the world. Grassroots adoption for the region, which is estimated using the value of the overall transaction volume of a region that is made up of retail-sized transfers, stood at 7% which is 2.2% higher than the 5% global average. This signals that cryptocurrency could be a viable alternative to African traditional banking systems.
Another feature of cryptocurrency use in African countries is the large role that Peer-2-Peers P2P platforms play in crypto transactions. According to Chainalysis, Africa has the highest rate of P2P services use than any other region in the world. This phenomenon can be attributed to the fact that in Nigeria and Kenya, two of the region’s largest adopters, the use of cryptocurrency has been constantly frustrated by regulatory authorities. Nigeria’s Central Bank in January issued a circular to all banks in the country prohibiting them from “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges’’. This echoed a similar move made by Kenya’s apex bank earlier in 2018. These measures have resulted in residents of these two countries having no recourse but to turn to the P2P market to carry out all crypto-related transactions.
One explanation for the tenacity of African cryptocurrency users lies in the fact that cross-regional transfers make up 96% of the total transactions of the region even though it only accounts for 78% of transactions of all other regions combined. This is due to the steep costs involved in sending money abroad from the region. Alongside the limits imposed by regulatory bodies on remittable amounts such as in Nigeria where banks do not allow customers to send more than $500 out of the country at a time, it is no surprise that Africa is turning to cryptocurrency.
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