Africa, the smallest crypto-economy, which received $105.6 billion worth of cryptocurrency between July 2020 and June 2021, saw a growth of more than 1200% by value received in the last year.
According to a report by Chainalysis, the region is seeing some of the highest grassroots adoption in the world, with Kenya, Nigeria, South Africa, and Tanzania all ranking in the top 20 of the Global Crypto Adoption Index.
This is due to P2P platforms being particularly popular in Africa. The reason for the popularity of P2P platforms in Africa is it is difficult to send money to crypto businesses from bank accounts.
“Crypto products are getting more user friendly, so they can onboard more people into the crypto economy and help them see that crypto is faster, cheaper, and more convenient,” said Artur Schaback, COO and co-founder of popular P2P exchange Paxful who is also seeing 300% growth in Kenya over the last year and 57% growth in Nigeria.
Remittance is actually the primary reason African users are using these platforms, as some countries in the region have implemented strict capital controls.
This can be seen in the monthly growth of crypto payments below $1,000 in both volume and number of transfers.
Cross-region transfers also make up 96% of all transaction volume in Africa. Additionally, the share of retail-sized transfers at just over 7% of overall transaction volume is the biggest compared to the global average of 5.5%.
Many African users are also turning to cryptocurrency to preserve their savings amidst harsh economic conditions, says the report.
Paxful’s growth actually accelerated in Nigeria this past year during times of currency devaluation, noted Schaback. Chainalysis observed a similar phenomenon, showing when the value of Nigerian Naira or Kenyan Shilling value falls, the trade volume of respective fiat currencies increases.
And while African governments may follow other countries and introduce their own CBDCs, people may not be as receptive towards it given the instability and management issues with the fiat currencies.
“The only reason to use the e-naira over cryptocurrency would be trust in the government, and that trust has been eroded for many,” said Adedeji Owonibi, CEO and founder of a Nigerian blockchain consultancy, Convexity.