Cryptocurrency transaction volume in sub-Saharan Africa is one of the lowest in the world, with $100.6 billion in on-chain volume received between July 2021 and June 2022, representing 2% of global activity. However, these figures contrast with a to analyze produced by chain analysis revealing that the crypto market in the region is one of the most developed, with the integration of cryptocurrencies into the daily financial activities of many users.
Retail transactions, an essential element of the crypto market in Sub-Saharan Africa
Sub-Saharan Africa’s crypto landscape is characterized by a dominant retail market and heavy use of P2P platforms. Retail transfers account for 95% of all transfers, but if we limit ourselves to retail transfers under $1,000, that share rises to 80%.
According to interviews conducted by Chainalysis, this phenomenon is a reflection of the choice of many young people in sub-Saharan Africa to turn to cryptocurrencies as a means of preserving and building wealth despite poor economic opportunities.
In addition, P2P exchanges account for 6% of the total cryptocurrency transaction volume in Africa, more than double the share of Central and South Asia and Oceania. Ray Youssefchief executive officer of Paxfulsaid that in order to establish itself in sub-Saharan Africa, one of the tricks used by the platform was the use of gift cards: “we connected Nigerians with Chinese players who wanted to buy gift cards for app stores, and a huge business was born market. That’s how Bitcoin entered Nigeria and then the rest of West Africa.”
Regulations restricting crypto activity have also contributed to the growing use of P2P exchanges. In Nigeria, for example, the government banned banks from transacting with crypto businesses in 2021, and while this action does not appear to have reduced the overall volume of crypto transactions, it has affected usage patterns.
Cryptocurrencies facilitate the transfer of funds
Two other use cases are driving cryptocurrency adoption in Sub-Saharan Africa: remittances and commerce.
Indeed, as in many developing countries, remittances from abroad account for a significant share of Sub-Saharan Africa’s economies, and inflows to the region increased by 14.1% to $49 billion in 2021, following a decline the previous year. However, these operations are particularly expensive and difficult to perform: a transfer made through the traditional banking network can cost up to 20% in fees, while the use of cryptocurrencies can significantly reduce these fees.
Cryptocurrencies are also one of the most widely used tools for commercial transactions. As remittances are particularly difficult due to capital outflow controls, many businesses dependent on international suppliers have turned to crypto for payments. Companies that need materials in the United States, for example, use USDT to settle their transactions.
In Africa, the growth of the crypto ecosystem is concentrated around five main countries: Nigeria, South Africa, Kenya, Morocco and Botswana. Yussef pointed to Ghana as the next country he believes should achieve similar adoption rates to Nigeria and Kenya, based on current growth trends and the needs of the local population. Chainalysis concludes that the use of cryptocurrencies in sub-Saharan Africa will continue to grow as residents face problems that cryptocurrencies can solve, such as preserving savings in the face of economic instability and being able to transact across borders on places with strict capital control.
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