Crypto adoption in sub-Saharan Africa driven mainly by retail and P2P activities

While institutional traders are not widespread in sub-Saharan Africa, the region is known for having the highest number of small retail transactions globally.

Part of the driving force behind cryptocurrency adoption is the devaluation of fiat currency, high unemployment and economic instability.

Crypto P2P thrives in Africa despite regulatory issues

According to a report by blockchain analytics firm Chainalysis, retail users make up the bulk of crypto-related activities in Sub-Saharan Africa. Institutional presence in the region is less than is the case in other countries.

However, retail volume on the continent is largely driven by economic factors such as the need for wealth preservation. This is because the currencies of many of these countries have suffered decades of devaluation against the US dollar.

“Our interviews suggest that this reflects the trend of many young people in sub-Saharan Africa turning to cryptocurrency as a way to preserve and build wealth despite low economic opportunities, unlike other countries where we see many using cryptocurrency as a way. to multiply their existing wealth,” Chainalysis stated in the blog post.

The near absence of institutional interest in crypto in sub-Saharan Africa can be attributed to the presence of strict regulatory guidelines. For example, Nigeria’s central bank banned commercial lenders from servicing cryptocurrency businesses.

The ban by Nigeria’s central bank also contributed to another adoption measure on the retail side. It triggered an increase in peer-to-peer crypto volumes. According to the report, these P2P transactions are not limited to platforms like Paxful and Binance that have escrow and intermediary services. Direct crypto P2P deals between buyers and sellers also occur outside cryptocurrency exchanges in the region.

Crypto also powers money transfers

Remittances are popular in sub-Saharan Africa due to the high number of diasporas sending money home. According to figures from the World Bank, inflows to sub-Saharan Africa rose by 14.1% to nearly $50 billion in 2021, following a decline of 8.1% the previous year. However, the high fees charged by mainstream platforms act as a deterrent for users. The situation has led people to seek cryptocurrency as it offers a faster and cheaper alternative.

Fintech payment platforms are also integrating crypto as a way to make cross-border transactions easier. There has been an increase in fintech payment projects across the continent. Fintech startups in Africa raised $3 billion in 2021, according to a report by market research firm Briter Bridges. This accounted for 60% of the total capital raised by African technology firms last year.

Cryptocurrency has also been useful for businesses importing materials as the region sees the emergence of crypto payment corridors between partners in Africa and Asia. These payment corridors often use stablecoins such as Tether to facilitate transactions.