Cryptocurrency adoption in Sub-Saharan Africa is largely based on retail and P2P activities

Although institutional traders are not common in sub-Saharan Africa, the region is known for having the highest number of micro-retail transactions globally.

Part of the motivation for using cryptocurrency is the devaluation of fiat currency, high unemployment rates, and economic instability.

Crypto P2P is booming in Africa despite regulatory issues

According to a report by blockchain analytics firm Chainalysis, retail users make up the bulk of crypto-related activity in sub-Saharan Africa. The institutional presence in the region is less than in other countries.

However, the continent’s retail volume is largely driven by economic factors such as the need to maintain prosperity. This is because the currencies of many of these countries have suffered decades of devaluation against the US dollar.

“Our interviews indicate that this reflects the trend that many young people in Sub-Saharan Africa are turning to cryptocurrency as a way to preserve and build wealth despite low economic opportunities, unlike in other countries where we see many using cryptocurrency as a means of multiplying,” Chainalysis said. In the blog post.

The almost complete absence of institutional interest in cryptocurrencies in sub-Saharan Africa can be attributed to the existence of strict regulatory policies. For example, the Central Bank of Nigeria has banned commercial lenders from serving cryptocurrency companies.

The ban by the Central Bank of Nigeria also contributed to another retail adoption action. It increased peer-to-peer encryption sizes. According to the report, these P2P transactions are not limited to platforms like Paxful and Binance that have escrow and brokerage services. Direct P2P crypto transactions also take place between buyers and sellers outside of cryptocurrency exchanges in the region.

Cryptocurrencies are also driving remittance flows

Remittances are popular in sub-Saharan Africa due to the large number of expats sending money back home. According to World Bank figures, inflows to sub-Saharan Africa rose by 14.1% to nearly $50 billion in 2021, after a decline of 8.1% the previous year. However, the high fees charged by the major platforms are a barrier for users. This situation prompted people to search for cryptocurrencies, as they provide a faster and cheaper alternative.

Fintech payment platforms are also integrating cryptocurrencies as a way to facilitate cross-border transactions. There has been a significant increase in fintech payment projects across the continent. African fintech startups raised $3 billion in 2021, according to a report from market research firm Briter Bridges. This amounted to 60% of the total capital raised by African tech companies last year.

Cryptocurrency has also been beneficial for companies importing materials as the region sees the emergence of cryptocurrency payment corridors between partners in Africa and Asia. These payment corridors often use stablecoins like Tether to facilitate transactions.

Crypto adoption subsequently appeared in Sub-Saharan Africa largely driven by retail and P2P activities first on CryptoPotato.

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