The adoption of cryptocurrencies in Africa has provided a suitable alternative to both traditional intra-regional and international payments. Transfer fees that remain higher in Africa than in the rest of the world have been greatly reduced by the use of cryptocurrencies. Although cryptocurrencies do incur a fee, it is far lower than what banks charge. The universal access to cryptocurrency networks via mobile phones makes these digital assets more convenient than rigid traditional banking and money-wiring services.
The ease that cryptocurrencies brought into the payment system made it possible for rapid adoption in Africa. Traditional banks are charging a higher fee for both local and international transfers, and the long wait in the queue makes it even more tiring. Once a suitable option for payment transfer shows up, which of course is cryptocurrencies, its adoption increases rapidly.
Although Africa captures only 2 percent of the global value of all cryptocurrencies received and sent, making it the worlds smallest cryptocurrency economy, the rising prominence of this innovative form of money is altering traditional financial flows to and from the continent.
According to the Chainalysis 2021 Global Crypto Adoption Index published in August, global adoption of crypto assets has jumped by over 2,300 percent since the third quarter of 2019 with P2P platforms driving cryptocurrency usage in emerging economies.
Chainalysis is a blockchain data platform. It provides data, software, services, and research to government agencies, exchanges, financial institutions, and insurance and cybersecurity companies in over 60 countries.
Our research suggests that reasons for this increased adoption differ around the world – in emerging markets, many turn to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances, and carry out business transactions, while adoption in North America, Western Europe, and Eastern Asia over the last year has been powered largely by institutional investment.
“In a year when cryptocurrency prices rose dramatically, each regions respective reasons to embrace the asset class seem to have proven compelling.”
“Africa amassed $105.6bn worth of cryptocurrencies in forecasts for the year ending June 2021, driven by peer-to-peer (P2P) transactions in key growth markets. Markets like Kenya, Nigeria, South Africa, and Tanzania had some of the highest grass-roots adoptions in the world and ranked in the top 20 Global Crypto Adoption Index.” - theafricareport
Chainalysis finds that the largest crypto channel connects Africa to East Asia, although channels to Northern and Western Europe and then North America trail closely behind. According to the 2020 Geography of Cryptocurrency report, the particularly high volume of funds sent from Africa to East Asia stems from the magnitude of Chinese nationals working in Africa.