According to a 2021 industry research by cryptocurrency exchange KuCoin, high inflation and currency depreciation are forcing Africans into the cryptocurrency market to avoid losing the value of their money.
The Central Bank of Nigeria has depreciated the naira three times in the last two years, while inflation has fallen from 16.47 percent in January 2021 to 15.7 percent in February 2022 – but this statistic is said not to reflect market reality.
As a result of the aforementioned, the naira is weakening, and some African countries are experiencing similar problems., Nigerians and other nationalitiescitizens throughout the continent are turning to bitcoin and other crypto assets to protect their purchasing power.
According to a KuCoin analysis from last year, this boosted the number of cryptocurrency users in Africa by 2,467.2 percent year over year, resulting in a 2,500 percent increase in crypto transactions in 2021, with monthly transactions increasing by 1,386.7 percent.
“The adoption of crypto technologies in Africa was preceded by the availability of the technology and the presence of various compelling elements,” KuCoin stated, explaining the influence of inflation and devaluation on digital currency adoption.
“These include the desire of the population to react quickly to any changes in the exchange rate of national currencies in countries with high rates of inflation and devaluation.” the report reads.
The cryptocurrency exchange further stated that, “The possibility of quickly transferring investments across assets mitigates the chance of savings depreciation.”, although the report acknowledged that not all countries are as inflationary.
“Even under 6.4 percent inflation (Tunisia), the urge to preserve purchasing power is natural for individuals attempting to preserve the value of their savings,” it stated.
Apart from trying to combat inflation and devaluation on the continent, Africans have turned to cryptocurrency to avoid paying expensive cross-border transfer fees, with many crypto cross-border transactions costing less than 0.01 percent.
Because of the low transaction fee, cross-border transfers account for 88.5 percent of all cryptocurrency transactions in Africa. “In many situations, customers pay less than 0.01 percent of the total value of the transaction sent in cryptocurrencies,” says one user.
“This simultaneously solves several issues associated with crypto transaction restrictions that are in place in countries like Nigeria and Kenya. End-users of services can conduct transactions in a matter of milliseconds without fear of temporary freezes of transferred funds, as is often the case with conventional payment systems.”
As cryptocurrency adoption grows in Africa, the continent now accounts for 2.8 percent of global crypto transaction volumes, and it is thought that adequate legislative attention and authorities’ acceptance of cryptocurrency could boost the decentralized market’s contribution to Africa’s gross domestic product (GDP).