The adoption of cryptocurrencies in Africa has sparked the curiosity of the cryptocurrency community, with various estimates on how much Africans are using these new asset classes available from various bitcoin analytic firms.
Cryptocurrency transactions surged by over 2,500 percent in 2021, according to a positive report from cryptocurrency exchange KuCoin. However, according to the research, crypto transactions in Africa account for roughly 2.8 percent of global volumes.
According to the report, both commercial and governmental entities are boosting their research and development (R&D) efforts in order to establish the circumstances for asset class acceptance, “Local public and private enterprises are increasing their investments in R&D, while creating the necessary bedrock for the establishment of the next generation of information and communication technologies. Most African countries have adopted bold policies aimed at building economies centered around modern technologies, including blockchain and cryptocurrencies.”
What you should know
The average number of monthly transactions across African countries increased by 1,386.7 percent from January 2021 to January 2022, according to the research.
The number of users has also increased dramatically, according to the data, with a 2,467.2 percent increase over the same time period.
The average transaction size has fallen, indicating, according to the research, “that the adoption of this technology is taking place not only for large transfers, but for small payments as well.”
The report attributed the massive growth in adoption to the high level of inflation seen in African countries. It states, “the adoption of crypto technologies in Africa were preceded by the availability of the technology and the presence of several motivating factors. 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.”
It further reads, “The possibility of quickly transferring investments across assets mitigates the chance of savings depreciation. Not all countries are as inflationary as those of Sudan (260%) or Ethiopia (66%). Still, the desire to preserve the purchasing power, even under 6.4% inflation (Tunisia), is natural for those seeking to preserve the value of their savings.”
According to the survey, more than 88.5 percent of African bitcoin transactions are cross-border transfers, and they use cryptocurrencies because of the low transaction fees. “In many circumstances, users pay less than 0.01 percent of the total amount of the transaction sent in cryptocurrencies,” it goes on to say, “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.”
According to the survey, Cape Town and Lagos are the driving forces behind Africa’s digitalization. “Cairo, Cape Town, and Lagos might be regarded as the region’s engines of digitization,” it says. Kenya has a distinct focus in East Africa, with 64 percent more bitcoin transactions in Nairobi, the country’s capital, than the rest of the region.”
The population’s readiness for such changes is demonstrated by soaring demand and an almost 25-fold increase in user numbers in the preceding year.
In the age of globalization, detaching from outmoded payment methods would help attract investments, minimize government spending, relieve the administrative burden on the banking industry, and build business relations with other countries without harming individuals’ financial well-being.
The report concluded by stating, “With the proper legislative attention and acceptance of the need for such digital technologies by the authorities, crypto platforms could be an effective steppingstone for the overall growth of Africa’s GDP.”