Over the past year, Africa has been widely reported as one of the fastest growing markets for cryptocurrency adoption. Now we have an idea of how fast the market is growing, thanks to a new report from blockchain research and analysis company Chainalysis.
The African crypto market has grown by more than 1,200% in terms of the value received over the past year. Chainalysis estimates that African countries received a total of approximately $ 105.6 billion worth of cryptocurrencies between July 2020 and June 2021. However, Africa is still the smallest crypto economy of all regions investigated by research firms.
here, Value received, When Value received See the dollar value of a cryptocurrency received or sent by a party or entity (Africa in this case).
The report features four major trends in the adoption of cryptography in Africa.
- Grassroots adoption growth
- Increasing popularity of P2P platforms
- Cryptographic remittance
- Cryptography as a tool for the preservation of wealth
Despite the relatively small crypto economy in Africa, Chainalysis said Africa “has the most grassroots adoption in the world, with Kenya, Nigeria, South Africa and Tanzania all ranked in the top 20 of the Global Cryptography Employment Index. “.
One way to determine grassroots adoption is to assess a portion of the region’s overall transaction volume that features retail-scale transfers. In Africa, that figure is just over 7%, higher than the global average of 5.5%, Chainalysis data show.
According to the report:
“Deeping further, Africa also sees a larger share of the volume of transactions, consisting of professional, large retail and small retail payments, than the global average. These numbers are many. That’s a big part of why African countries are ranked high in our recruitment index. Smaller transfer sizes indicate more grassroots adoption among everyday users. “
P2P platforms are becoming more and more popular
Peer-to-peer (P2P) volumes make up a small portion of all African transaction volumes (2.6% for Bitcoin and 1.6% for all cryptocurrencies), but have a higher percentage of P2P services than African crypto users. No other region is using it. Chain analysis.
An important impetus for this trend is that the governments of two major African countries, Nigeria and Kenya, have made it difficult for cryptocurrency companies (such as exchanges) to work with banks regarding the adoption of cryptocurrencies. It’s a fact. In January, the central bank of Nigeria sent a notice to domestic banks stating that regulated financial institutions were “banned” from “promoting cryptocurrency transactions and payments for cryptocurrency exchanges.”
The Nigerian Central Bank’s anti-Bitcoin move took place about three months after the “End SARS” protest of the virus, which demanded that young Nigerians curb the atrocities of Nigerian police. Bitcoin was, among other cryptocurrencies, an important part of the way protests received funds after Nigerian banks restricted accounts related to protests.
In 2018, the central bank of Kenya warned banks in East African countries about the handling of cryptocurrencies and the promotion of transactions of crypto-related entities. On June 4, local Bitcoin publication BitcionKE reported that some Kenyan banks began sending warning emails to customers who traded in cryptocurrencies using debit or credit cards.
Therefore, it is not surprising that residents of these two countries are looking to P2P platforms that do not facilitate direct transactions.
Between July 2019 and June 2020, the interregional value of Africa received was the highest of all the regions surveyed by Chainalysis. This may suggest that more Africans are receiving cryptographic remittances.
Chain analysis also pointed to the monthly growth of cryptocurrency payments of less than $ 1,000 (both volume and transaction count) as a potential sign of an increase in crypto-based remittances to Africa. The research firm considers an estimated remittance limit of $ 1,000 to be sent to African countries.
For reference, a study by the Brookings Institution found that sub-Saharan Africa received an estimated $ 48 billion worth of remittances in 2019, about half of which was sent to Nigeria.
In addition, World Bank remittance data show that sub-Saharan Africa is the most expensive remittance region. Bitcoin, and common cryptocurrencies, have long been touted as helping to reduce the speed and cost of remittances.
Currency risk is highest in many African countries. For example, the central bank of Nigeria has devalued its national currency, the naira, by about 35% over the past five years. For countries that consume more imports than exports (excluding crude oil), constant devaluation erodes Nigeria’s wealth.
Artur Schaback, chief operating officer and co-founder of P2P exchange Paxful, told Chainalysis that exchange growth in Nigeria has accelerated over the past year during the currency devaluation. Researcher data support Schabacks’ claim that P2P volumes have habitually surged following currency devaluations in both Nigeria and Kenya.
Warning for chain analysis data
Kimberly Grauer, head of research at the research firm, said on Zoom’s phone that web traffic is an important part of how Chainalysis determines the source and destination of crypto transactions.
As a result, the most up-to-date numbers in the report are only estimates and can vary significantly from reality.
“There are a lot of caveats in the report, but this is the best estimate you can get,” says Grauer. “Some of the warnings are like VPNs. For example, I found out that Nigeria has banned Twitter. Therefore, you need to use a VPN to access Twitter.
“Our web traffic data has no way to describe a VPN. This is a major warning.”
In addition, the report contains only data from 31 African countries. There are 54 countries in Africa. These 31 countries exclude Egypt, a chain analysis group in the Middle East.
“We have a statistically significant amount of data for 31 African countries, excluding Egypt, and we are confident that we can estimate the size of the region.”
The numbers are not Absolutely correct, Grauer believes it is “direction right”.
The focus of Chainalysis on Nigeria and Kenya in the discussion also stands out. This can give the impression that Nigeria and Kenya are by far the leaders in African cryptocurrencies. This is not always the case, Grauer warned.
“In absolute terms, South Africa is actually the largest crypto market far away, but Nigeria and Kenya stand out in terms of GDP and population.”
“We began to suspect that some things were happening in Morocco, and some other countries throughout Africa are sticking out for other reasons. Togo is always on all indicators. It was another country that showed very high performance in the index. “
Chainalysis ranks countries based on their cryptocurrency adoption index …