Cryptocurrency is Succeeding in Meeting the Economic Needs of Sub-Saharan Africans
Cryptocurrency has largely experienced top-down adoption, with many using cryptocurrency as a way to multiply existing wealth. But the conversation around cryptocurrency, and other digital assets, has been its potential to free underdeveloped economies, democratize individual finances and business transactions, and support underserved communities. Sub-Saharan Africa has taken a bottom-up approach to cryptocurrency, using tokens as a way to preserve and build wealth in spite of low economic opportunity.
The region accounts for the least cryptocurrency transaction volume of any region, according to research conducted by Chainalysis. With $100.6 billion on-chain volume between July 2021 and June 2022, Africa’s cryptocurrency usage only accounts for 2% of global activity. Yet from 2020 to 2021, the continent saw a 1,200% increase in cryptocurrency payments. Africa is the fastest-growing cryptocurrency market among developing economies, and the third-fastest growing market globally. Despite the explosion of adoption, it remains the smallest by market size.
However, the African continent is home to some of the most well-developed cryptocurrency market integrations of any region globally. Cryptocurrency has permeated everyday financial activity for many users. The region’s retail market makes use of Peer-to-Peer (P2P) platforms more than its global counterparts. Retail transactions below $10,000 make up 6.4% of its transaction volume, and 95% of all transfers are retail transactions.
“We see a lot of daily traders who are trading to make ends meet,” said Adedeji Owonibi, founder of Nigeria-based blockchain consultancy Convexity. “We don’t have big, institutional-level traders in Sub-Saharan Africa. The people driving the market here are retail. Nigeria has a ton of highly educated young graduates with high unemployment rates, no jobs available — crypto to them is a rescue. It’s a way to feed their family and solve their daily financial needs.”
The need-based motivation to invest in cryptocurrency, versus speculative investing that drives investors otherwise, can explain the phenomenon in Sub-Saharan Africa. Since the bear market has begun, small retail transfers actually grew in the region, while the number of other transfers fell.
Bitange Ndemo, faculty at the University of Nairobi, noted that cryptocurrencies are well-positioned to facilitate with remittances, given that cryptocurrency bypasses traditional banking services. Research from Chainalysis supports this, finding that cryptocurrency transactions associated with remittance payments have seen rapid growth, in value and volume, since COVID-19. It is also economically beneficial to recipients, where the value of local fiat currencies are dropping, as we’ve seen in Nigeria and Kenya. In an effort to meet the needs of this growing market, Web3 innovation has been thriving.
In a report published by Crypto Valley Venture Capital (CV VC), analyzing blockchain in Africa in 2021, blockchain startups on the continent were noted to have raised $91 million in the first quarter of 2022, a staggering 1,668% increase compared to Q1 2021 growth of 149%. A total of $127 million was raised in 2021, with 96% of those dollars going to businesses in Nigeria, Kenya, South Africa, and Seychelles. 53% of the money raised — $67 million — went to Fintech businesses.
“More African companies are joining the global unicorn club, and we anticipate that many of those new unicorns will be blockchain unicorns,” says Gideon Greaves, Managing Director at CV VC. “In terms of financial infrastructure, personal identification, record keeping and lack of access to individual financial independence, Africa’s current state of affairs has created the ideal conditions to accelerate the adoption of blockchain technology,” Greaves continued. “This is what makes the African tech scene so fertile. It solves real-world challenges faced by its people daily.”
With 370 million Africans unbanked, blockchain can make an immediate difference in financial inclusion on the continent. P2P platforms have grown immensely, accounting for 6% of all cryptocurrency transaction volume in Africa — double the share of the next closest region.
Bitcoin marketplaces Paxful and Localbitcoins are at the forefront of this movements, allowing millions of Africans access to a range of financial services. Paxful’s CEO, Ray Youssef, explained to Chainalysis that Paxful initially took hold as the first service to offer Bitcoin in the region. P2P platforms drove early cryptocurrency activity in Sub-Saharan Africa.
Adedeji and Youssef believe that along with P2P and remittances, commerce is also driving strong cryptocurrency adoption in Africa. According to them, many businesses relying on international suppliers have turned to cryptocurrency for payments, as sending funds abroad is too difficult under Nigeria’s currency capital controls. China has been a strong trading partner for crypto-based commercial transactions in the region.
Adoption reports have strongly indicated that what people believe is true — cryptocurrency can support developing economies and empower individuals. If they’re right, and this is the future for Web3, Africa has a head start in building the infrastructure needed to support cryptocurrency adoption from the bottom-up.
About Centuries Analytics
Investing in cryptocurrency doesn’t have to be risky — not anymore. We let data speak; not investors, “experts”, pundits, or tv show commentators. Centuries uses social media, financial, and macro-economic data to determine and predict cryptocurrency markets.
