The continent has more retail-sized transfers than any other region in the world
African countries are increasingly shifting towards cryptocurrencies from local fiat currencies as they present a means to overcome economic instability and offer low-fee remittances and an alternative way to save, a new report by blockchain analytics firm Chainalysis explained.
The blog that covered excerpts from the Chainalysis 2020 Geography of Cryptocurrency Report, further stated that Retail-sized transfers (transfers under $10,000 USD) make up a larger share of Africa’s cryptocurrency activity, greater than in any other region.
Africa has a relatively small crypto economy with just $8 billion worth having been received and $8.1 billion sent on-chain last year. A majority of these transactions are small value crypto transactions that have added life-changing value for users in the region, the report said.
The total number of transactions under $10,000 jumped by 55% in the year to June. The continent’s largest economy, Nigeria, along with South Africa, and Kenya lead the region in cryptocurrency transfers.
Abolaji Odunjo, who runs a mobile phone retail store in Lagos, Nigeria’s largest city told Reuters that he has shifted to crypto to pay his Chinese suppliers as it offers speed and convenience. “Bitcoin helped to protect my business against the currency devaluation, and enabled me to grow at the same time,” he said.
Odunjo added that crypto not only helped him avoid high fees but it also acted as an alternative purchasing increasingly expensive US dollars. With currency devaluation and instability, countries like South Africa have lost over 50% of their currency’s value against the US dollar in the last decade.
Overseas remittances are a crucial part of the economy for many parts of Africa. Roughly 25 million expats of Sub-Saharan African countries living abroad remitted $48 billion in fiat back to the region in 2019, the report explained.
However, fees for fiat remittance in Sub-Saharan Africa costs 8.9% on average, almost 20 % in South Africa. Bitcoin fees sit drastically lower, typically sitting below 3%, thus, crypto is being favoured to send funds back to the region. Data revealed that $562 million worth of cryptocurrency was transferred directly from overseas addresses to ones based in Africa in retail sized payments.
This also applies to intra-region remittances between African countries, which have historically been made difficult by large fees, the report stated.
Written by Harshini Nag