According to the newly published 2021 cryptocurrency geography report by blockchain data service provider Chainalysis, the cryptocurrency market in Africa grew by 1200% from June 2020 to July 2021.
Chainalysis noted that as the third fastest-growing cryptocurrency market in the world, the African market is still relatively small, but the most exciting and dynamic.
This makes four African countries, including Nigeria, Kenya, South Africa and Tanzania, among the 20 most active emerging economies in the company’s global crypto adoption index.
The total revenue of the market in one year was $105.6 billion, which is a small percentage when compared to other regions of the world.
However, three main growth drivers have resulted in explosive growth in retail sales in African countries.
The growth of P2P Exchanges for Cryptocurrencies
African cryptocurrency users prefer peer-to-peer transactions. As a result, they have grown into the world’s largest P2P user crypto community, which has resulted in tremendous growth in various P2P platforms. Artur Schaback, chief operating officer and co-founder of Paxful P2P Exchange, said the platform had growth of 57% and 300% in Nigeria and Kenya, respectively.
According to the report, the total retail transaction volume reached 7%, 1.5% above the regional average of 5.5%. Africa has the highest transaction volume in the professional, large and small payment categories.
According to Chainalysis, the higher concentration of smaller remittances clearly shows that daily users are increasingly exposed to cryptocurrencies at the base level.
Bypass government-imposed financial controls
The data shows that 98% of the total volume of cryptocurrency transactions in Africa consists of national transfers, this value is above the 78% average in other regions.
There are three reasons why P2P platforms are so popular. First, they offer Africans a cryptocurrency transaction method that does not require banks to participate, most of which are limited to providing cryptocurrency-related services.
Second, the P2P platform makes it easy for users to send or receive transfers across regions.
“Blockchain analysis confirms that cryptocurrency-based remittance payments are likely increasing in Africa.”
Thirdly, African traders can use cryptocurrency transactions for international trading transactions via the P2P platform.
Cryptocurrency to hedge against inflation
Most users consider cryptocurrency as a tool for hedging against inflation. The report indicated that trading volume on P2P exchanges increased during the period of sharp currency devaluation. For example, young crypto users in Nigeria are choosing to store their wealth in stablecoins, illustrating the unreliable instability of naira.
Chainalysis concluded that even if more governments in Africa make an effort to adopt CBDC, they may face more resistance from their respective crypto communities, just like Nigeria’s CBDC e-naira.
“While we can’t know for sure if users will embrace the e-naira, this anecdote shows that CBDCs may not be a magic bullet for better monetary policy, especially if citizens don’t trust them enough to use them.”