In accordance with a report on cryptocurrency by Chainalysis, Sub-Saharan Africa has the lowest volume of cryptocurrency transactions of any region, with $100.6 billion in on-chain volume received between July 2021 and June 2022, or 2% of global activity and 16% development over the previous year. This volume represents 2% of global activity.
Chainalysis’s deeper investigation finds that Africa has some of the most established cryptocurrency markets of any continent, with significant penetration and integration of cryptocurrency into many users’ daily financial activities.
This is notably evident in Nigeria and Kenya, which are respectively ranked 11th and 19th on the Global Crypto Adoption Index.
When population and purchasing power are taken into account, both nations exhibit significant adoption, particularly on P2P exchanges, which expert interviews have shown are essential to the region’s crypto economy. South Africa, which is the region’s leader in raw transaction volume, comes in at number 30 on the Chainalysis index.
Sub-Saharan Africa’s cryptocurrency industry is driven by small retail transactions
According to Chainalysis, Sub-Saharan Africa is distinct from other regions because of its retail market and excessive use of P2P networks. More than any other region, 6.4% of its transaction volume consists of retail-sized payments under $10,000 USD.
When the quantity of individual transfers is considered, the function of retail becomes much clear. Retail transfers account for 95% of all transactions, and if we focus only on small retail transfers under $1,000, the share rises to 80%, which is higher than in any other region.
In contrast to other nations where many are using cryptocurrency as a way to multiply their existing wealth, Chainalysis’s interview suggests that this reflects the trend of many young people in Sub-Saharan Africa turning to cryptocurrencies as a method of safeguarding and generating wealth despite the limited economic opportunity.
An intriguing pattern observed in Sub-Saharan Africa this year may be explained by crypto usage driven by daily necessity as opposed to speculation by the wealthy: Beginning in May, when the bear market officially began, the number of small retail transfers increased while the number of transfers of various sizes decreased.
Chainalysis states that people may be more inclined to keep trading despite price declines if many people engaging in small retail transactions are doing so to trade cryptocurrency due to economic necessity, particularly in nations where the value of local fiat currencies is declining, as is the case in Nigeria and Kenya, for instance.
Of course, price declines for Bitcoin, Ethereum, and comparable cryptocurrencies would have no impact on people purchasing stablecoins like Tether.
One essential component of the ecosystem is P2P exchanges
According to Chainalysis, P2P exchanges handle 6% of all bitcoin transactions in Africa, which is more than twice as much as the next-closest regions of Central & Southern Asia and Oceania.
Regulations that restrict crypto activities may also encourage the use of P2P exchanges. While this step doesn’t seem to have slowed overall bitcoin transaction volumes, it has had an impact on usage patterns.
In 2021, the Nigerian government forbade banks from doing business with cryptocurrency enterprises.
In Sub-Saharan Africa, the adoption of cryptocurrencies is driven by trade and remittances
Ray and Deji discussed two key use cases driving the adoption of cryptocurrencies in Sub-Saharan Africa with Chainalysis, namely remittances and commerce, in addition to trading and saving.
The economy of Sub-Saharan Africa has traditionally relied on remittances from outside, and after declining the year before, inflows to the region increased by 14.1% to $49 billion in 2021.
Another application is in commercial dealings. Due to Nigeria’s strict capital constraints, Adedeji Owonibi told Chainalysis that many companies that depend on foreign suppliers have started using cryptocurrencies for payments.
He mentioned China as another common trade partner for these cryptocurrency-based business transactions: “Companies need to acquire supplies from the United States, but there’s no means to get the money so they’re left with no choice except to use USDT.”
Future growth of crypto in Sub-Saharan African
Generally speaking, Chainalysis anticipates that the use of cryptocurrencies in Sub-Saharan Africa will increase as long as locals face problems that the technology has already shown it can help them with, like protecting savings during times of economic uncertainty and facilitating cross-border transactions in locations with strict capital controls.