Africa has the strongest grassroot adoption of cryptocurrency in the world, shows Chainalysis report

Currently the fastest growing cryptocurrency economy in the world, Africa is witnessing the strongest grassroot adoption of cryptocurrency in the world. This is according to a Chainalysis preview of The Chainalysis 2021 Geography of Cryptocurrency Report which is expected to be released in October.

By Africa having the strongest grassroot adoption, this means more everyday people use cryptocurrency in Africa more than any other region. Supporting this claim is the fact that there are more smaller transfer sizes of cryptocurrency in Africa than any other region.

There is retail adoption1 of cryptocurrencies or crypto assets in Africa. Of up to $105.6 billion worth of cryptocurrency Africa received between July 2020 and June 2021, retail transfers constitute the major size of cryptocurrency transfers. The rate of retail transfers currently stands at about 7%. This is 2.5% higher than the global average of 5.5%. Notably, the $105.6 billion worth of cryptocurrency represents a growth of over 1200% by value. Globally, crypto adoption has seen 880% growth in 2021.

Kenya, Nigeria, South Africa, and Tanzania lead this grassroot adoption of cryptocurrency

According to the Chainalysis report, African countries such as Kenya, Nigeria, South Africa, and Tanzania lead this grassroot adoption of cryptocurrency. 

One of the interesting dimensions about cryptocurrency adoption in Africa is that the use cases of cryptocurrency in Africa point to commercial transactions and remittances. While Africans at home are equally finding cryptocurrencies an alternative for completing commercial transactions, more Africans in the diaspora are finding cryptocurrency a cheaper and faster alternative for sending money home. According to the Chainalysis report, cross-region transfers make up a whopping 96% of all transaction volume. This beats the 78% for all regions combined. Peer-to-peer (P2P) platforms have been identified as the major driving force.

Matt Ahlborg’s Chart on Useful Tulips based on LocalBitcoins and Paxful order book data

P2P is the platform supporting grassroot adoption of cryptocurrency in Africa.

Two major reasons reportedly driving P2P adoption in Africa are: (1) the original idea of cryptocurrency being decentralization, with no need for a bank or central authority; (2) access to banking and financial services by players in the crypto market have been either restricted by regulators or made unfriendly by regulated entities such as banks and other financial institutions. This is why P2P platforms have become increasingly popular in Africa. For example, on Paxful—a P2P crypto platform—Kenya leads with over 300% growth in P2P adoption.

Related to the above are the combined factors that continue to drive cryptocurrency adoption globally. From restriction on the amount of money people can send internationally with their fiat currency to the devaluation of national fiat currencies; from the problem of inflation to the risk of having one’s fiat account frozen by banks or relevant regulators, these experiences and factors appear to be fueling grassroot adoption of cryptocurrency in Africa. 

It is therefore not surprising that P2P platforms such as Paxful, Local Bitcoin, as well as centralized exchanges with P2P solutions such as Binance, continue to witness growth in P2P adoption across Africa. For many African users of cryptocurrency, P2P appears to represent a window to digital inclusion, financial inclusion, and economic freedom. 

Could resistance against cryptocurrency adoption in Africa as well as its lack of regulation be spurring the current hunger for grassroot adoption of cryptocurrency?

Chainalysis chart as published in its preview of the Chainalysis 2021 Geography if Cryptocurrency report

What could the Chainalysis study mean for the crypto asset buyer?

The development reported in the Chainalysis study is significant to both the shape and size cryptocurrency or crypto asset adoption will most likely take in developing countries, particularly in Africa. It suggests more growth in retail adoption of cryptocurrencies or crypto assets in Africa. Grassroot adoption of cryptocurrency or crypto assets being driven by everyday or ordinary people in Africa mainly suggests three things: (1) Most African countries' lack of regulatory frameworks for cryptocurrencies or crypto assets presently discourages institutional adoption in Africa, therefore institutional adoption is expected to be relatively slow in Africa.; (2) Banning or restricting cryptocurrency or crypto assets in the banking and financial sector in African countries will only succeed in encouraging P2P, the central idea of private or decentralized currencies in the first place, thus effectively incentivizing cryptocurrency or crypto asset adoption without any efficient control or supervision by regulators; and (3) The opening of Africa's growing markets to cryptocurrency or crypto assets products and services developed by innovators in countries where institutional adoption is strong, thereby negatively affecting Africa competitiveness in the crypto asset economy and largely reducing Africa to a consumption market. To sum it up, Africans' growing appetite for financial inclusion and economic freedom in the emerging decentralized economy amidst hostile economic environments may continue to spur grassroot adoption of cryptocurrencies or crypto assets.

Retail Adoption

  1. Retail adoption, in contrast to institutional adoption, means the use of cryptocurrencies or crypto assets by everyday or ordinary people. This use may be for commercial transactions, investments, remittances, etc.

One Comment

Leave a Reply

Your email address will not be published.