This overview aims to analyse the global adoption of cryptocurrency, examining the metrics used to assess adoption levels, and specifically evaluating Africa’s position in relation to these metrics.
A. Global Cryptocurrency Adoption Index
According to Chainalysis (2022), there has been an upward trend in cryptocurrency adoption, as depicted by the global adoption index map, which rates each country on a scale from 0 to 5.
1. The index was developed by ranking 146 countries based on adequate available data. A country’s index score was calculated by taking the geometric mean of its rankings across five selected metrics, and then normalizing this final value on a scale of 0 to 1. The closer the score is to 1, the higher the rank, and consequently, the greater the level of cryptocurrency adoption in that country.
B. Global Cryptocurrency Adoption Index: Where Is Africa?
According to the Chainalysis report (2022), Kenya ranks 19th among the top 20 countries with high cryptocurrency activity, having an adoption index of 0.37. Nigeria ranks 11th globally with an adoption index of 0.5, while Morocco ranks 14th globally with an adoption index of 0.507. Peer-to-peer (P2P) exchanges were considered significant, as most retail orders (exchanging cryptocurrency for US Dollars) provided valuable insights into adoption patterns. Sub-Saharan Africa accounts for a small fraction of P2P transaction volume, with $100.6 billion in on-chain volume between 2021 and 2022.
ADOPTION AND USE OF CRYPTOCURRENCY IN AFRICA
This section examines cryptocurrency adoption in Africa and the factors contributing to its adoption and use across the continent.
Factors affecting adoption of cryptocurrency
In Sub-Saharan Africa, people use cryptocurrency in unique ways compared to other parts of the world. Many small transactions, those under $10,000, make up 6.4% of the total. Most importantly, 95% of all transactions are small, and 80% of these are even smaller, under $1,000. This is much more than in other regions, showing that many individuals are using small amounts of cryptocurrency regularly.
According to the Chainalysis report, cryptocurrency usage in Sub-Saharan Africa is driven by everyday necessity rather than speculation by the wealthy. This explains the ongoing cryptocurrency activity in the region, despite price fluctuations in cryptocurrencies like Bitcoin and Ethereum.
Sub-Saharan Africa’s P2P Cryptocurrency Transaction Volume by Region (July 2021 – June 2022)
Sub-Saharan Africa uses P2P (peer-to-peer) exchanges more than any other region. This is because of bans and unclear government rules about cryptocurrencies. For example, in 2021, Nigeria’s government made a law stopping all banks from using cryptocurrencies. But people in Nigeria kept using cryptocurrencies anyway.
Another reason people use cryptocurrencies is for remittance payments. This is money sent by families living in other countries back to their families at home. In 2021, Africa received $48 billion in remittances. Most of this money came from Europe and America, but some also came from other African countries.
Chainalysis report predicts that more people in Africa will use cryptocurrencies for international payments. The chart below shows the monthly growth of small cryptocurrency payments (less than $1,000), which are mostly remittances sent to African countries.
Many African users also use cryptocurrency for international transactions. For example, a Chainalysis report tells the story of an importer who finds it difficult to change their local currency to the currency needed to buy goods from China. Instead, they find it easier to buy Bitcoin on a P2P exchange and send it to the exporter.
Another reason people in Africa use cryptocurrency are because their own currencies can be very unstable. For example, the Nigerian Naira lost 52% of its value recently, so people in the region prefer to use stablecoins like Tether. Binance reports that the Kenyan Shilling has lost 22% of its value since mid-2022. Because of this, there has been an increase in cryptocurrency use in the region as people try to protect their savings from the high volatility of their own currencies.
KEY TAKEAWAYS ON THE ADOPTION TRENDS IN AFRICA
Cryptocurrency is becoming more popular in Africa, and there are a few reasons why:
– People use cryptocurrency every day for small payments through P2P marketplaces.
– The value of money in some African countries like Nigeria and Kenya changes a lot, so people prefer stable coins like Tether to keep their money safe.
– Instead of sending money the traditional way to family in other countries, people use cryptocurrency because it’s easier and can be used for cross-border payments.
– P2P exchanges in Africa have helped a lot in using cryptocurrency.
– People can use cryptocurrency to pay for things internationally, like buying goods from China.
– In Africa, a lot of money is transferred using P2P, more than in other regions like Central Asia and Oceania.
– The total value of the cryptocurrency market is about $4 trillion, which is going up from $1 trillion in 2018.
conclusion
In conclusion, even though countries like Nigeria, Morocco, and Kenya are ranked 11th, 14th, and 19th globally for cryptocurrency use, Africa is actually leading in P2P trading volume share, with 6.1% which is the highest compared to other regions. This means a lot of people in Africa use cryptocurrency for small transfers every day, which is a great trend that might continue in the future. The high P2P activity in the region shows that most transfers are for making payments locally and across borders, because P2P trading lets people exchange cryptocurrencies for regular money and vice versa. The increasing use of cryptocurrency in Africa is mainly because of the unstable native currencies, strict rules about sending money abroad, the availability of P2P services, and strict rules about international payments. Though there’s uncertainty about laws regarding cryptocurrency in Africa, it’s still important for the continent’s development.
