In the past decade, Africans have become one of the largest cryptocurrency users. This does not come as a surprise giving the poor economic condition of many African countries. The continent has been witnessing an economic revolution since the advent of cryptocurrencies.
In 2020, monthly cryptocurrency transactions to and from Africa below $10,000 had a year-on-year increase of 55%, with June as the best performing month (a total of $316 million). This figure is expected to go up in the coming years because of the ease of use that cryptocurrencies offer.
For instance, an average African can spend up to two hours or more to open a bank account and verify it. However, he can simply register on a cryptocurrency platform within minutes and start performing both local and international transactions immediately. As a result, individuals and small businesses are wholeheartedly embracing digital currencies.
There are other reasons why Africa is becoming a crypto hub and this article sheds more light below:
- Currency Devaluation
Many African countries are yet to recover from the 2008 global economic recession. Worse still, many of them have experienced subsequent recessions after that due to poor economic policies, leading to inflation and devaluation of currencies.
A World Bank report reveals that South Sudan had an inflation rate of about 102% between 2016 and 2017. Some other nations including Nigeria, Ghana, Mozambique, Kenya, and Zimbabwe have also faced currency devaluation and inflation in the recent past.
The continent witnessed an incredible rise in cryptocurrency adoption in 2020 as many economies took major hits because of the COVID-19 pandemic. For instance, the Nigerian Central Bank devalued the Naira by 24%, making citizens look for alternative stores of value and income sources.
With the decreasing money value in the continent, many individuals, especially tech-savvy youth have turned to cryptocurrencies because it is safer to use and protects them from using inflated currencies against the US Dollar and other thriving fiats.
- Easy Remittance
Statistics show that many African families receive a major part of their income from their relatives in the diaspora. A 2019 World Bank study shows that that money flow to sub-Saharan Africawas about $48 billion, with Nigeria receiving almost half of the total amount.
The report also reveals that an average sender incurs an 8.9% transaction cost to send money to Africa. This figure is above the global average of 6.8%. Resultantly, individuals in the diaspora are adopting cryptocurrency as a means of making international transactions.
Sending money through cryptocurrency platforms attracts cheaper costs compared to banks. In addition, the receivers do not have to pay bank fees or conversion charges to access their funds. This creates a win-win situation, which traditional banking systems have failed to offer. Therefore, this trend will most likely continue the increased cryptocurrency adoption in the continent.
Although many African governments do not support the use of cryptocurrencies, citizens are showing no signs of turning away from this discovery. Africans are among the leading users of cryptocurrencies because of their numerous benefits. Experts believe that there will be a time when cryptocurrencies will receive more recognition than fiats and this prediction might not take long to materialize.