SETH ONYANGO, BIRD
AFRICA amassed 105.6 billion dollars worth of cryptocurrencies in forecasts for the year ending June 2021, driven by peer-to-peer (P2P) transactions in key growth markets.
Markets like Kenya, Nigeria, South Africa, and Tanzania had some of the highest grass-roots adoptions in the world and ranked in the top 20 Global Crypto Adoption Index.
Digital analytics firm, Chainalysis’s latest figures show transactions volume made up of retail-sized transfers in Africa was 7 per cent, against the global average of 5.5 per cent.
“No region uses P2P platforms at a higher rate than African cryptocurrency users, as they account for 1.2 per cent of all African transaction volume and 2.6 per cent of all volume for Bitcoin specifically,” reads the report in part.
Trading volumes for several African currencies have especially grown on LocalBitcoins and Paxful, the world’s biggest P2P platforms by transaction volume since 2016.
Currently, P2P on those platforms have become entrenched in Nigeria and Kenya where consumers use them to sidestep stringent financial regulations that curtail cash transfers from banks to cryptocurrency businesses.
Regulators in the two countries have been by advising banks not to allow these transfers but P2P platforms, which are non-custodial, let customers trade cash for cryptocurrency amongst themselves.
Therefore, users can send cryptocurrency to centralised exchanges for more trading options if they so choose.
“P2P platforms are especially popular in Africa compared to other regions, and many African cryptocurrency users rely on P2P platforms not just as an on-ramp into cryptocurrency, but also for remittances and even commercial transactions,” Chainalysis said in the report.
“Cross-region transfers also make up a bigger share of Africa’s cryptocurrency market than any other region at 96 per cent of all transaction volume, versus 78 per cent for all regions combined. Below, we’ll explore the unique use cases and needs driving these trends in Africa.”
Adedeji Owonibi, CEO and founder of a Nigerian blockchain consultancy company Convexity and the associated 1st cryptocurrency community Hub CBHUB, told Chainalysis that Nigeria’s cryptocurrency economy has changed since the country’s central bank disallowed banks from facilitating cryptocurrency transactions.
“Binance used to be the most popular platform by far, but after the central bank’s sanction, many are moving to P2P platforms, like Paxful and Remitano,” he said.
Owonibi noted that lots of P2P activity is taking place over informal group chats on messaging apps rather than on conventional platforms.
“Informal P2P trading is huge in Nigeria on Whatsapp and Telegram. I’ve seen young people and businessmen in these groups carry out transactions for several millions with popular OTC merchants.”
Meanwhile, the growth of cryptocurrency in Africa comes as a number of countries on the continent are looking to launch their own virtual money, backed and issued by central banks.
Africa’s interest in digital currencies comes as the use of fiat cash declines in major economies in Africa, with consumers adopting electronic payment methods such as Lipa Na M-PESA, credit cards and payment gateways.
