While cryptocurrency is largely synonymous with the evolution of developed economies, global adoption rates are actually being propelled by emerging marketplaces.
This trend has been borne out through 2021, with peer-to-peer (P2P) Bitcoin trading volumes in sub-Saharan Africa crossing $18 million in August and surpassing trading volumes in North America for the very first time.
At Luno (another crypto trading platform), African users accounted for 45% of the one million customers that it added in June, with this a striking statistic that will have garnered interest across the globe.
But why is Africa a great match for cryptocurrency adopters, and are there potential disadvantages to the widespread adoption of cryptocurrencies in the region?
Why Africa is a Natural Home for Cryptocurrencies
Earlier this year, blockchain analytics brand Chainalysis reported that crypto adoption in Africa had accelerated by more than 1200% during the previous 12 months.
Overall, the region is the second-largest for peer-to-peer crypto transactions globally, with four African nations (namely Kenya, Nigeria, South Africa and Tanzania) ranked in the top 20 for total transactions and trading volumes.
One of the main reasons for this is the accessibility of cryptocurrency, which is helping to drive increased financial inclusion and resolve the challenges facing Africa’s huge unbanked population.
This currently accounts for 57% of the total population in the region, with an estimated 95 million Africans lacking access to even a basic bank account.
By adopting decentralised cryptocurrencies that aren’t issued by central banks or dominant third parties, Africans are accessing funds more easily and participating in the economy in a way that they would otherwise be unable to.
Another reason for the increasing popularity of cryptocurrency in Africa is related to the need for an effective means to complete cross-border payments.
Remember, a large number of African workers live away from their hometown rather than commuting on a daily basis, creating the need to send money across borders and to their families back at home.
However, traditional exchanges can be costly and feature middleman fees, with this type of expense negated by P2P crypto exchanges.
Are There Potential Pitfalls for Crypto Adoption in Africa?
With a strikingly low median age of 19.7 in 2020, Africa is home to the youngest population in the world.
Interestingly, this youthful population has little or no interest in local stock exchanges and forex trading platforms, instead eschewing these entities for crypto assets and tokens.
This is thanks largely to a trust deficit between citizens and their governments, but the volatile nature of crypto poses a significant risk to investors (particularly within shorter time periods and for traders who have relatively small amounts of capital).
This rule also applies to crypto adoption in general, as African residents boast relatively limited financial and disposable income resources and may struggle to cope with the daily fluctuations in crypto prices.
This is an important consideration for individual users, although not one that necessarily undermines wider adoption throughout the region.
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