Africa stands as a volatile continent, at large, with its denizens increasingly leaning on cryptocurrencies as a means of exchange, as opposed to local fiat currencies. This comes by way of Chainalysis, a blockchain analytics firm, having issued out a new report.
Crypto Proving Less Of A Hassle
The firm’s published data makes it clear that many local businesses and individuals are making ready use of cryptocurrencies, all in a bid to avoid regulatory complications, high fees, as well as currency instability.
The volume of monthly transfers both from and to Africa has now passed the 600,000 marks. Alongside this, the total volume of transfers under $10,000 saw an uptick of 55% since June last year, reaching $316 million in total volume. As it stands now, South Africa, Nigeria (Africa’s largest economy), and Kenya are the leaders in cryptocurrency transfers for the continent.
Bitcoin Proving Great Alternative
Abolaji Odunjo stands as a mobile phone retail store owner in Nigeria’s largest city, Lagos. In an interview with Reuters, he explained that he shifted to cryptocurrencies for both its convenience and speed, using Bitcoin to pay his China-based suppliers. Odunjo highlighted how Bitcoin was used to help protect his business against the devaluation of the Nigerian Naira, allowing him to grow in the process.
Odunjo further pointed out that this method of payment allows him to avoid high banking fees, and stands as a desirable alternative to purchasing US Dollars, which are increasingly expensive. Many countries in Africa struggle with instability and devaluation of their fiat currencies. This, in turn, increases the demand for the USD, which is seen as a benchmark currency, which only raises the costs of buying it, in turn. In the last decade alone, some African fiat currencies, such as the South African Rand, has lost more than 50% of its value against the USD within the past decade.
Avoiding Massive Remittance Fees
Reuters interviewed other individuals about the use of crypto in Africa, as well, with these people highlighting how it helps family members send money back home when working overseas.
The World Bank gave a post documenting the fees for fiat remittance across Sub-Saharan Africa, recording an average cost of 8.9%. South Africa, in particular, records some of the highest costs per transaction, going to 20%. By contrast, Bitcoin fees are incredibly lower, sitting at just below 3%.
The World Bank had reported that the previous total of fiat sent to Sub-Saharan Africa is expected to go down from 2019’s measurement of $48 billion. The total is expected to go down to $37 billion this year. At the same time, cryptocurrencies sent to Africa are expected to rise, surpassing the $8 billion mark recorded back in 2019.