Africans are increasingly turning to cryptocurrencies as a means of exchange over local fiat currencies, according to a new report from blockchain analytics firm Chainalysis.
Data from the firm shows that many locals individuals and businesses are using cryptocurrencies to avoid high fees, regulatory complications, and currency instability.
The number of monthly transfers to and from Africa has passed the 600,000 mark. The total number of transfers under $10,000 jumped by 55% in the year to June to reach $316 million. Nigeria, which is the continent’s largest economy, South Africa, and Kenya lead the region in cryptocurrency transfers.
Abolaji Odunjo, who runs a mobile phone retail store in Lagos, Nigeria’s largest city, started using Bitcoin to pay his Chinese suppliers. He told Reuters that he shifted to crypto for speed and convenience:
Bitcoin helped to protect my business against the currency devaluation, and enabled me to grow at the same time.
Odunjo added that payment method helped him avoid high fees and was an alternative to purchasing increasingly expensive U.S. dollars. Many African countries struggle with currency devaluation and instability, which increases demand for, and consequently the cost of buying U.S. dollars. Some currencies, like South African’s Rand, have lost over 50% of their value against the U.S. dollar in the last decade.
Other interviewees told Reuters that Bitcoin payments also help those who have family members living overseas in countries like the U.S. and the U.K. to send money back home.
According to a post by the World Bank, fees for fiat remittance in Sub-Saharan Africa costs 8.9% on average — with South Africa recording the highest costs of up to 20% per transaction. Bitcoin fees sit drastically lower, typically sitting below 3%.
The value of cryptocurrencies sent to Africa in 2020 is set to surpass the previous year’s total sent of $8 billion with almost $1 billion sent in June alone. By contrast, the World Bank reported that only $48 billion worth of fiat was sent to Sub-Saharan Africa in 2019, with the total expected to fall to $37 billion this year.