In a new report from blockchain analytics firm Globenewswire, it states that Africans are rapidly moving to cryptocurrency as a means of an exchange over local fiat currency. The analysis suggests that many local businesses and individuals are using cryptocurrencies to avoid high fees, currency instability, and regulatory complications.
The total number of transactions up to $10000 increased to 55 percent this year till June, with a valuation of 316 million dollars. In fact, the number of monthly transfers has already crossed the 600000 mark. Most transfers happened from Nigeria, the largest economy in Africa, along with South Africa and Kenya.
Many businessmen like Abolaji Odunjo, a mobile phone retailer from Lagos, Nigeria, have switched to cryptocurrency because of the speed and convenience. He told Reuters that using Bitcoins to pay his Chinese suppliers helped him avoid high fees and served as an alternative to the increasing price of U.S. dollars.
Abolaji Odunjo is one of the many individuals at the center of a silent Bitcoin era in Africa. It is driven by payments from small businesses as well as remittances from migrant workers staying abroad.
Many African countries struggle with currency devaluation and instability, which increases the demand for U.S. dollars and, subsequently, the price. Major African currencies like the South African Rand, have lost more than 50 percent of their valuation against the American dollar in the last decade.
Reuters had also interviewed other individuals, and everyone was happy with the comfort that cryptocurrency had to offer. As per some interviewees, Bitcoin transactions help such people whose family members live overseas in countries like the United States and the United Kingdom because sending money back home becomes easy.
Based on a report published by the World Bank, it suggests that fiat remittance fees in Sub Saharan Africa are very expensive. It cost an average of 8.9 percent, with the highest charges recorded in South Africa at around 20 percent per transaction. With cryptocurrency, primarily Bitcoins, the charges are comparatively low. It is approximately 3 percent per transaction.
The cumulative value of cryptocurrencies sent to Africa in 2020 is all set to cross the last year’s total sent of $8 billion, with June alone recording more than $1 billion cryptocurrencies sent. In contrast, the World Bank reported that only $48 billion fiat currency was sent to Africa in 2019, and the figures have considerably dropped in 2020 and are expected to be around $37 billion.
So why is there an insurgence of cryptocurrency in Africa? It is mainly because of the tech-savvy population that has adapted quickly to Bitcoins since the local currencies are fragile, and it becomes difficult to get dollars, the currency for global trade. What more the complicated bureaucracy in money transfers gives it all the more reason to use cryptocurrencies for financial transactions.