How Africans Are Benefiting From Crypto

The adoption of cryptocurrency in Africa is high compared to other regions.

According to Chainanalysis, Africans received about $105.6 billion worth of crypto payments between July 2020 and June 2021.

With the issues that have plagued financial services in Africa, cryptocurrency and decentralized finance bring a new era.

In 2014, a World Bank survey showed that 66% of Africans are “unbanked.”

Some reasons for the low patronage of traditional financial services were inaccessibility by rural dwellers, Hugh transaction and remittance fees, administrative bottlenecks, etc.

The cryptocurrency ecosystem is decentralized, has no high entry requirement, and charges little or no transaction fee.

Africans consider cryptocurrency and decentralized finance as a blessing.

Most crypto transactions in Africa are retail trading, and that is, the day-to-day purchases and business activities.

The benefit of crypto to Africans is the same in other regions, and it is a viable alternative to fiat currency and has a stable value compared to fiat.

Keywords: African, Crypto, benefits, financial service, commercial banks, Decentralized finance.

[Full Article]

It is widely believed that the financial service and the sector suffer a huge setback in Africa. So cryptocurrency and decentralized finance bring a viable alternative and a better working system for Africans.

This, among other advantages, led to the wide adoption and circulation of cryptocurrency in Africa. Since the adoption of cryptocurrency in Africa, Africans have not looked back.

In this article, we shall identify the benefits of crypto to Africans and how it is a viable alternative to traditional financial instruments.

Crypto Adoption In Africa

Image: Forbes

Cryptocurrency and decentralized finance have received increased attention and unprecedented buzz in Africa.

According to Chainanalysis, a blockchain data platform, Africans received $105.6 billion worth of cryptocurrency payments between July 2020 and June 2021. This shows a 1200% increase from the same period a year before.

Experts and industry players have attributed this feat to several issues and drivers. Topping the list of why Africans continue to adopt crypto is the issue plaguing the traditional financial system.

According to a world bank survey, 66% of Africans are unbanked. This survey was conducted in 2014, before the wide adoption of cryptocurrency. Some reasons for this high percentage of people without bank accounts include inaccessibility, high transaction cost, and administrative bottlenecks.

In traditional financial systems, one of the main issues rural dwellers face, which constitute a large percentage of Africans, is inaccessibility to banking services. Commercial Banks and other financial institutions are most cited in cities.

Those who require financial services but are domiciled in the villages go the extra mile to access these financial services. This is one of the ways Crypto is benefiting these sets of Africans. It is easy to use Decentralized Finance from anywhere, and rural and urban dwellers have the same access to crypto.

The cryptocurrency ecosystem has a low entry-level requirement, and you only need a mobile device and internet connectivity to open your wallet on the numerous online crypto platforms. Once you provide the necessary details and set up your profile, you can purchase the crypto token of your choice directly from your bank account.

In addition, you will be charged little or no fees when you make transactions, exchanges or trading, depending on the digital asset and the crypto platform used. This benefit has led to an increase in the number of crypto users in Africa.

In a continent where most countries are underdeveloped and have a developing economy, traditional financial institutions deduct all sorts of charges and bogus fees for account maintenance.

According to the World Bank, the average remittance or transaction fee globally is about 6.51% per transaction. However, in Africa, it is as high as 15%.

Since the crypto platform charges little or less when you use the platform to make withdrawals, Africans find it as a haven.

Similarly, traditional financial institutions in Africa are characterized by administrative bottlenecks. Commercial banks or the stock market tend to put every action into a long and unnecessary process.

You are expected to fill out multiple forms from opening an account to updating your data. The forms take several days to get to the appropriate quarters and activate your account. In case of any issue or technical fault, your account might be on hold till the issues are resolved.

On the other hand, cryptocurrency is a blessing to Africans in this regard. You can create and activate your crypto wallet in a few minutes, and immediately after activation, you can proceed to send and receive funds.

Similarly, the Cryptocurrency ecosystem is unregulated. The crypto tokens are not operating under any central bank or government agency, and the blockchain is decentralized, and consensus mechanisms govern all tokens. Albeit, some African countries are beginning to regulate the crypto ecosystem.

For instance, in September 2021, the Nigerian government released new directives through the Central Bank of Nigeria. The directive states that all digital assets will subsequently be viewed as securities, and any crypto-related business must apply for licensing before operating in the country.

Even with this regulation, Nigerians still engage in crypto transactions, exchange and trading as they used to before the directives were issued. However, crypto platforms no longer have the freedom they used to.

It is important to know that according to Chainanalysis, retail transactions, that is, transactions less than $10,000, have accounted for about 30% of Africa’s crypto trade volume. This percentage is higher than that of every other region in the world. This shows that cryptocurrency is mostly used for daily transactions in Africa against other regions that use it for investment, trading, and all.

The Benefits Of Crypto To Africans

Image: Medium

There are no (many) peculiar benefits of crypto to Africans. Like every region sees it as a viable alternative to fiat currency and traditional financial instruments, Africans do not see it beyond that.

Asides from that, financial services in Africa are poor. The currencies are always losing value against their foreign counterpart, so investors now prefer to invest in digital assets instead of fiat.

In addition, the series of Government policies regulating the financial market in Africa, which Cryptocurrency, blockchain technology, and Decentralized finance seeks to solve, has been beneficial to Africans.

Conclusion

Image: ACT Afrique

Cryptocurrency is considered by many as the future of financial services. While cryptocurrency adoption is considered slow in developed regions, its adoption and usage are increasing by the day in Africa.

Cryptocurrency and Decentralized Finance seeks to solve the bulk of the issues that have characterized traditional financial service in Africa. Little wonder Africans are adopting cryptocurrency.

Author: Valentine. A, Gate.io Researcher

This article represents only the researcher's views and does not constitute any investment suggestions.

Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.