Retail Bitcoin Payments in Africa

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The global bitcoin and cryptocurrency market is growing every day and Africa is no exception. Although Africa is the smallest cryptocurrency economy by continent, it is the most dynamic. It has seen massive growth, receiving more than $ 105.6 billion from July 2020 to mid-2021. In fact, it ranks as the third fastest growing bitcoin and cryptocurrency economy in the world by Chainalysis. Additionally, Nigeria, South Africa, and Kenya all rank in their 2021 Top 20 Global Crypto Adoption Index.

Nigeria is the largest bitcoin and cryptocurrency market in Africa with a first quarter trading volume of $ 99 million. Kenya and Ghana come second and third with $ 34.8 million and $ 27.4 million respectively. South Africa is behind the four. This means that the continent has one of the highest popular adoptions in the world.

Retail Bitcoin and Cryptocurrency Payments

Unlike other regions where institutional adoption is massive, small bitcoin and altcoin transfers are perhaps the most promising aspect of the African crypto market. Retail transfers are the highest in the world with an overall transaction volume of 7%, significantly above the global average of 5.5%.

The region is also the leader in inter-regional bitcoin and altcoin transfers. While interregional remittances account for 96% of all transaction volumes in Africa, this figure rises to 78% in other regions of the world combined. Again, this indicates increasing grassroots adoption.

Most of the transactions take place on peer-to-peer platforms, which are the backbone of the growth of the cryptocurrency market on the continent. Many people depend on P2P platforms for business transactions and remittances.

P2P Platforms Drive Bitcoin Retail Trends in Africa

Due to central bank sanctions, informal P2P trading has become the most popular method of trading bitcoin and altcoins on the continent. Non-custodial P2P platforms allow traders to trade cryptocurrencies and send money between them using banks or other money transfers. By using these platforms, users can overcome obstacles created by financial institutions on cryptocurrency trading.

Some African governments, for example in Nigeria and Kenya, have ordered banks to ban bitcoin and altcoin trading through their systems. As a result, peer-to-peer platforms have become suitable alternatives due to their convenience and efficiency.

Essentially, the bitcoin and cryptocurrency trading constraints imposed by banks are one of the main reasons attributed to the growth of P2P platforms such as Paxful and Luno. According to COO and co-founder Artur Schaback, Paxful has grown over 300% in Kenya over the past year and 57% in Nigeria. Likewise, P2P transactions account for 1.2% of all bitcoin and altcoin transaction volumes in Africa, the highest in the world. To be precise, 2.6% of bitcoin transactions occur on P2P platforms.

How are P2P platforms driving the use of bitcoin and cryptocurrency?

In 2020, sub-Saharan Africa received $ 48 billion in remittances, with Nigeria accounting for half of the amount. The bulk of these remittances came from Europe and North America. Once again, P2P platforms have played a central role in remittances and retail bitcoin and cryptocurrency payments.

According to Blockchain Analysis, crypto remittances are on a growth trajectory. The number of shipments under $ 1,000 has increased steadily since April 2020, with the exception of June 2021, when there was a substantial drop from the previous month.

Besides remittances, African businessmen rely more on bitcoin for business transactions. Sending fiat currencies for transactions can be difficult due to regulatory bottlenecks. For context, Nigeria has limited offshore debit card transactions to $ 500 at a time. For this reason, many people have resorted to bitcoin for their larger transactions.

Preservation of wealth and value

With tough economic times, bitcoin has become an ideal asset for preserving wealth and value. During the devaluation period, Paxful’s growth accelerated in Nigeria. Growth seekers are also investing in bitcoin and more speculative cryptocurrencies.

African countries are set to follow in China’s footsteps and launch their own central bank digital currencies. In fact, Nigeria and Ghana have already deployed their CBDCs. This means that users can send and keep blockchain-based versions of their fiat currencies in digital wallets.

Luno Growth

As mentioned, retail bitcoin and cryptocurrency alternative payments in Africa have significantly contributed to the growth of P2P platforms. One of the platforms that has grown significantly is Luno. African customers dominate the platform after increasing 271% since January 2020, reaching 4.7 million out of a total of 7 million customers. The platform has played a big role in growing bitcoin adoption by building infrastructure and introducing local currencies to the crypto market.

Keep in mind that retail has played a key role in the growth of bitcoin and altcoins, such as during the bull run in 2018. But the issue of trust was a major obstacle. According to a Luno poll, “54% of Africans are ready to adopt a single global digital currency”, which is a considerably higher percentage than 41% in Asia and 35% in Europe.

South Africa leads the way in regulation

Without a doubt, regulation is needed to support the sustainable growth of the bitcoin market. When it comes to regulating the financial arena, South Africa is subject to the continent’s most powerful regulator – the Financial Sector Conduct Authority. This regulator of financial institutions brings investor protection to the table and ensures that all FSCA approved companies play by the rules and do not take advantage of their customers.

With an expected increase in bitcoin adoption in South Africa, market regulators have embraced the trade by enacting the required laws. The regulations are designed to prohibit the improper use of bitcoin for harmful activities. In addition to improving transparency, the regulations will prevent terrorist financing and money laundering by addressing customer identification, verification and monitoring of their transactions to monitor their regular activities. Regulations will also limit banks’ exposure to risks that could spill over to the economy and cause financial instability.

Having said that, South Africa is charting a new course, which many other countries are not. Regulators in countries like Kenya, Nigeria and Zimbabwe have banned banks from processing bitcoin transactions.

Final words

Africa has immense economic potential. Although many countries lack adequate infrastructure and regulations, they can take advantage of bitcoin and blockchain technology to boost their growth. In fact, the region has adopted bitcoin and altcoins overwhelmingly, especially for retail cryptocurrency payments, which will undoubtedly have ripple effects in other sectors, leading to greater overall growth and adoption. .

This is a guest article by Jerry Goddard. The opinions expressed are entirely theirs and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

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