In 2022, Africa will be in the forefront of cryptocurrency adoption: Full Report

 In 2022, Africa will be in the forefront of cryptocurrency adoption: Full Report

Section I: Table of Contents

Global and African Crypto Adoption

The Opportunities for Crypto Adoption in Africa

Which African countries use cryptocurrency the most?

Use Cases for Cryptocurrency in Africa

African Users' Favorite Cryptocurrencies

Africa's Crypto Adoption Challenges

How to Increase Crypto Adoption in African Regions

Adoption of Cryptocurrency Worldwide and in Africa

According to a policy paper released by the United Nations Conference on Trade and Development (UNCTAD), the usage of digital currencies increased dramatically during the COVID-19 epidemic. The impact was seen more strongly in emerging nations, when people gravitated to cryptos as financial assets and experienced greater financial inclusion despite their mostly unregulated status.

The global pandemic created significant economic uncertainty, including a fall in GDP and per capita income, as well as increasing levels of unemployment owing to lockdowns. Many individuals all around the world now have an easy way to make money, whether through passive income or actively investing in the market.

Crypto adoption has a substantial beneficial influence on emerging markets with low levels of financial inclusion. Digital currencies, decentralized finance (DeFi), and other channels decreased the entrance barrier, allowing emerging markets' young and tech-savvy populations to easily own, transfer, and earn from digital assets.

In 2022, Africa will be in the forefront of cryptocurrency adoption: Full Report

Africa is swiftly developing as a worldwide crypto adoption hotspot as the technology spreads from rich countries to new nations.According to Chainalysis's 2022 Global Crypto Adoption Index, three African countries - Nigeria, Morocco, and Kenya - are among the top 20 countries utilising cryptocurrencies and related services.

According to the UNCTAD research, 8.5% of Kenyan people owned some type of digital money, making it the highest in Africa and the fifth biggest globally. According to UNCTAD data, other African countries leading in digital currency ownership include South Africa (7.1%) and Nigeria (6.3%).

This paper digs into the motivations, prospects, and difficulties of crypto adoption in Africa. We'll also look at the most crypto-savvy countries in Africa, as well as the most popular crypto assets that people in this area want to trade or hold.

The Opportunities for Crypto Adoption in Africa

Blockchain-based cryptocurrencies provide a decentralised, peer-to-peer, cryptographically secure method of money transmission. Innovation in the blockchain sector, such as DeFi, NFTs, and GameFi, has increased interest and drawn in more newcomers, leading to the global adoption of digital assets, particularly in important regions such as Africa.

Africa's crypto adoption is expected to increase quickly since its populace is educated, aware of cryptocurrencies and blockchain technology, and keen for novel wealth-generating options. This is a market with a large target audience for the cryptocurrency industry.

Let's look at some of the main reasons why bitcoin use is skyrocketing in Africa:

Inflation is increasing.

Global inflation is skyrocketing, as briefly stated in the preceding section. The aggressive rate rises by the US Federal Reserve and other major central banks to combat inflationary overheating have resulted in massive depreciation in developing market currencies.

African consumers have been struck a double blow in terms of declining purchasing power. Even when commodity and service prices rise, their individual native currencies lose value versus the US dollar. According to a World Bank analysis, basic food prices in Sub-Saharan Africa increased by about 23.9% between 2020 and 2022, the biggest increase witnessed since the 2008-09 global financial crisis.

Against this environment, some consumers in Africa and other developing nations may resort to cryptocurrencies to protect themselves from rising inflation. In contrast to many traditional financial assets, such as shares and commodities, the price of Bitcoin has remained relatively steady, protecting investors from losses.

Wave Web3

Web 3.0 ushers in a substantial shift in how consumers engage with online material. Blockchain technologies and cryptocurrencies fuel Web3.

Launching and using decentralised apps backed by blockchain might propel cryptocurrency even farther into the mainstream. As a result, more expansion in crypto acceptance across Africa and worldwide markets is possible.

Traditional Finance's Drawbacks

Traditional financial institutions, such as banks, are heavily regulated, and severe KYC rules make it impossible for a major portion of the developing world's population to obtain such services. A large amount of unbanked customers in Africa have been kept out of the traditional banking and financial services business for a variety of reasons, including a lack of sufficient finances, illiteracy, insufficient identification verification, and so on.

Cryptocurrencies, on the other hand, have cut the entrance barrier and helped the unbanked feel more included in their market. Unlike creating a bank account, anybody can sign up and begin buying and selling cryptocurrencies. Lowering the hurdles to entry has assisted some individual investors who do not have access to traditional banking services. And this segment of the population has had it easy.

Macroeconomic Conditions Are Poor

The COVID-19 epidemic affected not only the physical health of the majority of the people, but also their financial health. In an emerging economy like Africa, where the majority of the workforce lacks access to formal job alternatives, lockdown-driven layoffs have a significant impact on wages and savings.

Many astute young people went to cryptocurrency trading during this time, which lasted from the middle of 2020 until the end of 2021. In addition to skyrocketing trade volumes in the crypto market, decentralised finance services such as staking and yield farming enabled many jobless individuals to make income from the comfort of their own homes. The second wave of crypto acceptance in this area came from NFTs and blockchain gaming, which opened up more opportunities.

With many African nations suffering from currency instability, while inflation levels began to rise and economic development stopped until 2021, the demand for an alternative store of value as a hedge against inflation increased the attraction of cryptocurrencies in this market.

Cheaper Cross-Border Transfers

Cross-border transfers are used by a considerable number of Africans who work or reside outside of the continent to send money home to their relatives. However, relying on regular institutions to send money home is costly and time-consuming. While remittance inflows to Sub-Saharan Africa surged by 14.1% between 2020 and 2021, Migration Data Portal study shows that average remittance expenses reached a high of 7.8% over the same time.

When transferring money back to Africa, emigrants can use cryptocurrency to perform low-cost transactions rapidly. As one of the world's largest beneficiaries of remittances, crypto adoption grew faster than the legacy infrastructure supplied by traditional banking and financial services as a source of cheap and rapid international money transmission.

Use Case Innovation

Cryptocurrencies have gone a long way from being a handy means to facilitate financial transactions between peers. DeFi, Play-to-Make, Move-to-Earn, NFTs, and the metaverse have all introduced new methods to put crypto assets to work and even earn money from them in the last few years.

The enhanced adaptability of digital assets in recent years has made them even more appealing, driving up their use even more. Africa is a young and tech-savvy region that is eager to absorb new technology. Higher internet penetration in important nations has expanded population interconnection, closing the final gaps. Access to low-cost, high-speed internet has also increased access to quickly emerging technology such as cryptocurrency.

Which African countries use cryptocurrency the most?

Several study publications have investigated and highlighted Africa's rising crypto usage rates. However, the proliferation of cryptos, like any other technology, is unequal across the area.

Here is a list of Africa's most crypto-savvy countries in terms of the number of coin owners:

1. Kenya

South Africa is number two.

Three. Nigeria

four. Zimbabwe

5. Ghana

Use Cases for Cryptocurrency in Africa

Let's look at some of the most popular cryptocurrency applications among African crypto enthusiasts. Here is a list of the top crypto use cases in Africa:

Payments through p to- p

Several tech-savvy freelancers on the African continent accept cryptocurrency payments from overseas customers. P2P transfers in cryptocurrency, unlike remittances and other traditional forms of foreign money transfer, may be conducted swiftly and with low transaction costs. According to a Chainalysis research, individual transfers accounted for 95% of all crypto transactions in Sub-Saharan Africa.

Crypto, in addition to being a popular means for freelancers to receive digital payments, is also often used to move funds throughout the continent and by Africans working abroad who want to send money back home to their relatives. There are also no severe KYC requirements preventing young African customers from using crypto wallets and exchanges for financial transactions.

Trading in Cryptocurrency

After digital money, crypto trading is the second most popular use case for cryptocurrencies on the African continent. Young people who want to trade the market spend time learning how to execute technical and fundamental assessments.

They go to crypto exchanges to purchase or sell digital assets against one another after they comprehend what impacts market movements in the industry.

Mining and Cloud Mining

Several African users also participate to cryptocurrency mining. While purchasing mining rigs may be a costly proposition for the larger portion of African crypto miners, cloud mining services dramatically cut the entrance hurdle.

Cloud mining provides African customers with a quick and economical option to earn cryptocurrencies. They might gradually raise their donation of computing resources to earn more money from this activity. Users in Nigeria have shown a high degree of interest in KuCoin's cloud mining services.

Investing Through the DeFi and CeFi Platforms

Crypto exchanges and DeFi protocols provide various appealing wealth-creation opportunities for African crypto traders. There are several options to build crypto assets risk-free, ranging from liquidity mining to staking and yield farming.

Despite the fact that the DeFi market has shrunk significantly in TVL due to bear market circumstances, DeFi remains a popular alternative for young African investors eager to put their cryptos to work and make passive income from them.

Web3

Web 3.0 is the next most profitable way for Africans to use and profit from cryptocurrency. Gaming dApps, for example, allow users to play and earn, whilst Move-to-Earn dApps give prizes to encourage health.

There are also some African Web3 developers and content providers that have built a career in this industry. Because they accept bitcoin payments, this is another incredibly successful option to gain cash from cryptocurrency services on the continent.

African Users' Favorite Cryptocurrencies

We've looked at what drives cryptocurrency growth in Africa, the potential cryptocurrencies provide, and the barriers to further usage of digital currencies in the area. Let us now look at some of the most popular cryptocurrencies exchanged, utilised, and owned by African customers on KuCoin:

Bitcoin (BTC) (BTC)

Unsurprisingly, the crypto king rules the African market. The biggest cryptocurrency by market capitalization is the most popular coin among long-term investors.

Bitcoin (BTC) is viewed as a store of value rather than a digital transaction mechanism on a global scale. Bitcoin's price volatility has decreased in recent months, and its success versus the US dollar has strengthened trust in BTC as an appealing inflation hedge.

Ethereum (ETH) (ETH)

Ethereum is the second most popular cryptocurrency in Africa (ETH). The native crypto asset of the largest dApps platform has seen a significant increase in trade volumes in the weeks leading up to The Merge - the shift of the Ethereum blockchain from Proof of Work (PoW) to Proof of Stake (PoS) consensus (PoS).

Although its price fluctuates more than Bitcoin's, the lower Ether price makes it more appealing to African crypto users who like to store digital assets for the long term. The second most popular crypto traded in Africa is the more cheap but very liquid ETH.

Ripple (XRP) (XRP)

Despite the ongoing legal issues between Ripple and the US SEC, some crypto fans in Africa continue to HODL XRP. Because to legal uncertainties, RippleDespite the legal difficulties, African crypto consumers find Ripple (XRP) to be an appealing asset to trade or invest in.

The cheap price of XRP makes it quite affordable for many crypto investors in the region, increasing its popularity among the many crypto assets on the market today.

Litecoin (LTC) (LTC)

Litecoin (LTC), another cryptocurrency classic, provides an appealing store of wealth for some crypto HODLers in Africa. The price of Litecoin is less volatile than that of Bitcoin and Ethereum, therefore it is significantly more inexpensive to invest in.

Because of its limited total supply, LTC is a more cheap alternative to Bitcoin for African crypto consumers to acquire and retain. It is also simple to transfer cryptocurrency payments in Litecoin.

Cardano (ADA) (ADA)

The work of Charles Hoskinson Cardano (ADA) is another widely utilised cryptocurrency in Africa. One of the primary reasons for this might be the Cardano Foundation's commitment to pushing blockchain technology adoption throughout the African continent.

The ADA token is a popular altcoin among African cryptocurrency traders to trade, keep, and invest in. There is also a lot of interest in staking ADA for rewards.

Bitcoin Cash (BCH) (BCH)

Bitcoin Cash (BCH) is another prominent cryptocurrency used for peer-to-peer payments in Africa. Because of its cheap price and strong liquidity, it is a suitable crypto asset to store and utilise for decentralised and efficient money transfers throughout the continent and world.

BCH transactions are less expensive and quicker than BTC or ETH transactions. It’s

It's also popular since it's accepted as a payment method by major corporations all around the world.

US Dollar Coin (USDC)

Circle's USD Coin (USDC) is another popular cryptocurrency among African cryptocurrency aficionados. The stablecoin is a simple solution to collect payments on a global scale.

Furthermore, it provides an easy option to invest in the US dollar using cryptocurrency. As an inflation hedge, many crypto investors favour the US dollar and USD-backed stablecoins.

Africa's Crypto Adoption Challenges

Despite the fact that there are numerous prospects for bitcoin adoption in Africa, many major difficulties are impeding general acceptance of the asset class. Let's look at some of the urgent challenges that are driving consumers away from cryptocurrency:

Uncertainty in Regulation

Like the rest of the globe, the lack of cryptocurrency regulation and regulatory acceptability is likely the most significant barrier to consumer adoption and use of digital assets. For example, the Central African Republic (CAR) declared in April 2022 that it will accept Bitcoin as legal cash, making it the first in Africa and the second internationally. However, the excitement among cryptocurrency advocates quickly evaporated when the country declared a hold on this rule and a delay in its intentions.

The Central African Republic's decision to withdraw Bitcoin as legal cash is just one of several examples undermining investor trust in crypto assets. The urgent need is for an enabling environment to be created through international regulation that can be approved and implemented throughout emerging countries in Sub-Saharan Africa and the rest of the world.

Low Value Despite High Volume

While Africa has some of the world's fastest rising markets, such as South Africa, it also has some undeveloped economies. The African market is difficult to take seriously due to its low per capita income in comparison to the industrialised world.

Although digital currency adoption in several African nations is among the top 20 in the world, transaction volumes remain exceedingly low. According to Chainalysis' cryptocurrency study, total crypto transaction volumes across Africa between July 2021 and June 2022 were roughly $100.6 billion. While the number of cryptocurrency transactions appears to be significant, it accounts for only 2% of worldwide crypto activity.

Internet Transfer Rate

The world of Web 3.0, founded on the blockchain data platform, necessitates a high-speed internet connection. Crypto users are unable to participate in many profitable chances to generate money from cryptos due to intermittent internet access and slow network speeds.

A stable internet connection might allow many crypto-savvy African customers trade the markets more quickly and play more games. Play-to-Earn (P2E) games and immerse yourself in the metaverse. Although developed economies throughout the world and certain African nations are transitioning to 5G, the next-generation mobile network may take longer to completely roll out across the African market.

How to Increase Crypto Adoption in African Regions

After years of operating on the outside, recent events have confirmed digital currencies' enormous potential to alter how the world finances and uses money.Cryptocurrency usage is already widespread, not just in rich countries but also in emerging economies. Digital currency technical innovation has the potential to bridge the gap between these two markets and deliver more integrated operations in global finance and banking.

In Africa, bitcoin has the potential to empower a substantial portion of the people by allowing them to bank, transact, and engage with anybody in the world. Nations, on the other hand, must define and execute a regulatory framework to control cryptocurrencies and prevent fraud from accelerating bitcoin growth. While legal restrictions remain the most significant barrier to crypto adoption everywhere in the world, it is especially important in a developing market like Africa, where enthusiasm is strong but financial knowledge is low.

Some nations are considering implementing a cryptocurrency tax in order to capitalise on this burgeoning potential and to regulate the sector. Many governments are looking into using central bank digital currencies (CBDCs) to authorise and accept digital currencies.

Furthermore, stronger infrastructure to support crypto and blockchain technologies is required, beginning with dependable internet access. Increased internet penetration and performance may boost participation in the African cryptocurrency industry.

Finally, committed efforts by crypto and blockchain enterprises are required to stimulate innovation and acceptance of the technology by individuals, corporations, governments, and other institutions. Such a step would strengthen the public's opinion of cryptocurrency as a competent financial asset class.