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Sub-Saharan Africa may not have many institutional traders, but it is renowned to have the largest number of small retail trades worldwide. Devaluation of fiat currencies, a high unemployment rate, and unstable economies are some of the factors influencing bitcoin adoption.
The majority of cryptocurrency-related actions in Sub-Saharan Africa are conducted by retail customers, according to a report by blockchain analytics company Chainalysis. In comparison to other countries, the region has a lesser institutional presence.
However, economic forces like the urge to preserve wealth dominate the retail market across the continent. This is because many of these nations’ currencies have been devalued against the US dollar for many years. A recent blog post by Chainalysis reads:
“Our interviews suggest that this reflects the trend of many young people in Sub-Saharan Africa turning to cryptocurrency as a way to preserve and build wealth in spite of low economic opportunity, as opposed to other countries where we see many using cryptocurrency as a way to multiply their existing wealth.”
Tough regulations in Sub-Saharan Africa
The implementation of stringent regulatory rules can be used as an explanation for the almost total absence of institutional interest in cryptocurrency in Sub-Saharan Africa. For instance, the central bank of Nigeria has prohibited commercial lenders from supporting bitcoin businesses.
Nigerian central bank’s prohibition has also pushed another adoption metric in the retail sector. Peer-to-peer crypto volume growth was sparked by it. The study claims that these P2P transactions are not just available on platforms with the escrow and intermediary services, like Paxful and Binance. Direct P2P crypto transactions between buyers and sellers have become a very common practice outside of regional cryptocurrency exchanges.
Cryptocurrency is being integrated into fintech payment platforms as a tool to facilitate international trade. Fintech payment projects have multiplied all over the continent. According to a report by market analytics company Briter Bridges, fintech firms in Africa raised $3 billion in 2021. This equated to 60% of the total funding that African IT companies raised in 2021.
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