By Lisa Vives, Global Information Network
NEW YORK (IDN) — Why is cryptocurrency booming in Africa but sinking in rich western countries, including the U.S.?
For starters, cryptocurrencies have gained acceptance among a large proportion of the low-income population that was, previously financially marginalized. Most banks in Africa were not accessible to this segment. Even when they were, low-income account holders were discouraged by the high transaction fees.
Add to this the debt crises and political instability in African economies since the era of independence. This has resulted in weak currencies ravaged by inflation in countries like Kenya and Nigeria.
Small retail payments in Sub-Saharan Africa are powering exceptional crypto adoption and usage, with the region conducting the world’s highest proportion (80%) of crypto retail payments of less than $1,000, according to a report by the blockchain data firm Chainalysis.
The report also highlights how peer-to-peer transactions dwarf those of Central and Southern Asia and Oceania, the region with the second-highest volumes in that category.
Many Africans have integrated crypto into everyday life, the report says. Besides retail transactions, remittances and commercial transactions have also been key drivers for Africa’s high adoption and usage rates.
“Crypto usage is driven by everyday necessity, as opposed to speculation by the already well-off … especially in countries where the values of local fiat currencies are dropping, as we’ve seen in Nigeria and Kenya,” the report states.
Cryptocurrency gives everyone with access to a mobile phone and internet connectivity the opportunity to engage in activities similar to those conducted through financial institutions and intermediaries. That includes payments, sending remittances and making investments but without costly bank fees.
Cryptocurrencies are quicker, cheaper and easier to use than conventional methods. That’s because the technology facilitates peer-to-peer transactions rather than relying on banks, Western Union or other intermediaries.
The difference between cryptocurrency and, say, Visa or Mastercard, is that cryptocurrency is not now regulated by government and doesn’t need middlemen, and transactions rely on the internet, which means they can happen anywhere in the world.
Another recommendation is that transactions are anonymous, and users’ information is private and safe; there is little possibility of identity theft, which is common with other forms of digital payment.
While African commerce benefits from the unregulated aspects of cryptocurrency, western investors are hesitant to enter the market without government oversight.
Markets continue to follow the drama surrounding the collapse of crypto exchange FTX, including the December arrest and extradition of FTX founder Sam Bankman-Fried. Meanwhile, FTX’s downfall has triggered renewed calls for heightened regulation of the crypto space.
Looking ahead to 2023, crypto industry experts expect more difficulties ahead for investors as rising interest rates continue to weigh on risk asset prices. [IDN-InDepthNews — 24 January 2023]
Image credit: The Africa Report
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