Cryptocurrency acts as a remittance tool in specific scenarios and also eases the instability of currencies in some African countries.
Original title: “Depth丨Where is the next stop for mainstream exchanges? 》
Written by: Chainalysis Team
Translation: Li Hanbo
Of all the regions we analyzed in this report, Africa has the smallest cryptocurrency economy. Last year, the value of cryptocurrency sent on the chain was US$8.1 billion, while the value received was only US$8 billion. However, this relatively small amount of activity is creating life-changing opportunities for users in the region facing economic instability, because it provides low-rate remittances and a different way of saving.
Included currencies: BAT, BCH, BNB, BTC, BUSD, CRO, CRPT, DAI, ETH, GNO, GUSD, HT, HUSD, ICN, LEO, LINK, LTC, MCO, MKR, MLN, OMG, PAX, PAXG, TGBP, TUSD, USDC, USDT, WETH, ZIL, ZRX
Remittance is an early use case of this developing cryptocurrency economy
Included currencies: BTC
Small transfers (transfers under US$10,000) account for a larger share of African cryptocurrency activities than any other region, and remittance demand is an important part of it.
Similar to other regions in Latin America and developing countries, overseas remittances are an important part of the economies of many regions in Africa. A 2018 study by the Pew Research Center found that sub-Saharan Africa accounted for eight of the ten countries with the fastest growth in international immigrant populations since 2010, an increase of 50% between 2010 and 2017 , While the global average is 17%. Approximately 25 million foreigners living overseas in sub-Saharan African countries repatriated USD 48 billion in currency to the region in 2019.
Included currency: BTC. The size of the circle above = average transfer amount
The picture above shows that many people are also using cryptocurrency to send funds back to the region. Approximately USD 562 million worth of cryptocurrency is transferred directly from an overseas address to an address in Africa in a small payment method. Although these are unlikely to represent foreign remittances, many regions with high concentrations of African immigrants, such as North America, Western Europe, and East Asia, are well represented.
But perhaps as important as overseas remittances is intraregional remittances between African countries. Historically, remittances have become difficult due to huge handling fees. According to a study by the World Bank, the average fee for remittances under US$200 between two African countries south of the Sahara is 9%, while the global average fee is 6.8%. For some countries with large remittance flows, such as South Africa to Nigeria or South Africa to Malawi, the fee may be as high as 15%.
When we talked to Ray Youssef, CEO and founder of Paxful, a peer-to-peer (P2P) cryptocurrency exchange, he emphasized the role of remittances in these regions for African users on the platform. “Some of our users in Africa even set up their own remittance business on Paxful. A man I interviewed lives in South Africa, but the man originally from Nigeria saw the difficulty of remittance back home, so he started doing business. He took cash from other Nigerian expats, exchanged it into bitcoin, sent it to someone in Nigeria through Paxful, and then asked that person to exchange it into naira, and then sent it to this person’s home. Another one lives in Kenya Women have done the same thing, sending money back to people in Malawi.” Youssef added that although Africa does not account for the most mobile cryptocurrency on the Paxful platform, it does account for the largest share of personal transfers.
African users do not just use cryptocurrency for overseas transfers between individuals. Our interviews indicate that a large part of transactions between Africa and other regions-especially East Asia-are for commercial purposes. Ray Youssef has also seen examples of this activity among Paxful users. “Once, a user ran a business that imported video games from China to Nigeria for sale. His bank would not let him wire money to China, so he had to get U.S. dollars on the black market and then send the money in some way. China, usually through Hong Kong. But with cryptocurrency, he can sell Bitcoin, receive RMB in any major digital wallet in China, and send it directly to Chinese counterparties.”
Dovey Wan is a venture fund founder and cryptocurrency expert in China. When we asked her about the large number of cryptocurrency transfers between Africa and East Asia, she described a similar situation. However, she said that in many cases, Chinese citizens have accounts on both sides of the transaction. “Many Chinese businessmen live and do business in Africa and use cryptocurrency to remit money domestically.” For example, she said that some of these users are mining in Africa because many parts of Africa provide cheap hydropower. Others may tend to send cryptocurrencies home, like those engaged in incompletely legal business activities, such as businesses operating in the illegal diamond trade. Instead of going through the bank.
Cryptocurrency eases currency instability
The currencies of many African countries are severely depreciated and unstable, making it difficult for residents to maintain their savings. For example, the South African Rand (ZAR) has depreciated more than 50% against the U.S. dollar in the past ten years and has been one of the most unstable legal tenders. The national currencies of Nigeria, Egypt, Algeria, Ethiopia and Ghana face similar problems.
For people living under these conditions, cryptocurrency can serve as a more stable store of value. From the event point of view, we have heard several examples of such use cases in Africa, and our data confirms that this situation is likely to be happening. The chart below shows the level of currency depreciation in two African countries: South Africa and Kenya. The figure below is based on the amount of domestic currency exchanged for one U.S. dollar – the faster this number grows, the more the currency depreciates, and it also includes the P2P cryptocurrency transaction volume.
Included currencies: BTC
Included currencies: BTC
Both countries follow a clear pattern. When the local currency depreciates, P2P transaction volume will quickly rise. We believe that users will transfer their assets to cryptocurrency and use cryptocurrency to pay in response to the depreciation of their own currency.
Statistics on the largest platforms
Included currencies: BAT, BCH, BNB, BTC, BUSD, CRO, CRPT, DAI, ETH, GNO, GUSD, HT, HUSD, ICN, LEO, LINK, LTC, MCO, MKR, MLN, OMG, PAX, PAXG, TGBP, TUSD, USDC, USDT, WETH, ZIL, ZRX
In the past year, among the top ten services in the region by volume, on-chain cryptocurrency activity in Africa has further increased, and the share of these services in the overall activity in the region has risen from 66% in October 2019 to today 78% of it.
Included currencies: BAT, BCH, BNB, BTC, BUSD, CRO, CRPT, DAI, ETH, GNO, GUSD, HT, HUSD, ICN, LEO, LINK, LTC, MCO, MKR, MLN, OMG, PAX, PAXG, TGBP, TUSD, USDC, USDT, WETH, ZIL, ZRX
A large part of these trading activities are carried out on Binance, and since the beginning of 2020, Binance’s share of all cryptocurrency activities in Africa has risen sharply. Adedeji Owonibi, a senior partner of Nigeria-based blockchain forensics consulting firm A&D Forensics and an expert on cryptocurrency activities in the region, was not surprised when we showed him the data. “When Binance came to Nigeria, it gave many people the opportunity to buy and trade. I was able to conduct fiat-cryptocurrency transactions that I could never do before. They have more liquidity than other exchanges in the region , Recruiting local community managers from the cryptocurrency community in the region, and they provide free rewards to attract newcomers to sign up.” Owonibi also pointed out Binance’s active marketing strategy in Africa. He said that Binance’s marketing strategy is very focused on educating newbies. Use cryptocurrency.
The liquidity and diversity of trading pairs provided by top exchanges such as Binance are likely to be attractive to the growing professional trading market (we define it as consisting of cryptocurrency transfers worth more than US$10,000), despite the fact that it is similar to other regions In comparison, Binance has a low share of overall activities in Africa, but still accounts for 70% of all on-chain transactions. The chart below shows the growth of the professional market in Africa in the past 12 months, which seems to confirm this, because the increase in professional activities coincides with the increase in Binance transaction volume in Africa.
Included currency: BTC. Note: The above picture only includes direct transaction party transfers
Source link: mp.weixin.qq.com
