Chainalysis, the New York-based blockchain data platform, has today released a Geography of Cryptocurrency report focused on the African crypto ecosystem.

The report is the first dedicated report on the African crypto ecosystem—a testament to the growth within the ecosystem. It explores the volume and nature of transactions on the African continent between June 2020 and July 2021.

Chainalysis, the company which provided the report is a New York crypto firm which provides cryptocurrency exchanges, international law enforcement agencies and other clients with blockchain transaction analysis software to help them comply with regulations, assess risk and identify illicit activity. According to a the company's website, it tracks over 100 digital assets supported across 10 native blockchains, encompassing 90% of cryptocurrency economic activity.

Having read the report, here are X takeaways everyone should know:

  • Crypto adoption is growing in Africa fuelled by retail players

While Africa still trails the rest of the world in crypto adoption, growth is evident.  According to the report, the continent's cryptocurrency market has grown by almost 1200% in the last one year—more than any other region. This growth puts the local crypto ecosystem's value at $105.6 billion as at the time of the report.

The continent also has a significant amount of retail transactions at just over 7% compared to the global average of 5%. These numbers are likely to rise over the next 12 months with startups like Bitnob encouraging more retail transactions with the integration of lightning network.

  • Illegal crypto transactions are a rarity on the continent

Despite undying tales of African Prince scammers and negative insinuations from politicians and central bank governors, crypto transactions on the continent are remarkably clean.

Figures from the report show that less than 1% of cryptocurrency received in Africa came from illicit sources e.g. scam accounts, stolen funds, darknet activities. Most crypto transactions on the continent ( over 85%) originated from exchanges and lending contracts.

  • P2P transactions are exploding, encouraged by strict government regulation

It is not news that African governments have not looked kindly on cryptocurrencies. Regulatory reactions to crypto have been at best, discouraging. For instance, in January 2020, the Nigerian Central Bank cut off crypto exchanges from banking services.

It is impossible to estimate the damage to adoption that these regulations have caused, as crypto numbers have generally gone up regardless of them. However, user behaviour one thing that has been affected. The data clearly shows that crypto users have adopted P2P transactions as a way to get around.

Prior to the time period under consideration for the report, Binance—one of the world's biggest centralised crypto exchanges, was the most popular platform for crypto trading in the region. However, the last year has seen a surge in the  popularity of peer-to-peer (P2P) platforms like Paxful and Remitano.

According to Artur Schaback, COO and cofounder of popular P2P exchange Paxful, the company has seen 57% growth in Nigeria over the last year and 300% growth in Kenya.

  • Remittance is driving cryptocurrency usage on the continent

This takeaway is one that may bother certain African central bank governors who spend inordinate amounts of time obsessing over FX inflows and outflows.

Remittance to Africa has grown consistently since April 2020  with the exception of a slight drop in June 2021. Cross-regional transactions made up nearly 96% of all crypto transactions on the continent in the time under consideration. Simply put, this means more Africans are turning to crypto as a means of getting money into the region.

Much has been said about Africa's isolation from the global economy due to broken financial rails and crypto's promise to to deliver connectedness. If anything, the current crypto trends show that the promise is real.

  • Young Africans are using crypto to hedge inflation

Young Africans are getting money smart, realising the negative impact that inflation can have on their saved income. Per the Chainalysis report, there have been noticeable spikes in crypto trading volumes every time there has been a devaluation the relative value of  local currencies to the dollar.

These spikes have been most noticeable with both the Nigerian Naira and the Kenyan Shilling— the official currencies of Africa's first and sixth biggest economies respectively. The implication of these spikes is that young Africans are turning to cryptocurrencies to hedge against their local currencies.

Final thoughts

For people who are keen observers of the African crypto ecosystem, the Chainalysis report only serves to confirm some of the leading thoughts. While regulations have been unfavourable, crypto transactions have continued growing in leaps and bounds, powered by remittance and savings to hedge currency.

Interested readers can find the report here.