Four months ago, in a busy street market in Lagos, Abolaji Odunjo made a fundamental change to his business of selling mobile phones: he started paying for his suppliers in Bitcoin. From China and the United Arab Emirates, Odunjo supplies handsets and accessories. His Chinese suppliers asked to be paid, he said, for speed and convenience in the cryptocurrency. As he no longer has to purchase dollars using the Nigerian naira or shell out fees to money-transfer firms, the change has boosted his profits. It is also an example of how bitcoin, the original and largest cryptocurrency, finds the practical use it has largely failed to find elsewhere in Africa.
The data from U.S. blockchain research firm Chainalysis shows that monthly cryptocurrency transfers to and from Africa of under $10,000-typically made by individuals and small businesses-jumped more than 55 per cent in a year to reach $316 million in June.
According to Chainalysis, the number of monthly transfers also increased by almost half, surpassing 600,700, which says the research is the most comprehensive effort yet to map out global crypto use. A large part of the activity took place in Nigeria, the largest economy on the continent, along with South Africa and Kenya. This represents a reversal for bitcoin, which has been mainly used for speculation by financial traders rather than for trade, despite its birth as a payment tool over a decade ago. Young, tech-savvy populations that have rapidly adapted to Bitcoin; weaker local currencies that make it more difficult to obtain dollars.
In many countries, Bitcoin and other cryptocurrencies are unregulated and their legal status is unclear, meaning that if you lose funds, there is no safety net and little recourse. For many, it depends on informal brokers to convert local currencies to and from bitcoin. Prices are volatile, and a complex process that requires technical knowledge is buying and selling. Cryptocurrencies were not legal tender in 2018, the Nigerian central bank warned, and investors were unprotected.
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Data Source: Reuters