The recent 2021 Chainalysis global crypto adoption index has ranked Kenya first in the world when it comes to peer-to-peer transaction volumes.
The index, whose methodology takes absolute volumes and weights them to favor countries with lower PPP per capita and fewer internet users, gave Kenya the best possible index of 1.
According to Chainalysis, the adjustment of absolute for PPP and number of internet users highlights countries where more residents are putting a larger share of their overall wealth into P2P cryptocurrency transactions.
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In the month of August 2021, combined P2P trading volume on Paxful and Localbitcoins for Kenya was $16.20 million.
This is an increase of 54.28% from 10.5 million in July 2021.
On the other hand, Nigeria, which generates the highest trade volumes every month has grown by 9.5% from $34.8 million in August 2020 to $38.1 million in August 2021.
Below are 3 key reasons why Kenya was ranked the highest in global P2P crypto transactions:
- Remittances / International Transactions
Remittances compose about 3% of Kenya’s GDP.
According to the World Bank, it costs roughly 8.9% to send money into Africa compared to the the global average of 6.8%.
In August 2021, Kenyans in the diaspora sent home $336.7 million (KES 36.8 billion) in July 2021 setting a new monthly record on remittances since the Central Bank of Kenya started capturing the data.
This represented a 21.6% increase compared to the $277 million (Sh30.3 billion) recorded in July 2020.
One of the main use cases for bitcoin and other cryptocurrencies is the opportunity to cushion remittances and cross-border businesses from costly transfer fees and the risks of weakening currencies.
In May 2021, Kenyans sent back $315.8 milllion and about $305.9 million in June 2021.
Cumulative remittances in the 12 months to July 2021 totaled $3.4 billion (Sh376.5 billion ) compared to $2.9 billion (Sh317.2 billion) in the same period in 2020 – a 20.3% increase.
Moreover, in spite of the pandemic, remittance flows to the country increased by 10%, from US$2.796 billion in 2019 to US$3.095 billion in 2020, accounting for 3% of the country’s Gross Domestic Product (GDP).
Due to the depreciating value of the Kenyan Shilling (KES), cryptocurrencies are increasingly becoming a better store for savings.
In addition, crypto is also seen to offer the chance of gains, which seem less risky given their overall trajectory and sentiment.
In contrast the Kenyan Shilling has been depreciating over recent years:
- Kenya Shilling (KES) has lost 45% of its value since 2008
- The KES has lost 10% of its value since 2020
Kenya is also a leading country when it comes to fintech innovation.
Mobile money platforms such as MPESA have helped provide banking access to millions of Kenyans in the last few years. People not having access to traditional banking systems in rural areas in Kenya use digital platforms to transact.
It is no surprise why cryptocurrency has become attractive to many young Kenyans who are already familiar with concept of digital money wallets, according to financial experts.
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RECOMMENDED READING: Kenya’s Mobile Money Transactions Up 56% in 2021 YoY So Far
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