RECENT TRENDS IN AFRICAN CRYPTOCURRENCY PEER-TO-PEER(P2P) MARKET:

A DEEP DIVE BEYOND THE TOP FOUR

— A Report By Johnpaul Nwobodo (Investment Analyst at Adaverse)

1.0 INTRODUCTION:

Peer-to-peer (P2P) trading refers to a type of cryptocurrency trading method that allows the direct exchange of assets between two parties the need for a centralized third party to facilitate the transactions.

Unlike centralized trading which is facilitated by an exchange platform using its automated trading engine while having strict regulations and verification processes, P2P exchanges allow trading among peers with fewer regulations.

In P2P trading, individuals are presented with choices in terms of pricing, hence allowing them to select their preferred offer and trade directly with a counterparty rather than using an automated engine to execute their transactions. This implies that they have more freedom to pick the best rate and payment method for trading needs — and with lower costs.

A 2021 report by Yahoo Finance highlighted Africa as the leading continent in Bitcoin P2P trading volume growth, further depicting an increase in the adoption of cryptocurrency in Africa and a growing P2P market.

But then, What are the core drivers of this P2P growth? We will find out during the course of this research.

2.0 ESSENCE AND METHODOLOGY

The Essence of this research is to examine the P2P market in Africa, with a deep dive into markets outside of the top 4 (Nigeria, Kenya, South Africa, and Egypt ). Prominent Exchanges utilized by the markets outside the top 4 will be highlighted too.

Tonnes of material were scanned during the course of this research, and information from this material was aggregated to give birth to this research. All sources utilized are cited in this research.

3.0 P2P MARKET IN AFRICA AT A GLANCE

• P2P trading accounts for 1.2% of all African transaction volume and 2.6% of all volume for Bitcoin specifically, however, it is worth mentioning that no other continents use P2P platforms like African cryptocurrency users.
• According to Chainalysis, the major driver of the adoption of cryptocurrency in Africa has been through P2P exchange.
• Recent trends in Africa’s cryptocurrency space have shown continued growth in P2P cryptocurrency trading, as depicted in the chart below.

Source: Chainalysis

• Africa leads other continents in the P2P crypto transaction by volume. This includes Bitcoin and other Digital currencies. (Chainalysis, 2021)

P2P Share of all transaction volume by country July 2020–2021. Source: Chainalysis,2021

Major P2P platforms like Paxful and Local Bitcoin which are operational in Africa have cited a spike in their transaction volume, particularly in Nigeria and Kenya.

• Artur Schaback, COO and co-founder of popular P2P exchange Paxful, confirmed to chainalysis that the Paxful platform has seen 57% growth in Nigeria over the last years and 300% growth in Kenya.

4.0 PEER-TO-PEER BY MARKET: OUTSIDE THE TOP 4.

The following table explores peer-to-peer crypto transaction trends outside of Nigeria, South Africa and Kenya vis a vis P2P Trading Volume, Platforms of usage and Regulations.

i) Tanzania

P2P Trend and Volumes

• Tanzania is Ranked 4th in the P2P segment of Chainalysis, Global Crypto adoption Index in 2021.
• Recent P2P trading volume cited by African Crypto shows that P2P transaction on LocalBitcoin between Sept 27 — Oct 2nd’22 is currently pegged at USD50k, a 25% Increase from the previous week which closed at USD40k.
• P2P transaction volume YTD(For 2022 Physical Year) on LocalBitcoin is currently at USD1.8mn.

USD Equivalent weekly volume data for peer-to-peer (P2P) Bitcoin trade by Tanzanians on LocalBitcoin (Source: Africancrypto Research)

Trading Platforms

• Remitano, Coindirect, Localcryptos, Spectrocoin.
• Other available Platforms, that aren’t P2P-based, include Bitpesa, Belfrics, and Bit2me.

Crypto Regulation: No Stated regulation

ii) Zambia

• Cryptocurrency has gained significant interest in Zambia, leading to the issuance of a warning by the Bank of Zambia. The Zambian government is also exploring the launching of its own CBDC(Bloomberg’22).
• P2P transaction in Zambia is relatively low when compared to countries like Nigeria
• Statistics on LocalBitcoin shows that P2P transaction carried out by Zambians totals about USD330k YTD for the 2022 fiscal year.
• Zambia closed the last week of September with a P2P total transaction volume of $9,891, 20% from the previous week(LocalBTC).
• Total P2P transaction on LocalBTC for the 2022 fiscal year is currently at USD334k, trailing behind Egypt and Botswana

Trading Platforms

• P2P platform includes Paxful, LocalBitcoin. -
• CEX includes PrimeXBT, FTX and Huobi.

Crypto Regulation:

• Not Regulated.
• A statement has been issued by the bank of Zambia to warn citizens of this. The full statement can be accessed here

iii) Angola

• P2P total transaction volume for the 2022 fiscal year on LocalBTC is currently at 295k(AfricanCrypto Research).
• Angola closed the last week of September on LocalBTC platform with a 107% increase, recording USD4.6k in total transactions for the week.

USD Equivalent weekly volume data for peer-to-peer (P2P) Bitcoin trade by Angolans on LocalBitcoin (Source: Africancrypto Research)

Trading Platforms

LocalBitcoin, Paxful.

Crypto Regulation:

• No Legislation.
• An uncounted part of P2P is the informal P2P platforms. These are P2P transactions that are carried out on Telegram and Whatsapp Groups. This is popular amongst OTC merchants. These informal P2P activities are usually not included in the P2P trends as they are quite hard to track.

5.0 DRIVERS OF PEER-TO-PEER TRANSACTIONS IN AFRICA

• Unfavourable Crypto Laws:
• Countries like Nigeria have passed unfavourable laws and have even gone to the extent of prohibiting banks from interacting with cryptocurrency platform
• This had led to an uptick in P2P usage in Nigeria and other African Nations, allowing retail investors to bypass Government laws.

6.0 WHAT DO EMERGING MARKETS IN AFRICA USE P2P FOR?

• Investors in emerging markets like to utilize P2P transactions in the following ways:

Remittances

• In 2019, Sub-Saharan Africa received at least $48 billion worth of estimated remittances, about half of which went to Nigeria, according to a Brookings Institute study. (Chainalysis”21)
• While most remittances to Africa came from North America and Europe, some of these transactions are also within Africa.
• Some African countries have limited the amount of money that can be moved abroad. (Eg: In Nigeria, Banks limit customers to spending only $20)
• P2P in this case serves as the rightful means to access fx and remit money abroad, using stable coins or other digital currencies..

Estimated Cryptocurrency Remittance payments in Africa Apr’19 — Jun’21. (Source: Chainalysis)

International Commercial Transaction

• Some Businessmen in Africa, particularly Onitsha and Nnewi in Anambra state, Nigeria who imports goods from China and other Asian countries now turn to crypto for the payment of their commercial transactions.
• The lack of FX has spurred these individuals into leveraging P2P for the settlement of cross-border transactions.

Savings

• As inflation and currency depreciation hits different African countries, citizens of these countries are turning to stablecoins(USDT, BUSD and USDC) to serve as a hedge against inflation
• Nigeria’s inflation rate currently sits at 19.64%(Vanguard), Zimbabwe at 280%(Trading economics), Kenya at 7%(Statista),

SOURCES:

Marcel Deer. May 17th 2022. What is P2P Trading and How does it Work in Peer-to-Peer Crypto Exchanges — Cointelegraph. https://cointelegraph.com/news/what-is-p2p-trading-and-how-does-it-work-in-peer-to-peer-crypto-exchanges

Rahul N. June 14th 2021. Africa Leading Bitcoin P2P Trading Volume Growth in 2021. https://finance.yahoo.com/news/africa-leading-bitcoin-p2p-trading-080724935.html

Chainalysis Team, September 14th ’22. Global Crypto Adoption Index 2022 — Chainalysis. https://blog.chainalysis.com/reports/2022-global-crypto-adoption-index/#our-methodology

Tanzania and Kenya leads the world in Peer to peer crypto trade. https://www.thecitizen.co.tz/tanzania/news/business/tanzania-kenya-lead-the-world-in-peer-to-peer-crypto-trade-3524422

Eugene Mniwasa, 2021, Regulation on Virtual Currencies in Tanzania — Academic.edu https://www.academia.edu/77251166/REGULATION_OF_VIRTUAL_CURRENCIES_IN_TANZANIA_SOME_COMPLEXITIES_AND_OPTIONS_THE_LAW_SELF_REGULATION_CO_REGULATION_OR_REGTECH#:~:text=The%20law%20in%20Tanzania%20does,regulates%20virtual%20currencies%20in%20Tanzania.

BTC in Tanzania. https://www.nigeriabitcoincommunity.com/btc-in-tanzania/#:~:text=1.-,Remitano,you%20can%20buy%2Fsell%20bitcoin.

Press Release on Cryptocurrencies by the Zambian Government. https://www.boz.zm/PRESS-RELEASE-ON-CRYPTOCURRENCIES.pdf

Zambia explores digital currency but warns against Crypto. https://www.bloomberg.com/news/articles/2022-02-09/zambia-explores-digital-currency-but-warns-against-crypto

How to buy Bitcoin in Zambia. https://cryptobuyer.com/zm/coins/bitcoin/

Angola and Cryptocurrency https://freemanlaw.com/cryptocurrency/angola/

Nigeria inflation rate increases to 19.6% — Vanguard. https://www.vanguardngr.com/2022/08/nigerias-inflation-rate-increases-to-19-64-in-july-2022-nbs/

Kenya’s inflation rate. https://www.statista.com/statistics/1139807/monthly-inflation-rate-in-kenya/

Zimbabwe’s inflation rate. https://tradingeconomics.com/zimbabwe/inflation-cpi

Peer to Peer trading is driving Africa’s digital money revolution. https://qz.com/africa/2068839/peer-to-peer-trading-is-driving-africas-digital-money-revolution/

Best P2P Crypto exchange in Nigeria. https://medium.com/coinmonks/best-p2p-crypto-exchange-platform-in-nigeria-e10c842b531c

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