4.2 million Kenyans own crypto, highest in Africa – report

A new report by the United Nations Conference on Trade and Development (UNCTAD) has shown that 8.5% of the population in Kenya own cryptocurrencies. 

That percentage indicates that around 4.2 million people own digital assets in the East African country, the highest rate of ownership on the continent and the fifth globally.

The UNCTAD report shows that Kenya is leading Africa in cryptocurrency ownership despite warnings from regulators such as the Central Bank of Kenya (CBK) that the emerging assets can be high-risk.

Kenya has emerged as a leader in terms of uptake and usage of digital currencies by its citizens. The crypto-economy has been growing rapidly in Kenya, with several citizens having used digital currencies over the last year.

United Nations Conference on Trade and Development

The new UN report also corroborates a similar finding by blockchain analytics firm, Chainalysis which disclosed in June that there are an estimated four million Kenyans with crypto accounts.

The UNCTAD report

In the report, Ukraine is ranked top, with 12.7 per cent of its population with cryptocurrencies, followed by Russia (11.9 per cent), Venezuela (10.3 per cent) and Singapore (9.4 per cent).

The rating places Kenya at fifth, ahead of developed economies, including the United States, which ranked sixth with 8.3 per cent of its population owning digital currencies.

South Africa is the second-ranked country in Africa and eighth globally, with 7.1% of the population that owned or held cryptocurrencies in 2021.

Nigeria, which is regarded by Paxful as the biggest cryptocurrency market in Africa, has about 6.3% of the population who own or hold cryptocurrencies. 

This indicates that out of the West African country’s population of 211 million, over 13 million were owners of digital currencies in 2021. The UNCTAD data shows that the number of Nigerians who invested in digital assets will increase considerably in subsequent times.

Australia has the least percentage of the population owning digital assets out of the 20 countries that were surveyed – 3.4% owned cryptocurrency in the said period.

Why are more people in Kenya trading crypto?

The use of cryptos in third-world nations became widespread during the pandemic, with countries such as Kenya, Nigeria and South Africa, occupying the top ten list in crypto ownership globally. 

The United Nations body indicates there are two main reasons for this: the use of cryptocurrencies was an attractive channel in terms of price and speed through which to send remittances. 

During the pandemic, the already high costs of traditional remittance services rose even higher during lockdown periods due to related disruptions.

Also, the UN said digital assets are popular among middle-income individuals in developing countries because they see them as a way to protect their household savings against inflation and currency depreciation. 

The downsides

The report says that while cryptocurrencies can enable fast and cheap payments, they also have potential downsides.

For instance, a drop in the market price of a cryptocurrency could result in a loss for investors who purchased the digital asset with a loan. 

Also, many digital assets are not yet widely accepted as payment for goods and services, which could make people use them for illicit activities such as money laundering and tax evasion.

If prices plunge, monetary authorities may need to step in to restore financial stability. Importantly, in developing countries, the use of cryptocurrencies provides a new channel for illicit financial flows.

According to the report, the main concern is that, due to their volatility and high-risk profile, crypto assets are likely to encourage speculation rather than adoption in retail or commercial settings.

UNCTAD warns that if left unchecked, cryptocurrencies may become a widespread means of payment and even replace domestic currencies unofficially (a process called cryptoization), which could jeopardise the monetary sovereignty of countries.

“The use of stablecoins poses the greatest risks in developing countries with unmet demand for reserve currencies. For example, the turmoil in May 2022 prompted a flight to higher quality stablecoins that publish audited holdings of their backings.”

Proposed solution

To minimise the highlighted risks, UNCTAD has now called on governments to move and regulate the cryptocurrency sector.

UNCTAD says it recommends “the mandatory registration of crypto-exchanges and digital wallets.”

The agency also proposes imposing “entry fees for crypto-exchanges” or levying taxes on cryptocurrency trading. According to them, doing this would make the use of cryptocurrencies less attractive. 

UNCTAD also urges authorities to ban regulated financial institutions from holding stablecoins and cryptocurrencies or offering related products to clients. It also emphasised the regulation of decentralised finance (DeFi). 

Other recommendations include the restriction/prohibition of the advertisement of crypto exchanges and digital wallets in public spaces and on social media

Lastly, UNCTAD proposes creating a public payment system to serve as a public good, such as a central bank digital currency (CBDC).