Could Cryptocurrencies Be the Key to Economic Development in Africa?
“I think the internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing but that will soon be developed, is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B, without A knowing B or B knowing A.” – Milton Friedman
To believe that years ago the meaning of currency was as simple as an exchange of animals or beads and today our world is home to 180 official currencies is incredible. No one can dispute the mega impact that technological inventions have had on individuals and communities as a whole, whether it be the impact on our day-to-day interactions, the way we do politics or commerce. However, it is hard to ignore the contribution of new technologies to the creation of an over-centralized financial system in which taxes and fees are imposed on our daily transactions. Luckily for us, as technology continues to achieve the impossible, we might be getting closer and closer to welcoming cryptocurrencies as our first global currency with no set borders. Furthermore, this decentralized currency also referred to as digital money, might be the Holy Grail that will save you a $30 transaction fee when transferring funds in the future.
So what is a cryptocurrency? A cryptocurrency is a revolutionary currency fully decentralized and based on various encryption methods that allow and verify secure peer-to-peer transactions. As of today, Bitcoin, initiated by Satoshi Nakamoto in 2009, remains the first and most known decentralized cryptocurrency in the world. Since the rise of Bitcoin, many other cryptocurrencies have made their apparition on the market. It’s the case of Ethereum, known as the second biggest cryptocurrency. The impact of these currencies cannot be overlooked, as they are changing our financial system and attracting many developing economies, such as African economies.
Have these cryptocurrencies anything to offer to Africa?
The economy in Africa is improving, and I strongly believe that there is a huge potential for cryptocurrencies to be used in Africa. In fact, Bitcoin is already present in big cities in Africa such as Accra (Ghana), Lagos (Nigeria), Nairobi (Kenya) and Cape Town (South Africa). According to the Global Findex, nearly 75% of the adult populations in Sub-Saharan Africa do not have access to bank accounts. The inefficiency of banks suggests that a new system is needed. Banks and branches are expensive, transfers are slow and have higher rates, all of these require a lot of paperwork. The failure of a centralized banking system might be a green flag for the implementation of a successful decentralized system. Such a currency could reduce government control over populations and therefore shrink the inequality gap.
Many Africans could effortlessly switch to a cryptocurrency like Bitcoin, or a revolutionary bank of the future such as Luno which is currently the biggest Bitcoin company that offers exchange services (buying and selling Bitcoin) in Africa. Furthermore, Bitcoin and other cryptocurrencies could be the bridge for Africans to have access to useful and affordable financial products and services that meet their needs.
To transact in Bitcoin, you need an internet connection and preferably a smartphone. There are still places underserved by telecommunication or internet, but this is changing really fast in African countries and the smartphones prices are continuously getting cheaper. Multiple start-ups and individuals in Africa are building an African Bitcoin ecosystem by supporting bitcoin and its essential technology to deliver innovative services to African consumers, businesses, and investors.
Luno is one of Africa’s largest cryptocurrency exchanges and mobile wallets. A bitcoin wallet is a software where you can store your bitcoins securely and access it anytime anywhere using your smartphone via the internet. People can send bitcoins to anyone quickly, as well as buy and sell bitcoins in supported countries in Africa. Imagine how the diaspora could easily use cryptocurrencies to send money home; faster and cheaper.
The biggest challenge will be to educate the population on this new technology. At Luno, they provide a learning platform where users can easily learn about Bitcoin. Something which is no minor task, but it is showing growth and endorsement in Africa. Many bitcoin conferences are held in many countries to introduce cryptocurrencies and show to local businesses and investors how they can benefit from this new system.
In the near future, there will be more cryptocurrencies present in Africa with different qualities and different purposes. Bitcoin is attracting more investors and is becoming a new alternative for emerging markets in Africa. Cryptocurrencies have already impacted a few big African economies and are being quickly adopted by others. Will this be a key change for a sustainable development?