African perspective on bitcoin and cryptocurrency -

African Perspective On Bitcoin and Cryptocurrency

The rise in bitcoin and cryptocurrency use in Africa over recent years has shown that not only are digital currencies a vital way to move funds between countries, but also that they are a valuable means for financial excluded people to access global markets.

It’s a necessity to have bitcoin and cryptocurrency

Despite regulators’ efforts to limit the trade or use of cryptocurrency, the number users of these digital assets is growing. As numerous studies have shown, cryptocurrencies such as bitcoin have become a necessity.

Although cryptocurrencies are volatile, they offer holders and users a degree of control over their wealth that is not possible with fiat currencies. In countries with high inflation and unstable currencies, cryptocurrencies can offer an escape route.

Recent reports from Turkey show that when a currency is rapidly depreciating in an environment where ownership of or access to other stores of value such as gold is restricted, residents may switch to crypto.

Many believe that cryptocurrency or cryptocurrency rails for transferring funds across borders have been the most valuable and effective use case. This assessment is supported by few people who oppose digital currencies that are privately issued. It is true that sending money across borders using cryptos such as XRP, Stellar or bitcoin cash is more efficient than using traditional channels, both formal and informal, to send funds.

The situation in Nigeria prior to the blocking of cryptocurrency entities from the banking system showed that cryptocurrency-based remittances could surpass regular channels for money transfer. Nigerian migrants were able bypass many of the traditional intermediaries involved in cross-border transactions by sending money in cryptocurrencies. This was in addition to the speed with which funds could be transferred.

This meant that senders could send money at a lower cost to their loved ones. However, recipients in Nigeria had the option of using cryptocurrencies to convert funds to local currency using the market rate, rather than the official exchange. It was actually partly for this reason that the Central Bank of Nigeria (CBN), decided to take action against crypto entities on February 5, 2020.

This act and subsequent actions by the CBN did not stop the popularity of cryptocurrency in Nigeria, as authorities had hoped. The restrictions have not promoted peer-to-peer trading of bitcoins, as Useful Tulips data from the past nine months shows. The failure to regulate by the CBN, and many other regulators around world, once again shows that regulation cannot stop a useful innovation.

Global Financial Markets Access

The most important, but perhaps less well-known, use case for cryptocurrencies is their trading opportunities and easy access to people living in less developed countries. Access to certain financial products can be limited in these regions due to factors that vary from the country’s GDP to the size of its financial system. Access to certain financial services can be limited in certain cases due to the relationship between less developed countries and their more developed counterparts.

If relations become frosty, there’s a high chance that access to the global finance system and associated services will be severely restricted. OFAC sanctions could prevent a Zimbabwean national from buying or trading stock on the New York Stock Exchange.

However, a Zimbabwean citizen can buy global stocks such as Microsoft, Amazon, and Tesla using certain cryptocurrency platforms. So, traders from Africa have access to some of most profitable and liquid stocks worldwide through cryptocurrency.

Trades on the African continent can also be done directly on many global cryptocurrency platforms, 24 hours a day. They are able to engage in other forms of cryptocurrency trading, including risky futures, margin trading, and staking. Because cryptocurrencies are open to anyone, even those who are financially excluded, all of this is possible.

Fighting Cryptocurrency: A Futility Exercise

Although regulatory agencies may wish to restrict or stop the use of cryptocurrency, the truth is that it has opened up many new opportunities. It is unlikely that anyone will attempt to ban cryptocurrency trading or use without offering an alternative or improving the financial system for everyone.

It should be obvious to African countries, which have copied and pasted what their Western counterparts did to curb or stop the use of cryptocurrency. The regulators and central banks of Africa should be aware that the launch a digital currency by their central banks (CBDC), will not bring back confidence in a currency.

It takes more than simply giving the currency a new name to get people to believe in it again after it falls. Instead of trying to prevent people from using crypto assets, smart regulators should view the popularity of these assets as a sign of lack of trust in the financial system. This understanding of the popularity and potential dangers associated with cryptocurrency will help African central banks to develop the right regulatory response.