Digital currencies: to adopt or not?
There has been an immense surge in digital currency adoption in the world. In Africa, Kenya and Nigeria are currently the leading consumers of Crypto.
The growth is linked to peer-to-peer (P2P) trading— a decentralised platform where two individuals interact directly with each other, without a third party.
It is on record that cryptocurrencies have seen an abnormal growth rate since the introduction of Bitcoin in the market in 2011.
Bitcoin was the first decentralised token to ever exist and is still the most popular of all cryptocurrencies to date.
Coin Shows, a media and news platform, indicates that crypto adoption in Africa grew by 1200 per cent.
Jeremiah Maangi, the founder and managing director of Bizin Africa, an investment management agency focused on driving growth in Africa by helping more businesses to launch their operations on the continent, says more cryptocurrencies are emerging every day, thanks to the acceptability by the public as a means of exchange.
“Although Crypto isn’t recognised as a legal tender by most jurisdictions across the world, some nations have started having deep thoughts about it and how it can be legally accepted.
This has led to the emergence of Central Bank Digital Currency (CBDC), which are legally recognised as legal tender because they are managed and regulated by Central Banks. This has already been implemented in China where now there exists a Yuan CBDC,” he says.
Zimbabwe is also considering introducing CBDCs. Would we see more countries in Africa and the world adopting this in the coming days?
“It is a wait-and-see matter,” Maangi replies. “Cryptocurrency has emerged as a major transaction unit in Africa today. One of the biggest boosts to this is the nature of cryptocurrencies and the technology they are built under,” he continues.
Many markets including the gambling sector such as Sportsbet have adopted cryptocurrency as a means of deposit and withdrawal.
“This is attributed to the efficiency of using crypto for digital transactions such as online payments. Crypto betting has some added advantages compared to fiat currency.
Crypto withdrawal is instant and with minimal transaction costs. Transactions between your e-wallet and the betting site are secure and instant. There is no waiting for the transaction to be complete or delays of any kind,” Maangi adds.
With the blossoming opportunities for Kenyans to venture into digital currency, Mary Njoki, a marketing and IT expert, says value exchange has evolved in Africa over time as digital currency is making waves.
“We first had barter trade, then moved to fiat currency and now moving to digital currency, which holds a unique feature where finance is decentralised. Here, someone is able to come up with a currency, which can easily be shared among people,” she says.
“Crypto is built using blockchain technology which is very secure and enables users to make anonymous transactions on the block.
That the blockchain is a transparent mechanism that enables users to make safe and anonymous transactions makes it easily acceptable as a means of exchange or payment,” she explains.
Mary points out how bitcoin has been used in investments and value exchanges where someone only requires a bitcoin wallet from the platform and then sends the coins to the other party, who can choose to cash it through mobile money transactions.
“People can now also receive Bitcoin or any other form of digital assets as gifts. There are firms today that have made it simple and secure to receive or share Bitcoin with anyone even if your recipient has never dabbled in digital money before. Mainstream financial institutions such as Skrill, Patricia, Coinbase and Venmo are some of the big names allowing this,” she says.
Call for regulation
However, Mary advises users to be very careful as some of these platforms can be fraud. For gaming, she says that digital currencies also work as one buys characters on the game, and when getting paid where you also need to have a wallet.
The design has evolved that some digital wallets such as CashApp, have a slot where a user can send crypto gifts to anyone with just mobile numbers.
“This has eased the transfer of digital currency to almost everyone as long as one has a mobile number that can receive money. It’s not necessarily just cash or coins that you can give as a gift, but also a coin wallet. With or without anything in it.
These are hardware wallets that plug into your computer via a USB port. If you do decide to set up a hardware wallet for someone as a gift, make sure to follow the manufacturer’s instructions closely and keep track of the key phrases once you set the wallet up,” says Maangi.
Some governments have even moved to ban cryptocurrency saying that they are being used to funnel money to illegal sources and argued that the rise of crypto could destabilize their financial systems.
Countries like Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, Bangladesh, and China have all banned cryptocurrency.
According to a 2021 summary report by the Law Library of Congress published in November, Forty-two other countries, including Algeria, Bahrain, Bangladesh, and Bolivia, have implicitly banned digital currencies by putting restrictions on the ability for banks to deal with crypto, or prohibiting cryptocurrency exchanges. Other than the ban of crypto, other movements are looking into how to regulate digital currency, including the US
However, experts argue that as seen in the case of China, which announced the ban in 2018, a complete ban on cryptocurrency is next to impossible, and investors will find one or another to use and invest in cryptocurrencies.
Experts assert that cryptocurrencies being decentralised is a stateless asset, and thus no country can ensure or enforce a blanket ban on them. Therefore, an attempt at banning will further enhance the risks.
In the end, the investors will not be affected much through such bans because there are multiple markets for cryptocurrencies like bitcoin, whose acceptability globally is only rising.
Maangi asserts that cryptocurrency has been important to the economy. It provides an incentive for business owners across the globe and has made it easier for people to do business within the country and outside.
“Economic growth is surely guaranteed with the extensiveness of cryptocurrency in Kenya today. People are learning and embracing new technology.
Largely as a means of earning and creating jobs. This is having a positive impact on the economy,” he says.
Many countries in Africa, especially the ones suffering high levels of inflation are opting for crypto as means of payment.
“Countries like South Africa and Kenya have allocated professionals to check into cryptocurrencies to figure out whether to incorporate them or not in the economy. This is just to show how much influence crypto has and how much potential it’s indicating to have in the future,” he says.