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A veritable explosion of cryptocurrencies, all leveraging blockchain technology, have sprung up in Bitcoin's wake. As of the end of November , there were an estimated 1 cryptocurrencies and counting available on the internet.
Payment platforms, wallets, global settlement networks and hundreds of cryptocurrencies abound. Blockchain is a distributed digital ledger that allows participants to inexpensively and transparently record transactions in a permanent, traceable way. The data are stored on many different computers around the internet, and even around the world. Ethereum is an open software platform based on blockchain technology that enables developers to build and run a wealth of decentralised applications.
Potentially, blockchain can be used anywhere the need to track the ownership of documents, assets, or voting rights might exist.
Firstly, blockchain-enabled remittance services are helping people send money to and from Ghana, Zimbabwe, Uganda, Sierra Leone and Rwanda at a fraction of the current banking rates.
Along with its advantages, the use of cryptocurrencies for remittances in Africa also has its potential drawbacks. In Zimbabwe, where assets lost huge amounts of value overnight during the hyperinflation period of , some of its citizens have turned to cryptocurrency as a savings mechanism.
When long-time president Robert Mugabe was ousted by the Zimbabwean military in November, Bitcoin saw a surge in price on the Harare exchange. When uncertainty was at its peak, the price for a single bitcoin on the Harare bitcoin exchange was close to double the price on global bitcoin exchanges. It can provide a secure voting platform for countries in which citizens might battle to access voting stations or face intimidation.
Blockchain is responsible for movements such as Usizo, a South Africa-based blockchain platform that allows members of the public help pay electricity bills for community schools. And, in a change that will affect every African country with a seaport, blockchain is doing away with the need for paper documents in the tracking of goods by sea, a difficulty that could previously not be met by electronic bills due to the need for non-forgeability and a central register.
The potential application for this on the African continent is vast. Other African countries such as Kenya, Ghana, and Morocco also have volumes, but due to lack of bitcoin exchanges the volumes are not easily traced.
Gareth Grobler, of cryptocurrency platform ICE3X estimates that between and South Africans are now involved with cryptocurrencies. Marina Niforos, principal at Logos Global Advisors which compiled a report about blockchain in emerging markets to the World Bank, described the keen interest of the Kenyan market.
With the most mature mobile money market in Africa, Kenya is leveraging its existing networks to allow for the transactional use of Bitcoin in the country. This is allowing for an easier exchange between fiat and cryptocurrency. These informal networks, resemble the airtime currency informal networks of pre, that powered remittance payment networks before M-Pesa became a thing.
This provides the backdrop for … disruption in the remittances and payments segment. South African mobile money network PayFast recently integrated bitcoin payments options and now provides access for bitcoin payment to 30 merchants outlets across the country.
Philip Asare, the chief executive officer of bitcoin exchange BtcGhana, believes that cryptocurrencies can usher in a new era of prosperity to Africa. Cryptogene holds regular webinars, lectures and group training sessions for its members. Since its inception about a year ago, the Cryptogene community has grown to about people from Nigeria and surrounds, ranging from tech experts to people who know very little about cryptocurrencies.
To address a generally low level of financial literacy, its founders aim to eventually develop a user-friendly, accessible platform for remittances. Internet access is another prohibitive factor.
Thomas Rehermann, an economist for the International Finance Corporation who specialises in the cryptocurrency space, points out the added concern of electricity costs. And, in order to use cryptocurrencies, Africans need to be able to exchange their fiat currency into the desired crypto. Langelihle Mnyandu, an associate in the Banking and Finance department at Bowmans Law Firm, pointed out that money in Africa is still very much paper-based. How is Africa regulating this new type of transaction, which by nature is decentralised and can be conducted anonymously?
The only way to address this, he said, is by collaboration between governments and sectors. Regulators across Africa need to work together to come up with solutions that transcend borders. Bright Tibane, a senior associate in the same department at Bowmans Law Firm, said that one way of doing this was by adopting an approach called sandboxing. This practice creates a regulatory framework that forms the space for innovators to break the rules, and then allows them to demonstrate that breaking the rules has not been detrimental in that particular case.
The United Kingdom and Singapore are following this approach. South African authorities are looking to adopt something similar.
In addition to South Africa, Uganda has shown proactivity in its approach to regulation, says Tibane. And generally, African regulators have been fairly receptive to cryptocurrencies, they said. According to Moashilane, cryptocurrencies will offer revolution in established markets, and a different kind of change in Africa. In the meantime, cryptocurrencies and their protagonists continue to think and act big.
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