Bitcoin may still be less popular in parts of Africa but it presents itself as an alternative to several challenges facing the region that has been dubbed the mobile-led continent, according to Llew Claasen, Executive DIrector of Bitcoin Foundation.
Claasen believes that the current levels of Bitcoin adoption in Africa reflect where Bitcoin is on its technology adoption curve globally and the continent shouldn’t be seen as being behind.
“Africa has many challenges where Bitcoin offers a viable alternative and this strong need may see Africa taking more than it's fair share of the global Bitcoin dividend,” Claasen said via email. “It's so early in the adoption of this technology for all of us that it's difficult to say how it all plays out in specific regions.”
African assets and challenges
Here are some factors which make Bitcoin a good bet for African countries. According to fiatleak.com, which provides a realtime overview of global currencies and their flow into Bitcoin, South Africa is one of the top users of the digital money.
The McKinsey Global Institute (MGI) described the potential and progress of African economies as “lions on the move” in 2010, a trend which has continued despite the collapse of global commodity prices and political shocks.
According to Punam Chuhan-Pole, World Bank Africa acting Chief Economist and author of the latest Africa’s Pulse report, African countries “need to accelerate the pace of structural reforms aimed at boosting competitiveness and diversification” and one of the four ways to achieve this is by reducing the cost of cross-border trade. Another is by making the financial sector more inclusive.
Currencies are not so stable in several African countries. In some others, it is hard to get money in and out of the countries. High inflation rates and exorbitant transfer charges combined with unnecessary delays by financial institutions are rampant.
Several Bitcoin-related fintech startups such as Bitpesa have started to spring up as the ICT sector gains more grounds across the continent.
Is digital currency good for Africa?
Claasen can't think of many ways that Bitcoin could be bad for Africa and its people. In 2015, Bitcoin was the world's best-performing currency. It's also been trading within a remarkably stable price range leading up to and following the halving event.
However, some have questioned its stability as a store of value for poor communities.
“There are only 21 million Bitcoins that will ever be mined. It's deflationary, much more likely to yield long term capital growth than traditional fiat currencies and our recent Brexit experience even tells us that it could supplant gold as a traditional currency hedge.”
Consumers need to be able to earn Bitcoins, store them in a digital wallet and eventually, exchange them both at point of sale and peer-to-peer which is hard to achieve within short periods of time.
“It took the closest cousins of cryptocurrencies, credit card networks, more than 50 years to achieve widespread adoption and even they didn't crack it in Africa. That complexity may lead to Bitcoin being adopted first as a store of value and only later as a medium of exchange.”