The following article was written by Adinah Brown, content manager at Leverate.
Cryptocurrencies seem like the type of endeavor that will split the world into the haves and have nots. Despite its talk of democratization of currency via removal of the impact of central banks, cryptocurrencies practically are only available to those people with access to technology. This is the kind of thing where first world countries have a distinct advantage over third world countries.
Despite this expectation, the reality is that cryptocurrencies not only have a strong role to play in the future of many third world countries, but also have already provided some interesting benefits to third world people, spurring some exciting innovations.
The case of Bitcoin in Africa highlights several interesting elements.
When bitcoin first hit the $10,000 mark on 26th November, it was actually not the first time that this had happened. On the Zimbabwean exchange Golix, Bitcoin had hit $14,000 two weeks earlier. The reason for this underlines how important something like cryptocurrencies are to developing and third world countries. The reason that the Bitcoin price shot up was due to a political crisis. This created economic turmoil, which in turn caused people to look for a more secure method to protect their assets.
This led them to bitcoin.
In a similar way that Chinese nationals turned to cryptocurrencies because of Chinese government policies, people of third world countries need a safe haven to protect themselves from hyperinflation, government seizure of assets, massive devaluation and the like. An anonymous, secure currency with no ties to a central banking authority, cryptocurrencies offer the perfect solution. In Africa, a region involved in ongoing political and economic instability, the opportunity to use cryptocurrencies offers civilians the chance to ensure that their property is not impacted by this turmoil.
There is also a significant amount of Africans that work overseas that send money home to their families. Cryptocurrencies offer a means of transferring currency easily, without the costly issues associated with traditional money transfer. It is also quick and for most part avoids taxation and the like, another remnant of opportunistic political largesse. In fact, mobile money transfer has become so popular, that it was reported in The Economist that over 25% of money in Kenya is transferred through the mobile money service M-Pesa.
Part of this can also be attributed to other structural banking elements. In Africa, a relatively small amount of people have traditional bank accounts. Less than 3% of the population has access to credit cards in Sub-Saharan Africa. PayPal is prohibitively expensive or blocked in many countries. Bank transfers are several times more expensive than in other parts of the world. All of these factors contribute to the practical need for non-traditional means of transferring and holding money.
Cryptocurrencies and mobile transfers have created an opportunity for people in Africa to control and protect their assets. The purest ideas that underlie the cryptocurrency project is on display, lighting the way forward by enabling equal access to currency solutions to everyone, regardless of circumstances.