Vires in Numeris… This is a Latin motto that has become synonymous with Bitcoin. It is supposed to demonstrate the digital currency’s robust strength and infrastructure. Vires in Numeris is Latin for strength in numbers.
Hit with a sudden and rather bemusing stroke of inspiration albeit laced with a little madness, the President of CAR Faustin-Archange Touadera took to his Twitter account in May last year tweeting an ominous, “more to follow” followed by the Latin motto and his country’s motto. A bunch of hashtags dubiously accompanied his tweet, rather reminiscent of Elon Musk’s often cryptic outbursts online. More what exactly?
The tweet marked The Central African Republic’s decision to officially onboard the digital currency as legal tender. This is The CAR…a country where nine out of every ten people do not have internet and where one in seven do not have access to electricity.
Let us not even bring up the incessant power cuts at this juncture. What is the point of a legal tender that cannot be used?
What was the rationale of Faustin in adopting bitcoin as legal tender when the very infrastructure it requires to be bought, sold or used, is for all intents and purposes non-existent in the country?
This move by The CAR was nothing short of the stuff of a monetary hyperspace that many countries are yet to experience.
It is common knowledge that Bitcoin and in fact any cryptocurrency is highly volatile and therefore unpredictable. Regulating such decentralized digital products is quite the challenge, especially for African economies which already face a lot of turbulence brought on by internal and external factors.
Currently, only 25 per cent of sub-Saharan countries have regulations in place for cryptocurrency.
Tanzania, the Republic of Congo, Lesotho, Sierra Leone, Ethiopia and Cameroon have completely banned cryptocurrencies while Zimbabwe and Liberia have also imposed implicit bans on crypto.
The situation is however different in Kenya, Nigeria and South Africa where cryptocurrency has found an eager market.
What is the main attraction(s)?
The crypto market in Africa, despite remaining rather small in comparison to other key players, is currently one of the fastest growing. In June of 2021, crypto transactions on the continent peaked at a record high of twenty billion dollars per month.
Following a prolonged bear market last year the value of bitcoin fell to an all-time low of $15,700 (compared to $70,000 in November 2021). There has however been an upward trend since then which has seen the cryptocurrency surge to highs of $23,500 last month.
These crazy lurches in value of this and other virtual objects, which in truth are no more than code, are perhaps the biggest attraction for cryptocurrency enthusiasts both within and without the continent.
While their western counterparts consider bitcoin as a store of value which can be bought for speculative purposes, African users have adopted a more transactional approach to virtual currency, using it to make everyday payments instead.
The bear market does not, therefore, affect such transactions which are mostly carried out as a matter of practicality.
According to Statista, the gross monthly minimum wage in Kenya as of 2022 was $130. As one of the countries on the continent where the uptake of cryptocurrency has spiked, it is clear to see that the amount of disposable income available to households would not be sufficient to hold bitcoin purely for speculative ventures.
Mobile money is prominent on the African continent. Kenya in particular is a mobile money giant with transactions last year reaching Kshs 7.9 trillion. The populace of most African countries is young and extremely tech-savvy.
Mobile and virtual currency is seeing the continent go through an economic revolution that is completely removed from any bank and whose effects are only just beginning to emerge; Traders in South Africa, Kenya and Nigeria are using bitcoin for commerce.
African nations that have adopted cryptocurrency also see their citizens benefit in the way of remittances. Both internal and external remittances are a whole lot easier (and cheaper) to make using cryptocurrency like bitcoin. Making cross-border payments using bitcoin is a lot less marred with bureaucratic procedures.
The fact that bitcoin is largely unregulated even in countries like Kenya and Nigeria is a major source of appeal for Africans in these countries.
Furthermore, currencies such as the Nigerian Naira and the South African Rand have constantly taken beatings plunging further and further down. Bitcoin users in these countries keep their money safe in their E-wallets in form of crypto and are unconcerned about their failing, depreciating or volatile national currencies.
In code we trust – right?
Satoshi Nakamoto, the creator of bitcoin has remained anonymous to this day. This is a fact that undoubtedly has remained an intrigue for many who have any kind of interest in cryptocurrency.
It is an idea that benefits from the intersection of multiple disciplines; philosophy, technology, politics, computing, and money just to mention a few. Suffice it to say that John Oliver was dead on the mark when he said, “Bitcoin is everything you don’t understand about money combined with everything you don’t understand about computers.”
Proponents of cryptocurrency will vehemently disagree but investing in crypto is delving into the deep black hole of the unknown.
It is a long and unnerving walk into a world where investment and gambling are one and the same. A cautionary point would be the fact that most people buy bitcoins because…well….other people are.
This is not to say that bitcoin is a scam. Far from it. It is however a speculative mania that the continent would do well to tread slowly around.
A major concern that policymakers on the continent have had is that bitcoin and other digital currencies can be used to further criminal activities, circumvent systemic regulations and interfere with the outflow of capital.
If the use of crypto such as bitcoin were to become widespread, monetary policies would be severely undermined risking financial instability in concerned countries.
Crypto as legal tender, as in the case of the CAR, is a huge gamble for any country on the continent.
Conventional or fiat currency primarily works on a trust system where a central bank is trusted to maintain the integrity of currency and not debase it.
History has however shown that this has not been the case. Cryptocurrencies were formed to provide a working alternative with the emphasis being on the working part. It was the trusted, trustless option if you like.
African governments have to start thinking about regulation. As a continent, Africa cannot in all honesty risk the potential financial burdens that come with a digital currency which operates on the greater fool theory.
The price turbulences that it frequently suffers as well as the environmental destruction it is leaving in its wake globally (crypto mining is a power guzzler) are a cause to pause and rethink.
If the recent collapse of FTX is anything to go by, regulating crypto in African countries and the protection of consumers is a matter that now requires urgent action as the digital currency continues to gain traction on the continent.
The shared fiction of cryptocurrencies which, granted, is benefitting several people on and off the continent, can lead to increased financial instability in Africa if not checked and strictly regulated.
Cover Photo By: David McBee/Pexels
