Africa expects big things from Bitcoin in 2017
Africa expects big things from Bitcoin in 2017
2016 was a landmark year for Bitcoin in Africa. The currency, which shot past the US$900 mark in the last three days, as well as its underlying technology, Blockchain, has proven useful in several spheres - particularly for remittance.
Traditional money transfer service providers may face greater contention in the market in 2017. To transfer money from Europe to Nigeria using Western Union, for example, will incur a €6 charge at an exchange rate of €1=NGN383.55. In total €106=NGN38,355 at the receiving end. This rate reflects mostly what other service providers offer. However, with Bitcoin, sending an equivalent of €100 using Bitpesa in Kenya or BitX in South Africa, the exchange rate would be €100=0.115237 BTC. When sent (with charges included), NGN47,364 will be received in Nigeria between 10 and 15 minutes.
In 2017, alternative platforms are likely to emerge and existing offerings, such as ICE3x, Chankura, Zenithincome and Nairaex will improve or spread their operations to several African countries as the awareness increases.
Similar principles of cost-saving and ease apply to the burgeoning e-commerce sector. Several outlets including popular South African online marketplace, BidorBuy and the Nelson Mandela Children's Fund now accept Bitcoin. However, merchant adoption still lags.
Bitcoin regulation, which will be topical across Africa next year, will likely enable eCommerce sites like Jumia and Konga to openly express their interest in the digital currency without being seen to be contesting the view of governments in their respective countries of operation.
Some of these countries have openly criticised Bitcoin use, while others have maintained a wait-and-see approach.
When a known African journalist, Charles Onyango-Obbo, met with a fellow Ugandan who does some work with Barclays and they discussed the Bank's decisions to get out of Africa, the banker convinced him to take an interest in Blockchain and cryptocurrencies like Bitcoin.
Onyango-Obbo found - as noted in a piece - that Blockchain and cryptocurrencies "will allow us to do something ancient in new ways - to sleep with our money under the mattress" albeit in a digital form.
That was before the United Nations African Institute for the Prevention of Crime and the Treatment of Offenders (UNAFRI) released the outcome of its first round table discussion on policy, legal, ethical and socio-cultural issues surrounding the regulation of virtual currencies in Uganda.
The deliberation points to the fact that Uganda could be the first African country to regulate digital currencies as participants agreed to develop further guidance that would be informed by academic research, scholarship and data from the financial regulators to preserve financial stability and legal certainty before their next meeting in July 2017.
When achieved, regulation in Uganda may convince counterparts like Kenya to follow suit. Kenya has struggled with legalising Bitcoin since 2015, despite the country being home to some of the continent's most ardent users.
According to LocalBitcoins, the world's largest online trading marketplace for Bitcoin, recorded transactions in the digital currency in the East African country increased more than ten times in 2016.
This was supported by several events held in the country including the Coalition of Automated Legal Applications where experts like Ethereum lead developer Vitalik Buterin and a Bitcoin Core developer Peter Todd concluded that Blockchain technology was meant for Africa.
The massive inflow of more Nigerians into the Bitcoin market will greatly impact the price of the digital currency.
On Monday 21 November, the price of one Bitcoin rose to as high as US$1,250 in Nigeria according to BitX due to higher demand, while the average global price was US$740 at the time - except for India where the price had accrued an increase of between 10% and 20% (about US$890) due to the country's demonetisation process.
The surge came after a clamp down on several forex hoarders. Though the forex rate has dropped slightly currently, situations like this are likely to recur after most Nigerians visiting the country for the festive season return to their respective bases when there could be a shortage of foreign currencies in circulation.
If the Nigeria Deposit Insurance Commission (NDIC) and stakeholders like the Central Bank of Nigeria to review Bitcoin use and a formal regulation materialises, the digital currency will achieve some form of legitimacy - particularly with the alleged collapse of the MMM pyramid scheme in Nigeria.
South Africa ranks highest in Bitcoin use in Africa presently. A South African also heads the Bitcoin Foundation which contributes significantly to shaping the global perception of the currency.
Llew Claasen expects Bitcoin adoption to grow in the areas of savings, peer-to-peer payments and mobile PoS for informal vendors.
A 2014 forecast by a London School of Economics author Garrick Hileman had earlier positioned Nigeria and Zimbabwe among the top 10 of 178 countries with the highest relative potential for Bitcoin adoption. The author maintains their spots in 2016.
While several claims have been made that Bitcoin would suit Zimbabwe's needs considering its hyperinflation level, economist Philip Haslam, co-author of When Money Destroys Nations, reiterated Bitcoin as a potential solution to address Zimbabwe's ongoing currency woes.
Bitcoin-related activities have been going on in Zimbabwe and may see higher level of transactions in the coming year.