An African Perspective on Why the World Needs Cryptocurrencies – Op-Ed – Crypto News
The increasing use of cryptocurrencies in Africa in recent years has not only shown that digital currencies are now an important means of moving funds across borders and between people, but that cryptocurrencies are also an important means of accessing the financially marginalized to global markets.
Cryptocurrency is now a necessity
Despite ongoing efforts by regulators to restrict the use or trading of cryptocurrencies, the number of users of such digital assets continues to grow. As some studies have repeatedly shown, cryptocurrencies like Bitcoin, viewed or used as an alternative store of value, have become a necessity.
Aside from their volatility, cryptocurrencies offer users or holders some level of control over their wealth that they cannot do with fiat currencies. In fact, in countries that have been hit by inflation or unstable currencies, cryptocurrencies offer an escape route that keeps them safe from the 2008 global financial crisis.
Like New Reports from Turkey have shown that residents will switch to crypto if a currency quickly depreciates in an environment where possession or access to alternative stores of value such as gold is restricted.
For many, using cryptocurrencies or cryptocurrency rails to send funds across borders has proven to be the most important and perhaps even the best use case to date. Very few opponents of privately issued digital currencies will contradict the assessment. Indeed, sending funds across borders is more efficient when using cryptos like XRP, Stellar or Bitcoin Cash as the use of traditional channels, both formal and informal.
As the situation in Nigeria before the blockade of crypto units from the banking ecosystem has shown, Cryptocurrency-based transfers have the potential to outperform the regular channels for sending money. In addition to fast money transfers, sending money in the form of cryptocurrencies has enabled Nigerian migrants to bypass the many intermediaries traditionally involved in cross-border transactions.
For senders, this meant a much lower cost of sending funds to loved ones, while for recipients in Nigeria, cryptocurrencies – which cannot be controlled or censored as easily as fiat money – gave them the ability to send funds using the Stock market price instead of the overvalued official stock market. In fact, it was in part that led the Central Bank of Nigeria (CBN) to finally crack down on crypto companies on February 5, 2021.
Of course, this act and subsequent moves by the CBN did not destroy the popularity of cryptocurrencies in Nigeria as the authorities had hoped. Rather, the restrictions have so far only been conducive Peer-to-Peer Bitcoin TradingAs the data from Useful Tulips for the past nine months suggests. This failure of the regulatory action of the CBN and many other regulators worldwide proves once again that a meaningful innovation cannot be stopped by regulation.
Access to the global financial markets
Perhaps the less discussed but equally important use case of cryptocurrencies is the trading opportunity and access they provide to people in less developed countries. Indeed, in many of these regions, access to certain financial products is restricted by factors ranging from the size of a country’s financial system to its GDP. In certain cases, access to certain financial services actually depends on the relationship between a less developed country and its more developed counterparts.
In frosty relationships, the chances are good that access to the global financial system and related services will be severely restricted. For example, a Zimbabwean citizen interested in trading stocks on the New York Stock Exchange or buying goods on Amazon may be prevented from doing so directly because OFAC Sanctions.
However, with certain cryptocurrency platforms, the same Zimbabwean national can actually buy hot global stocks like Tesla, Amazon, Microsoft, etc. In other words, traders from Africa are exposed to some of the most liquid markets and profitable stocks in the world through cryptocurrencies.
In addition to using cryptocurrencies to trade fiat stocks, traders in the African continent can also trade directly 24 hours a day on many global cryptocurrency platforms. You can and indeed have engaged in many other forms of crypto trading, including staking, risky futures, and margin trading. All of this is possible because cryptocurrencies can be held by anyone, including those who are financially excluded.
Fighting Crypto: An Exercise in Futility
As much as regulators want to stop or restrict the use of cryptocurrencies, the reality is that crypto has opened the door to many possibilities. Therefore, trying to ban the use or trading of cryptocurrencies without offering anything better or making the current financial system beneficial to all is likely a pointless exercise.
This fact should be clear to African countries that have so far copied and pasted everything their western counterparts have done to stop or restrict the use of cryptocurrencies. It should also be clear to African central banks and regulators that the introduction of a central bank digital currency (CBDC) alone will not restore confidence in a currency.
As soon as a currency falls, it takes a lot more than just giving it another name for the people to believe in it again. Therefore, rather than trying to discourage people from using cryptocurrencies, a shrewd regulator should look at the popularity of crypto assets as a measure of the lack of confidence in a financial system. Such an understanding of the popularity of cryptocurrencies should help African central banks find the appropriate regulatory response.
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Source: Crypto News Austria