By
Bena Ilyas
April 25th, 2024
About 80% of all cross-border payments from African banks are processed offshore.
Since the flagship cryptocurrency Bitcoin, was launched in 2008, it has been subject to contempt from most parts of the world. Governments struggle to accept this new form of money that has all the makings of a get-rich-quick scheme, while many think its complexity means that it would only be useful for the tech-savvy. To date, there are still concerns about bad actors using Bitcoin to launder their ill-gotten gains and cover their tracks. Whereas, the volatility of crypto assets is another problem that never goes away. Despite all the uncertainties around its concept, however, Bitcoin remains the most potentially disruptive and transformative alternative to the existing financial system in Africa.
Bitcoin Is Set to Bring Financial Inclusion, Other Benefits to Africa
According to CNBC, Africa has an $86 billion banking system. However, the system could do even more with the help of Bitcoin. The cryptocurrency would help onboard the unbanked African people to the financial system. More so, since the vast majority of the African population is unbanked. While most people, especially those in remote and rural areas, have limited access to commercial banks, digital banking options are not even a better alternative. That is not to mention the endless hyperinflation and capital controls by African governments.
Presently, most national currencies in Africa are no longer safe stores of value. International sanctions also contribute to the strain, ensuring that Africa is disconnected from the global economy. Given this, a virtual currency such as Bitcoin which requires no intermediary to approve transactions may just be the continent’s saving grace.
Part of the systemic issues that plague Africa’s banking sector also stems from its quasi-colonial payment structure. About 80% of all cross-border payments from African banks are processed offshore. That is certainly more expensive and would take a longer time to process such transactions.
Another major issue with Africa’s banking system is interoperability. The interoperability issue has caused the entire banking system of Africa to nearly crumble, says Ray Youssef, CEO of Paxful. To further drive home his point in that regard, Youssef said partly to CNBC:
“Two thousand payment networks and only 2% of them talk to each other. That number continues to grow. It’s not getting better, it’s actually getting worse.”
In light of the major issues with the African banking system, Bitcoin may well be poised to save the day. By allowing citizens to send and receive digital payments between one another, high-cost intermediaries are eliminated.