Bitcoins are About to Reinvent Banking in Africa

bitcoins
If you’ve been paying any attention at all to financial markets over the past several weeks there’s no way you’ve missed the Bitcoin: the unregulated, uncontrolled digital crypto-currency that’s risen over 600% in value in a month. Durable, portable, fungible and unique; the best way to understand exactly what they are is to watch Robert McNally’s slideshow Introduction to Bitcoin.
Speculations are swinging wildly, gold investors are hailing them as the only truly safe commodity, underground markets are starting to form.. Everyone has an opinion. But what does this mean for Africa?
To start with, it’s a completely new kind of digital currency that doesn’t come with the rules, regulation or history of your standard banking system. It doesn’t rely on any capital investment to use – no payment gateways or processing fees – just pure digital capitalism.
Shiny and new, Bitcoin immediately looks interesting considering the challenges facing payment systems across Africa. Reading through a Jenna Burrell’s post on some of the issues that Ghana is facing paints a decent picture. Blocked countries, unavailable credit cards… And solutions like M-PESA still have their challenges, with some users unable to use the service across borders.
Bitcoins, however, are uniquely portable. They are accepted around the world, instantly. BitInstant has opened 700,000 locations to buy Bitcoins across the US, Brazil and Russia. Adoption in China is spiking. BitcoinTrading.com has a list of several hundred online merchants that accept Bitcoins, and a man in Texas recently used them to purchase a Porsche. Currency exchange rates are widely posted.
Then there’s control. Bitcoins are not controlled by any company, bank or government. They cannot (yet) be duplicated. This places them squarely outside the hands of parties interested in manipulating their value. Much like gold they cannot simply be printed and they are not dependant on a single supplier. There are no international restrictions, no tracking methods, no reporting requirements. Even the issue of taxation is up for debate, as the coins are not legal tender or backed by anything tangible.
bitcoin-no-controlImage: bitcoinmagazine.com
This proves challenging as well, as control often comes with regulation. As a completely decentralized, unregulated currency there is no oversight or policy keeping the currency in balance… The wild peaks of the past few weeks have show just how volatile the currency can be, with some comparing the current spike to Holland’s tulip bubble in the 1630′s.
Then there’s the community. While some argue that Bitcoin could undermine the modern idea of statehood, others simply think that it could lead to a massive black market. Shady markets are full of shady merchants, leaving one to wonder how rational it is to base your living on a currency that is mainly used by people who don’t want to be tracked.
The MIT Technology Review ran an article just over a year ago detailing some of the advantages of Bitcoins in Africa, and Afrinnovator ran a similar piece earlier this month. MTR’s article ended with Tonny Omwansa, an academic at the University Of Nairobi, Kenya and author of a book on M-PESA remarking “Hardly anyone I know has heard about it.”
Well, now they have. The question is, how far will it go? Do the risks of instability and shady transactions outweigh the truly borderless economy this could bring into African communities? Will larger entities – multinationals, banks and governments - start to trust Bitcoins as actual tender? Would you?