Cryptocurrencies are gateway currencies for individuals in cash strapped economies, allowing individuals in Nations to access hard currency where it maybe scarce. One recent example of this is in Venezuela which announced its own state backed cryptocurrency to alleviate the problem of a lack of cash in the Nation which has significantly affected imports leading to a severe shortage of basic necessities such as food. However the most recent adaptation of cryptocurrencies, particularly the Bitcoin is taking place in Africa where millennials can’t get enough of the coin and a whole new economic system based around cash transfers has been created.
Africa’s Bitcoin Craze
As African economies develop at a relatively fast pace, they also face issues that rapidly developing but cash strapped economies face. From having the right financial infrastructure in place to being able to access foreign cash. This has created a whole new market sector, from facilitating international cash transfer, paying wages to investment. As cryptocurrencies address one major issue and that is international cash transfers which can take weeks or even months when using traditional forms of money transfer such as Banks and can be very expensive. Furthermore international bank transfer can also be extremely inconvenient as such facilities are available only in major cities or the capital. However with the use of the Bitcoin and other cryptocurrencies, international transfer are quick, convenient, cheap and potentially even profitable, it can also be done anywhere as long as there is internet access.
Bitcoin trading has surged by almost 15% in South Africa alone in a period of few months, this in turn has created a whole new economic sector revolving around cryptocurrencies and more importantly jobs in the impoverished continent. Bitcoin users in South Africa themselves have grown by almost 600%. This has led to jobs being created ranging from companies that deal in international money transfers such as Bitpesa which is a platform that uses the Bitcoin to facilitate international transfers which is a quicker and cheaper method of transferring money as the company uses USD to buy the Bitcoin itself and when money is sent abroad the receiver does not have to convert the cash which saves a lot of money in international transfers.
Bitcoin as a Safe Haven
In regions with economic and political insecurity is where the Bitcoin particularly thrives as it is out of the control of not only national politics but it is also not affected by national political problems and thrives in such environments as it is seen as a safe haven currency. As we have seen the Bitcoin rise in popularity and demand in countries such as Brazil, Czech republic and Zimbabwe in particular where there is vast amounts of political and economic uncertainty. In Zimbabwe the price of a Bitcoin can be a few thousand dollars higher than the price of a Bitcoin in countries such as the UK or United States where there is little or no political or economic uncertainty.
Zimbabwe is a key example that faced hyper-inflation with a single egg costing 50 billion Zimbabwean dollars at one point in time. Until 2015 when Zimbabwe has adopted the United States dollar. This in turn caused further economic problems as foreign currencies and reserves are scarce which means it is hard for individuals to get their hands on United States dollars. Which in turn has also fueled a Bitcoin boom in Zimbabwe, making it potentially the safest asset or way to store savings in the country.
To conclude the Bitcoin is not just a forms of investment anymore but it is also evolving in emerging markets are a way to facilitate transactions in a cheap, fast and convenient way in countries and places where economic infrastructure is weak. Furthermore Bitcoin provides a safe haven in countries with economic and financial turmoil as we saw in Venezuela and Zimbabwe where people lost their entire savings to hyperinflation which made their savings almost worthless.