The increasing use of cryptocurrency in Africa in the past few years not only shows that digital currency is now an important means of transferring funds across borders and people, but also that cryptocurrency is also an important means for financial exclusion to enter the global market.

Cryptocurrency is now a necessity

Despite continuous 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-seen or used as an alternative store of value-have become a necessity.

In addition to volatility, cryptocurrency provides users or holders with measures to control their wealth, which is not possible with legal currencies. In fact, in countries ravaged by inflation or countries with unstable currencies, cryptocurrency provides an escape route that they cannot use. 2008 global financial crisis.

As recently Report Research from Turkey has shown that when currencies rapidly depreciate in environments where ownership or access to alternative value stores such as gold are limited, residents will turn to cryptocurrencies.

For many people, sending funds across borders using cryptocurrency or cryptocurrency tracks has proven to be the most important and possibly the best use case to date. Few opponents of privately issued digital currencies would disagree with this assessment.In fact, cross-border remittance is More efficient When using cryptocurrency Ripple, Stellar or Bitcoin Cash is better than using traditional channels, whether formal or informal.

As Nigeria’s situation before the blockade of crypto entities in the banking ecosystem showed, Remittance based on cryptocurrency It is possible to go beyond conventional remittance channels. In addition to the speed at which funds are transferred, sending funds in the form of cryptocurrency means that Nigerian immigrants can bypass many intermediaries traditionally involved in cross-border transactions.

For senders, this means that the cost of sending money to their loved ones is much lower, while for recipients in Nigeria, cryptocurrency-not as easy to control or censor as legal tender-gives them the option to use the following Ways to convert funds into local Naira currency Market interest rate Rather than an overvalued official exchange. In fact, part of the reason was that the Central Bank of Nigeria (CBN) finally took action against crypto entities on February 5, 2021.

Of course, this behavior and CBN’s follow-up actions did not stifle the popularity of cryptocurrency in Nigeria as the authorities hoped.On the contrary, these restrictions have so far only successfully promoted Peer-to-peer Bitcoin transactions, As indicated by the useful tulip data for the past nine months. The failed regulatory actions of CBN and many other regulatory agencies in the world once again prove that regulation cannot prevent useful innovation.

Access to global financial markets

Perhaps the lesser-known but equally important use case of cryptocurrencies is the trading opportunities and access they provide to people in less developed countries. In fact, in many such regions, access to certain financial products is limited by various factors ranging from the size of a country’s financial system to GDP. In some cases, access to certain financial services actually depends on the relationship between less developed countries and their more developed counterparts.

If the relationship is cold, then access to the global financial system and related services is likely to be severely restricted.For example, Zimbabwean nationals who are interested in trading stocks on the New York Stock Exchange or buying goods on Amazon may not be able to do so directly because I do Sanctions.

However, using certain cryptocurrency platforms, the same Zimbabwean national can actually buy popular global stocks such as Tesla, Amazon, and Microsoft. In other words, through cryptocurrency, African traders can access some of the most liquid markets and the most profitable stocks. world.

In addition, in addition to using cryptocurrency to trade fiat stocks, traders on the African continent can also directly trade on many global cryptocurrency platforms 24 hours a day. They can and do have, Engaged Among many other forms of crypto trading, including betting, risky futures, and margin trading. All of this is possible because anyone can hold cryptocurrency, including those who are financially excluded.

Fighting encryption: a futile exercise

Therefore, although regulators may wish to stop or restrict the use of cryptocurrency, the reality is that cryptocurrency opens the door to many opportunities. Therefore, trying to prohibit the use or trading of cryptocurrency without offering something better or making the current financial system beneficial to everyone is likely to be futile.

This fact should be clear to African countries that have copied and pasted everything their Western counterparts have done so far to stop or restrict the use of cryptocurrencies. African central banks and regulators should also be aware that simply launching a central bank digital currency (CBDC) cannot restore people’s confidence in the currency.

Once a currency falls, to make people believe in it again, it is more than just giving it another name. Therefore, rather than trying to prevent people from using cryptocurrencies, smart regulators should regard the popularity of crypto assets as a measure of lack of confidence in the financial system. Understanding the popularity of cryptocurrencies in this way should help the African Central Bank to develop appropriate regulatory responses.

What are your thoughts on this story? Tell us what you think in the comments section below.

Terence Zinwara

Terence Zimwara is an award-winning journalist, writer and writer in Zimbabwe. He has written a large number of articles about the economic difficulties of some African countries and how digital currencies can provide a way out for Africans.