Currently, 350 million people in Sub-Saharan Africa do not have a bank account. As a monetary technology which has the potential to improve businesses and commerce, Bitcoin can provide solutions to this. Bitcoin can remedy issues for individuals, and help connect them with businesses.
WHAT IS BITCOIN?
Bitcoin is often described as a ‘digital’ or ‘crypto’ currency. This means that it is completely virtual (not physically existing). Anyone can purchase bitcoins and then store them in a ‘digital wallet’ which is accessed via a smartphone. When money is transferred, the record is kept in something called a blockchain (a public list of digital information).
ADVANTAGES FOR AFRICAN BUSINESSES
Small businesses and startups have found many advantages in using Bitcoin. Twiga Foods, a Kenyan startup, relies on Bitcoin because it allows the company to buy food directly from suppliers. Previously they had to travel and bargain at local markets. The company has been able to save money and time by buying digitally.
Other businesses that connect individuals and businesses across Africa and the world are finding that Bitcoin helps get around issues with trading currencies with traditional banks. Bitpesa is a currency and foreign exchange company that uses Bitcoin as a means to facilitate exchange. It serves 6,000 customers and was useful in 2017 when the Nigerian government limited access to the US dollar. People were able to transfer money across borders through Bitcoin, instead of trying to exchange the Naira into US Dollars directly.
PROBLEMS AND RISKS
Journalists and commentators have noted that there are many disadvantages for businesses and consumers when using Bitcoin. This is because digital currency is difficult to regulate, and no government has found a proper solution for making sure it is safe for consumers and businesses. The governor of the central bank of Kenya has equated them to Ponzi schemes (a scheme in which people invest for a profit and convince others to invest more money) because of the way in which some investors have been tricked into investing on the promise of greater return, only to have people lose all of their money.
In addition, Bitcoin’s value (how much it is worth, determined by demand for the currency) fluctuates significantly. This has led to people losing money in a very short space of time. One trader in Kampala lost $900 just two hours after earning a profit of $200. Furthermore, Bitcoin relies upon the participation of businesses in order to flourish. Many have pointed to the fact that the number of businesses accepting Bitcoin is still relatively small. Such fears would have to be resolved before others commit.
Overall, businesses and consumers could benefit from using Bitcoin. Despite certain fears, the technology has much to offer by solving traditional issues arising from conducting business and dealing with banks. This gives small and larger businesses greater independence and allows them to expand their services.