How Crypto Can Enable Trade in Africa

Bitcoin is money. But its beauty is that it operates differently from the fiat money we know so well. While fiat is centralised and under the control of governing bodies like central banks, bitcoin came as a decentralised currency. That means a Bitcoin transaction does not require a middleman to be completed. And because of its decentralised nature, the Bitcoin network is cheaper than traditional alternatives. So you could send money anywhere in the world at a fraction of the cost that would be incurred if you were to use, say wire transfer.

In addition, and perhaps most importantly, bitcoin is digital. The implication of that in a world adjusting to the new reality while still trying hard to combat the spread of the virus is that businesses and trades could resume. Remember that this medium is cheaper, safer -- because of the transparency and encryption offered by the blockchain -- and now, borderless because you can move large amounts from one end of the earth to another in a matter of minutes or hours without contact.

This was the big break the world needed and bitcoin came as the saviour. Little wonder then why its adoption rate has skyrocketed over the last couple of months. We’ve seen institutional investors add it to their portfolios thus driving up the value of the favourite cryptocurrency. But that’s just half of the story.

The more practical use case of bitcoin is right here at home in Africa.

Cross-border payments and economic growth

The growth of fintech in Africa has been remarkable over the last couple of years as we’ve seen financial inclusion go up amongst the unbanked and underbanked. Beyond this, however, this growing industry has also attempted to tackle existing problems with cross-border payments in Africa.

Remittance has been a notable contributor to many African economies with 19 countries depending on remittances for 3% or more of their GDP and 6 countries for 10% or more as of 2017. And while the bulk of remittances are from overseas, a growing chunk is also happening within Africa. However, the same problem is experienced regardless. Using traditional banks and money transfer agents such as Money Gram and Western Union has continually proven to be too expensive with as much as 14% of the money being sent often going into fees in some cases.

However, with the growth of bitcoin which offers near-seamless and a cheaper alternative, a viable solution is finally available for the over 30 million Africans working abroad to send money home.

Read also: The Future of Blockchain Technology in Africa

Beyond that, with many African nations struggling economically even before COVID-19, the challenge has grown in the past few months so that a quick way to kickstart the economy is needed. Many leading institutions have noted inter-trade between nations as a good way to get many economies out of the red. Yet, with the absence of a single fiat currency and the need for regulations which have led to under par relations between countries, trading has been stifled. Now, with the presence of cryptocurrencies, nations and businesses can turn to a better and cheaper alternative to making payments and trading successfully.

For instance, El Salvador recently endorsed bitcoin as legal tender, which means it can be legally accepted within the country for any financial transaction the same way fiat would be accepted. This is expected to improve trade relations as well as business growth within the country. Similarly, Africa as a continent can benefit from the ease of use, security to funds and speed of transaction processing that bitcoin offers.

Read Also: The Future of Crypto in Africa

Leading the charge on this front in Africa is our cryptocurrency exchange, Yellow Card. With operations already in 9 countries, the crypto fintech has focused on both the informal market, providing financial inclusion for the underbanked and unbanked, as well as for anyone seeking a more efficient way to use money. In addition, it has been able to create an inter-country network within Africa that can facilitate cross-border trading and payment thus providing a way to boost the economies of struggling nations.

Start Trading With Bitcoin