CBK and other Monetary Authorities In Africa Are Sitting On A ‘Time Bomb’ Called CryptoCurrency
The mention of the name cryptocurrency is often met with slight sneers may be the impression that it is just a fantasy and a bubble that will burst soon. Most people think Bitcoin not knowing that since its launch a decade ago, many variants of the currency have since been launched, an indication that cryptocurrencies are here to stay.
Currencies being a big part of what defines a state and the power within, Central Banks across continents have a hard time integrating cryptocurrencies into the market owing to the fact that they cannot control its volatility. This means that the unpredictable movement of exchange rates in the global foreign exchange market might affect legal tender leaving the monetary authorities powerless.
In April 2018, CBK Governor Patrick Njoroge issue a bank circular to all banks warning them on the risks of dealing digital currencies saying that any transactions with institutions that are engaging in virtual currencies will be punished within the law. You see the main issue here is the fact that CBK would not have any say for lack of currency centralisation.
“There are risks associated with cryptocurrency particularly on consumer protection, fraud, hacking and loss of data and they are prone to be used as pyramid schemes,” stated the CBK governor, Patrick Njoroge. Centralisation of currencies is however important and trade and economies wouldn’t be the same without these authorities. They would be chaos. However, the innovation of digital currencies too cannot be ignored by sticking to old books.
Amid all the excitement around cryptocurrencies and the active fight by authorities to ban the virtual currency, it is important to note that digital innovation will only spread further across borders. Considering Asia is currently leading the way in crypto adoption, governments will either have to join the party, or get consumed by currency dynamism.
There are many types of cryptocurrencies with some even performing better than the space’s pioneer, Bitcoin. Litecoin, Ethereum, Zcash, Ripple, Monero are just some of the top cryptos currently building their chain at a high rate. Bitcoin currently leading in token value, the market capitalisation is more than $125 billion while Ethereum’s market cap goes up to $50 billion. While we recognise the downside of having cryptos as legal tender, It is important for monetary authorities to peer into the future and begin to make the hard decisions as one. Africa seems to have the stuck up authorities and the fact that the continent contains 54 countries, different currency regulations have made it a bit hard for cryptocurrencies to penetrate markets.
The suggestion by World bank that Central banks come up with their own cryptos will beat the sense of innovating decentralised currencies. If each country has its own cryptocurrency, it will be the same as having current legal tenders that set countries apart when it comes to ForEX.
Since cryptos will scrap existing exchange rates, offer cheaper transaction charges, this will mean easier international trades and most of all liberation from ‘controlled’ monies. I do not see cryptos taking over current legal tenders, but the liquidity of currency will be on an all-time high since the ease of doing business will not be encountered by simple hindrances such as variant current values.
For example, if either M-Pesa or Paypal decides to hold your money due to hitches either from their side or regulatory issues, what they call flagging an account, you will have to work around getting back your money by following whatever process it is set to free your coins. Cryptocurrencies, on the other hand, let you own a private ‘key’ and another public key that makes up your cryptocurrency address. Then it means your account is not owned by any entity and in this case no one is ‘keeping’ your money for you.
If anyone loses their cryptos, it is because they lost their key or your host in this case a web-based wallet has lost the cryptos. The introduction of the digital currency will also allow the financial inclusion of billions of individuals globally with access to the internet and smart devices but do not have access to the traditional exchange.