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What Role Can Bitcoin And Other Cryptocurrencies Play In The AfCFTA?

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Bitcoin and cryptocurrency role in AfCFTA


The African Continental Trade Free Area (AfCFTA), which is projected to swing into action this year, is set to be a game-changer in the affairs of African trade, and even global trade. With the creation of a single market in the continent and uniting 54 African nations, via restriction-free trade and commercial activities, the free-trade area is the largest in the world, in terms of the number of participating countries, since the formation of the World Trade Organization.


At the core of international trade, such as the AfCFTA, lies the dire need for efficient financial systems. Existing traditional financial systems are good for the task, but are still largely deficient. The wide scope of the AfCFTA increases the dependence of its success on a more robust financial system that can cater for such a large-scale international trade system as the AfCFTA. This opens up an avenue for cryptocurrencies to play a vital role in the facilitation of the single-market vision of the African Union (AU).

In previous years, African nations have clamoured for the creation of a single currency within the continent and geographical regions within the continent. As far back as 2003, a single currency, eco, was planned to be introduced into West Africa, by ECOWAS leaders. In similar vein, the African Monetary Union is another of such attempt at creating a unified monetary system, with the aim of creating a new unified currency in Africa, which is similar to the euro.

One of the central ideas behind the creation of a single currency is to facilitate cross-border trade. Considering that the AfCFTA expands the horizon of cross-border trade in Africa, one may begin to ponder if this is not the right time to create a unified currency for the continent, to ensure the success of the free-trade area. However, this is just a slice of the financial challenges that would need to be effectively addressed to ensure the success of the AfCFTA.

Quite interestingly, cryptocurrencies could be the hero of the scene here. Instead of having to deal with different currencies with different exchange rates in the course of trade engagements between the 54 participating countries of the AfCFTA, cryptocurrencies could be used as a universal payment medium. With a cryptocurrency like Bitcoin or simply a stablecoin backed by a basket of African currencies. All participating members can trade with anyone, from anywhere, with just a single currency. With the existence of cryptocurrencies, it would no longer be necessary to create a unified currency to facilitate cross-border trade for the AfCFTA.

Beyond the enablement of transactions in the same currency, cryptocurrencies would also make trade transactions occur almost instantaneously, as opposed to the reliance on traditional banking systems for making payments, which would take days for transactions to be completed due to institutional friction within the financial system. This is possible because cryptocurrencies would eliminate the need for intermediaries in the process, which majorly cause international transactions to take long periods to get processed.

In addition to the speed of financial transactions after the successful trading of goods and services between the participants of the free-trade area, with cryptocurrencies, cross-border transactions would also be completed at a much cheaper rate than alternative traditional financial systems.

Considering that a large percentage of Africans are still unbanked, and many of these unbanked Africans would be major participants in the new free-trade system, cryptocurrencies would also present the most suitable alternative for them to access the financial tools and services that they would require to complete the financial transactions that accompany the exchange of their goods and services within the free-trade area. Right in their pocket, cryptocurrencies can provide them access to a bank and all the financial services that they would be needing, to enable inclusive participation in the AfCFTA.

The security and detailed record of transactions, which are key features of cryptocurrencies, would also play integral roles in making the cross-border trade between the 54 Africans more efficient. The blockchains generated from cryptocurrency transactions create secure records that can be easily traced and validated. Utilizing blockchain supported by cryptocurrencies, it would be possible to track trade transactions and the complex logistics that would be involved in the transportation of goods from one country to another. This would ensure transparency in the trade process and also make the process more efficient.

The AfCFTA would provide a wonderful opportunity to showcase the immense potential of cryptocurrencies. Integrating cryptocurrencies into the financial systems that would support the AfCFTA is critical to unlocking more than what we think is currently possible with the AfCFTA. Bitcoin and cryptocurrencies, in general, could be the game-changers for the AfCFTA.

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Kehinde is a driven human who is passionate about leveraging technology to transform the future of humanity and the way we all live. His interest lies in constantly getting valuable information and being part of a mission that seeks to create a transformative radical shift.

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  1. Caxton

    10 January 2021 at 11:44 AM

    These insights are what we need.We as African continent need to fast track the initiative and handle challenges as they occur.Nothing is impossible.

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Crypto Assets

Crypto prices drop as global market fear increases

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Top cryptocurrency prices have fallen amidst a drop in stocks and fears over China’s Evergrande debt crisis. In the last 24hour, Bitcoin dropped from $47,772 to $42,630 shedding about 8.58%. this is the lowest in price since another bull run began on Sept 5 after the April crash.

El- Salvador’s President, Nayib Bukele sees the fall as an opportunity to invest more. Recall that the country adopted Bitcoin as a legal tender on September 7. Despite the adoption, the price of Bitcoin has fallen by almost 14% since then.

Other coins have experienced dramatic crashes within the last 24hours. Solana, a coin that has experienced 355% growth within the last 3 months fell from $162 to $130 shedding about 11.39% within the last 24hours. Solana’s fall may be categorized by the 17-hour outage which the founder, Anatoly Yakovenko said was caused by bots “flooding the networks”

Ethereum fell by 9.37% while Dogecoin and Axie Infinity fell by 11.22% and 14.14% respectively within the last 24hrs hours. While crypto experiences dark Monday, El-Salvador keeps investing more money in Bitcoin.

A look at the global market

The global market is experiencing fear due to the Evergrande debt crisis. A report published by the University of Michigan shows that consumer’s sentiment is beginning to decline. This trend alone may impact the crypto market as well.

On the other hand, the global market downturn must have been spurred by the Evergrande debt crisis. The company grew to be one of China’s biggest companies by borrowing more than $300bn. Last year, Beijing made rules to control the debt owed by big real estate developers. This led Evergrande to offer its properties at major discounts to raise more money to keep the business afloat. Right now, the company is struggling to meet the interest on payment of debts.

Why would it matter if Evergrande fails?

The collapse of the multi-million dollars company would affect the global market; including the crypto market. Many people bought properties from Evergrande and they expect to make gains. If Evergrande falls, crypto investors will be forced to withdraw more money to keep their business running without the means to invest more. When one business fails, the other gets affected indirectly. This also applies to other firms that do businesses with Evergrande.

The potential impact on China’s financial system is another effect of Evergrande’s fall. In his statement to BBC, Mattie Berkink, the Economist Intelligence Unit (EIU), said that “the financial fallout would be far-reaching. Evergrande reportedly owes money to around 171 domestic banks 121 other financial firms” if the company fails, other lenders or businesses may be forced to lend less. Thereby leading to a credit crunch- a situation where companies struggle to borrow money.

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Bitcoin in Africa

The rise of CBDC in African economies

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Many nations have taken cues from the world of crypto and its resounding successes over the last decade. In order to avoid getting left behind, governments worldwide are increasingly turning their attention towards implementing some form of digital currency, a CBDC which in full is Central Bank Digital Currency. Although inspired by cryptocurrencies, CBDC’s are quite different from traditional crypto platforms. The main differences are that CBDC’s are unlikely to be decentralized, the supply of this currency regulated by the host’s country’s central bank as the CBDC is designed to operate as a sovereign legal tender, the digitized form of the host country’s fiat currency. Thus, a central bank may issue digitized tokens of its currency of which their value is pegged to the fiat currency of the nation in question, making CBDC’s stablecoins.

Africa has seen a rise in the use of cryptocurrencies and it’s still pushing frontiers in this sector. Although the use of crypto in many African nations is becoming more and more pervasive by the day, the tone of governments in many of these countries toward the sector is cautious at best and threatening at worst. However, a few nations have voiced interests in creating digitized versions of their legal tender to function as a CBDC. Amongst these are Ghana, Nigeria, Morocco, Kenya and Tunisia.

Many of these projects are still in the research phase or developmental phase however. A good example is Ghana’s proposed CBDC, the E-cedi being developed in partnership with German company, Giesecke + Devrient. Nigeria’s CBDC project, the eNaira has been announced and according to Nigeria’s central bank, this CBDC will be launched sometime in 2021. To that end, the CBN has partnered with fintech company, Bitt Inc. to serve as the technical partner in the eNaira’s development. Reportedly, the CBN had made the decision to digitize the Nigerian Naira in 2017.

While the pursuance of digital currencies in African nations is a welcome development, implementation of these schemes isn’t without challenges. Chief among the issues countries in Africa face would be the already existing financial service inequality and poor penetration of internet access in the continent. These challenges must be tackled in order to allow for mainstream adoption of CBDCs and the subsequent provision of financial inclusion. The benefits largely depend on the peculiarities of the nation deploying them. For instance, a digital currency is thought to help Nigeria increase foreign remittances, it’s second largest source of forex after oil. Whatever the outcome of these projects, it is becoming apparent that CBDC’s have come to stay.

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Bitcoin trades above $51k ahead of El Salvador’s adoption

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Bitcoin growth

Bitcoin price has rallied above $51,000 ahead of El Salvador’s adoption. The immediate surge in price may be due to the social media campaign that everyone should buy sats of Bitcoin to support El Salvador’s plan to make the coin a legal tender or it may be due to the news of El Salvador’s adoption of the coin as a legal tender on September 7. Users of social media platforms like Twitter and Reddit are discussing how they will buy Bitcoin of $30 each to mark the new El Salvador Bitcoin law.

The surge in Bitcoin’s price began in the last 24hrs with the price rallying around $51,955 with a 3.37% increase. This is an all-time high after the April crash that brought the price of Bitcoin from $64k down to $28k. The move by El Salvador to be the first country that accepts Bitcoin as a legal tender and the social media campaign that leads to a surge in price ahead September 7 are a repetition of events that occurred late last year and early this year with regards to institutional investors and how the price of Bitcoin skyrocketed.

El Salvador, a country in Central America, has been preparing heavily to adopt Bitcoin by installing ATMs to allow citizens to convert the token into US dollars. Last week, the country’s Legislative Assembly passed a law to allow for the creation of a $150m Trust to support the conversion of Bitcoins to US dollars.

To promote the use of Bitcoin, the government states that it will give the adult population of El Salvador $30 in Bitcoin once they download “Chivo” the wallet issued by the government. This was confirmed by the Finance Minister, Alejandro Zelaya.

What this means for Bitcoin investors

Apart from the adoption by Salvadorians, on-chain analytics show that Bitcoin is in high demand. The fourth halving that occurred will make Bitcoin become a scarce token in the nearest future. Thereby increasing the price sporadically.

With El Salvador’s interest in Bitcoin, other countries are likely to follow suit- Panama is considering following El Salvador’s lead. History will repeat itself as this development will serve as another crypto rout that occurred early this year when Tesla and MicroStrategy announced their support for Bitcoin.

El Salvador’s new law allows the use of Bitcoin as a legal tender it can be used to buy goods, pay for taxes and bank loans. This means more demand for Bitcoin, with the fourth halving that occurred, it means less supply. A common rule of economics for demand and supply will apply. Prices are projected to keep rising. At the time of writing this report, Bitcoin is trading at $51,839 with a projection of $52k before the end of today and higher tomorrow when Salvadorians begin to use the token.

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