Here, according to Mrs. ‘Dedoyin Hassan-Hamzat, a Nigerian registered Fund /Portfolio Manager, are reasons for the current revolution in financial services system, and why cryptocurrency is the beginning of a subtle end of Central Banking System around the world. She spoke during the Platforms Africa e-Discourse. Excerpts:
What is cryptocurrency and why is it gradually turning the elementary definitions we were given about money into lies?
Cryptocurrency can be said to be a digital currency so we can call it a form of money.
We can argue that crypto is not money as it is ‘currently’ not a generally accepted medium of payment. All other characteristics of money have been satisfied by crypto.
You can use crypto currency to purchase goods and services though many of its users hold crypto portfolios as a store of wealth. People invest in Crypto like other financial assets: bonds, equities, precious stones and others.
To a layman, crypto currency is a type of currency that uses digital files (codes) as money. These files are created with the method of cryptography (the science of hiding information), which ensures that individuals information are encrypted. Crypto currency uses a decentralized control which means they are not controlled by one person or government.
I have put currently in quotes as time will tell if it will be generally accepted or not. This is because crypto is well accepted in the digital world now. Bitcoin has been around for 12years now.
Bitcoin is actually one of the types of cryptocurrency. It is the most recognised and highly associated with the cryptocurrency system. There are others such as: Ripple, Stellar, Litecoin, Bitcoin Cash, NEO, EOS, Ethereum, Cardano and so on.
The origin of Bitcoin can be traced to 2009 when an unknown person using the alias Satoshi Nakamoto created a ‘new currency’ to ensure transactions are completed without middlemen or banks.
He posted a paper called ‘Bitcoin – A Peer to Peer Electronic Cash System’ to a mailing list discussion on cryptography. This person’s real identity remains a mystery till date.
Can we have a brief understanding about how the bitcoins, which is uses in connection with crypto currency, came into existence?
The Bitcoin software was made available to the public for the first time and mining began in 2009. Mining here is the process through which new Bitcoins are created and transactions are recorded and verified on the blockchain.
Bitcoin was never traded at the beginning, only mined hence it was difficult to assign a monetary value to the units.
In 2010, someone decided to sell theirs for the first time – swapping 10,000 of them for two pizzas. By 2011, other rival bitcoins had emerged due to its popularity and the idea of decentralized and encrypted currencies.
These alternative cryptocurrencies are sometimes known as altcoin and generally try to improve on the original Bitcoin design by offering greater speed, anonymity or some other advantage. Amon… Bitcoin is the first decentralized cryptocurrency that uses the blockchain technology to facilitate peer to peer payment.
What is Blockchain?
This is a technology of what we can call ledger.. like record but encrypted.
Correct me if l am wrong, but why has cryptocurrency not been officially recongised as a unit of exchange by the apex bank of any nation?
Are we seeing the beginning of the end of Central Banking System around the world? What will he the implication of this for GDP and National wealth calculation for countries of the world?
The crypto market crept into the financial world and no country was prepared for the massive popularity it gained within a short term.
As of today, no active economy in the world can claim ignorance of the existence of the crypto market. The challenge is that there is no central system for the cryptocurrency activities such that it is difficult to be regulated.
The truth is cryptocurrency is a kind of revolution in the financial services system, removing any transactionary glitches
Central Banks all over the world wants to ensure stability of the financial system and also protect its integrity but cryptocurrency is designed to be fast and boundless.
Much of the interest in these unregulated currencies is to trade for profit with speculators atimes driving prices northwards.
No doubt cryptocurrency is more appealing to the generation that wants ease of transaction and high profit despite the high risks that comes with it. All you need is a smart device with internet access; then you become your own payment and money transfer system.
The closest to regulation that we have seen is cryptocurrency being classified as Digital Asset, Intagible Asset, Virtual Currency and so on but no government has been able to provide any statutory pro…
Are we seeing the beginning of the end of Central Banking System around the world?
What will be the implication of this for GDP and National wealth calculation for countries of the world?
It is a subtle end to it … Sad that the world is not ready… This is the reason why No Apex bank can formally accept it. The value of bitcoin changes regularly and quickly too. The value of a Bitcoin was at par with a USD in 2011. Example: if you buy or mine $100 in bitcoins, then trade them for $2000 because the value increased, you would have made $1900.
How does crypto currency work?
Crypto currency is a trade in digital asset! The coins!!! There is a digital exchange (trade) of coins at a quoted price. Since there is no centralised agent such as a central bank to supply currency or verify transaction, the distributed Blockchain acts as a ledger for all transactions in the history of Bitcoin.
That ledger allows a party to prove they own the coins they’re trying to sell and prevent double spending.
There are a number of platform where these trades are carried out. So your log in details is yours alone and no other person needs to know you. No need for KYC.
Next question is, some people have equated Cryptocurrency with gambling, is this true?
It is not the same. Cryptocurrency is speculating for gains on the prices of an asset (digital coins). So I own some bitcoins and watch the market then sell when I am okay with my gains. It sure have the capacity to do that.
Cryptocurrency is currently the 5th most used currency by value.
Can you move on with this question-What is the level of penetration and participation in cryptocurrency by Africans?
The pandemic also boosted the penetration of crypto-currency due to increase digitization of other spheres of our lives. The participation of Africans in the crypto currency system is huge given the high population of young people. In a 2020 study by Statistic Global Consumer Survey, 32% of Nigerian respondents said they have used or owned cryptocurrency.
This is the highest in the world with Asian countries – Vietnam and Philippines occupying 2nd and 3rd positions with 21% and 20% respectively.
The high cost of sending money across borders in the conventional way has made many young people to turn to cryptocurrency exchanges which tend to cater for overseas workers and their families.
Payments revolution in Africa has seen 60% of the world’s mobile money pass through Africa-based and led payments platforms. There seems to be a race to capture the African crypto market which has accompanied increased investment interest in cryptocurrencies.
The Twitter’s CEO- Jack Dorsey, recently announced he would be moving to Africa to explore the opportunities in crypto.
No doubt that cryptocurrency is attractive to virtual businesses and fintech companies.
It is VERY POSSIBLE and open to criminal activities. This is the actual fear that all financial authorities in the world have about the crypto industry.
And this is truly a genuine fear to be honest if we consider the way it operates and the anonymity of the exchanges and how they are ‘untraceable’. It is difficult to separate the genuine investors from the criminals who are looking for where to hide laundered money and also scam the virtual investors.
I agree with the CBN when in its 2017 Circular submitted that the cryptocurrency is open to abuse by criminals especially in money laundering and financing of terrorism (FT).
Comments by government officials across Africa show that they do not fully understand cryptocurrency. In Nigeria, for instance, the Central Bank has said it is studying the market after it had slammed a ban on it. What is your reaction to this?
I disagree that government and financial authorities do not fully understand the cryptocurrency system.
They are only trying to protect the financial system from the model of crypto that is not centralised. This makes regulations difficult or almost impossible. Unfortunately, the crypto industry is large and expanding; in fact is becoming more popular with the purported banking ban.
The crypto currency cannot be banned as it were, you can only shield your banking system from its exchanges. This is what Nigeria and many other countries have done. By this, there is a kind of caveat as the financial authority will not provide any kind of legal redress for a crypto investor if there is a platform crash. The crypto industry is becoming a revolution of the trading.
Several global businesses are being affected by cryptocurrencies. Tesla lost hundreds of thousands of dollars recently. Why does everyone appear to be going there and African government appears to be going away from there?
The truth is the crypto system is highly volatile and it poses lot of risk to any business. Even Tesla warned investors on the volatility of bitcoin’s price.
We have also seen how Tesla’s public endorsement of crypto has driven the market.
Having said that, the African government like every other government of the world wants stability of their financial system and they are not prepared to have such exposures to bitcoin an its attendant volatility.
Can cryptocurrency be the currency of the future?
I am afraid YES and the future is nearer than we could have imagined
Why do you think so, if Central Banks are very protective?
So, crypto is banned in Nigeria and Nigerians have continued to trade is it outside the banking industry.
So there protection continues for the traditional banks that these bitcoins traders are not interested in
What can Africa do? What should Africans know about a future with cryptocurrency?
While Africa slept, the cryptocurrency has penetrated and keeps gaining popularity amongst the young, old and also corporate organisations. The acceptance is massive and cannot be stopped.
Africa needs to be look at way of integrating the cryptocurrency into its banking regulations.
Cryptocurrency is legal is Zimbabwe and gaining ground in Uganda. We cannot ignore the digital money resolution.
The Nigerian SEC (Securities & Exchange Commission) announced last year of its intention to regulate DIGITAL ASEETS including cryptocurrency.
The Nigerian VP also shared some opinions on Twitter yesterday on the need to deepen the financial market and integrate the digital assets.
SEC also on February 11, 2021 states that it would partner with the CBN to analyse and better understand risks of crypto to ensure that appropriate regulations are put in place should it be allowed in the future.
Platforms Africa e-Discourse, is a weekly enlightenment programme organised by Platforms Africa, the leading e-Community of Intellectuals, policy moulders and opinion leaders in the continent created by Adeola Yusuf to fight misinformation. The event is moderated by Accra, Ghana-based veteran Journalist, Mr. Francis KOKUTSE
