Cryptocurrency: Africa’s Golden Trade Ticket
Consisting entirely of emerging markets, the vast African continent faces many challenges financially. However, the emergence of cryptocurrencies has the potential to empower Africa and allow the continent as a whole to rise above its economic challenges and thrive, particularly in terms of global trade but also at the individual level.
The most popular cryptocurrencies available at the moment include Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP). Countries like Zimbabwe, Kenya, Nigeria, Botswana, South Africa and Ghana already have significant levels of adoption, although they are still very low. Regardless of the cryptocurrency or the network chosen, what is clear is that blockchain technology has the potential to economically liberate Africa and provide the ingredients for a quantum leap forward in terms of economic growth and activity.
What is Cryptocurrency?
A cryptocurrency is a digital asset that is designed to work as a medium of exchange and uses strong cryptography to secure financial transactions, control the creation of additional units and verify the transfer of assets. They are usually fully decentralized, meaning that no single entity or group has control over the network and transactions are facilitated on the network using distributed ledger technology, typically a blockchain. This is an open distributed ledger that can record transactions between two parties in an efficient, permanent and verifiable way. Basically, it’s transparent and fair.
For a better understanding of about cryptocurrency, see here.
An Opportunity for Trade in Africa
The nature and design of cryptocurrencies makes them “borderless”, meaning that they are not bound by international borders. This makes them an ideal vehicle for the settlement of international trade payments.
Presently, most African economies face severe challenges in terms of international trade. There are many reasons for this including lack of infrastructure, high costs, frequent shortages of US Dollars or other foreign currencies, corruption, economic, political and security instability and other issues. Further, traditional international payment settlement systems such as SWIFT often tend to unintentionally discriminate against the emerging markets that most need access to them.
Cryptocurrencies and blockchain powered decentralized payment networks offer a way around all of this and can provide even the most modest tradesman with an efficient, secure, reliable and quick method of settling international payments.
How Euro Exim Bank is Leading this Transformation
Through our partnership with RippleNet, Euro Exim Bank is able to settle cross border transactions using the cryptocurrency Ripple (XRP), which is cheaper than traditional international wire transfers and much faster; virtually instantaneous vs. 3-5 business days. Settling trade transactions via RippleNet is highly beneficial and attractive to emerging markets because of increased accessibility and reduced transaction costs along with an established payment ecosystem and a holistic payments process that allows for the embedding of trade finance and other messages within the transaction payload itself.
To learn more about how RippleNet works and how Euro Exim Group is using the technology to transform global payments, please see here.
Not Just Global Trade
In emerging economies such as those in Africa, cryptocurrencies are providing a way for anyone to access the financial system. There is almost no barrier to entry except internet access and an internet capable device, both of which are now widely available. Cryptocurrencies allow individuals and businesses even within a single country, let alone across borders, to bypass corrupt and unfair systems that are expensive and often discriminate against the smallest and weakest participants.
Blockchain technology also allows for the implementation and use of smart contracts, which are computer protocols intended to digitally facilitate, verify and enforce the negotiation or performance of a contract between two parties, without the requirement for a third party to enforce it; they are also trackable and traceable. However, this technology is not yet widely adopted and is still in its early stages. But the potential for economic liberation and the fuelling of international trade is clear for all to see.
A Final Word
The internet revolution broke down information barriers and levelled the playing field in the information economy. The advent of cryptocurrencies can be seen as an extension to that revolution, breaking down financial barriers for entry and levelling the playing field in the financial economy and democratizing finance globally. Once cryptocurrencies enjoy widespread adoption, each individual and business will truly be in control of their financial destiny and we at Euro Exim Bank are actively contributing towards facilitating this transformation.