Bitcoin for Africa, re-examined

I think that Nigerian (and in general, African) businesses, would benefit from having Bitcoin as an additional means of payment besides cash, credit cards, Interswitch, bank transfer, and so on. As a merchant, after you get a payment in Bitcoins, there are two things you can do with it:

Deposit it into a bank account. This is what many businesses do, to safeguard from the volatility of Bitcoin. Many third-party bitcoin payment processors make it easy to set up automatic close-of-business-day deposits.

Keep it as bitcoins. Going from the past year, it seems bitcoin is currently more of a cool thing to hold on to for speculation and varying levels of investment, than it is a safeguarded store of value. By this, I mean that if you have bitcoins in a bitcoin wallet or exchange, you are likely keeping it there (1) with the hope that it turns out to be a good investment, or (2) because there still is something about owning bitcoins that screams cool, alternative, and revolutionary, and you like that, or (3) as savings, to keep yourself from spending the amount invested. I think this differs from the fundamental reasons for keeping money in a current account or in a Paypal account, which is to make payments. There might be some more dedicated bitcoiners whose understanding of the currency has got to this level. But if it is a company’s money and not an individual’s, I think it better to deposit daily as explained above.

While I think a universally-recognized digital currency would be a facilitator of African integration into the global market, I do think that bitcoin in particular is a bit too far along for Africa-based speculators to gain much out of hopping on board now. Remember how bitcoins came into existence: people mined them on their computer servers. It used to be cheap to mine bitcoins. There are people with lots of bitcoins. Seeing that only a couple of African countries, South Africa and Ghana, have bitcoin exchanges, it can be safe to say that up to 99% of bitcoins are already not owned by individuals on the African continent. Yet to spend bitcoins, you have to own bitcoins.

So while it is ok for e-commerce and other businesses to adopt it as an additional means of payment, I don’t think that trying to get as much bitcoin as possible on the African continent will be the most optimal use of energy.

I don’t know the solution — should Africa create its own digital currency? Won’t that be a bit like the euro, where some countries start to do a lot of trade with one another due to a common currency, but the countries outside of that loop have a harder time joining in the fun? If there was such a digital currency (say it got up and running in Africa, and in ten years’ time, was responsible for 30% of online payments among African countries), would governments get involved and make it official? Should they?

I don’t know the answers to these questions. But I feel it is good to update you on where my thoughts are regarding Bitcoin and whether it should be just another form of payment (for merchants) and a cool investment for speculation (for individuals), or whether it should be a key player in the strategy to increase Africa’s involvement in global online trade.

Best,
Minku

PS if you would like to read the ways companies in Africa can start adopting Bitcoin, the article is here. Thanks!

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