Africa & Bitcoin: A Case Study
Bitcoin is being used to buy groceries in Africa. Which is strange because I've been told it's only used for money laundering. Also, Nigeria is going cashless... hmm.
Nigeria has been in the news a lot lately and for good reason. It was the first country in Africa to launch a central bank digital currency. It essentially banned crypto in 2021. Turns out the Nigerians didn’t really care for the crypto-antagonistic rule so they decided it didn’t matter. If this story sounds familiar it’s because it was the inspiration for In the End, We’re All Criminals.
“less than 0.5% of Nigerians are using the eNaira even though doing so on certain services offers a 5% discount. Is it because Nigerians don’t understand cryptocurrency rails? Nope. According to some estimates more than half of Nigeria is using crypto each month”
In that post, I made the point that Nigerian crypto adoption in spite of the Nigerian government condemning its use was proof positive that people really are ultimately in control of how this crypto experiment is going to go.
Shortly after I wrote that piece, I’m talking literally days, the Nigerian government flipped on crypto and was set to pass a bill that would allow capital investment in the space. Beautiful! An inspiring story, legitimately. We got another financial-news nugget out of Nigeria again yesterday… phasing out cash.
From Bloomberg:
Nigeria will ban cash withdrawals from government accounts from March 1 to tackle illicit activity and push toward a cashless economy.
Of course getting rid of cash is all about the ‘illicit activity.’ But wait, I thought only crypto was used for crime? You’re telling me the preferred instrument for crime has been fiat all along?
Certainly going cashless is all about stopping crime. I’m sure it has nothing to do with controlling the populace financially through forced CBDC use. To be fair, there is actually some credence to the idea that cash can lead to crime. Since paper cash is in physical form, large quantities of it in a single unsecure place leaves the holder of that cash susceptible to a robbery. According to Lowers & Associates, there were nearly two dozen domestic armored truck robbery attempts last year in the US alone:
Of course the removal of cash entirely is not good either because that means people are reliant on the banking industry to store a fiat currency that has a centrally controlled supply - as we’ve witnessed the last two year, massive growth in currency supply generally leads to higher consumer prices when there is infinite money chasing finite goods. This inflation problem that is finally showing up in the domestic data is something that people in other parts of the world have been dealing with for a long time. Turkey, Zimbabwe, and Venezuela have all gone through hyperinflations within the last 15 years. And I’m probably even forgetting some examples.
“Bitcoin Fixes This”
Don’t laugh, it actually does. After analyzing and writing about Bitcoin over the last several years, I’ve seen a variety of different objections to BTC and to crypto more broadly; the spectrum of criticisms range from ‘reasonable’ (some of which I absolutely agree with) to ‘preposterously low value.’ Skewing more to a low value critique is the idea that Bitcoin doesn’t solve a problem. It absolutely does. It’s just not a problem that people who regularly use dollars or euros generally deal with. Max DeMarco is an independent filmmaker and Bitcoin advocate who just released his short film The Silent Bitcoin Revolution of Africa yesterday:
Africa is one of the most interesting case studies for Bitcoin because it is not a continent that has the best electricity grid infrastructure and it has a high level of unbanked citizens. Despite lacking internet connectivity at the kind of scale that is enjoyed elsewhere, Africans are making Bitcoin work anyway because it is in their interest to do so for a variety of different reasons. Among those reasons; high levels of cash do actually increase crime - Africans who aren’t banked have cash hoards and are targets of honeypot raids.
Of course, holding digital fiat has problems as well as and we’ve seen what can happen in places like Canada when governments decide to weaponize the banking system. Despite the horrid arguments against Bitcoin by someone like Michael Shellenberger, governments should not have a monopoly on money. For many people in Africa, this is already well understood. And Bitcoin is actually highly useful. The video above shows how they are using Bitcoin’s secondary Lightning Network layer to buy groceries.
Lightning allows Bitcoin to be swapped for less than a penny per transaction. It’s currently cumbersome to use and needs serious UI help, but there are protocols like Strike that are attempting to do exactly that. Despite the drawdown in price per coin, Bitcoin’s Lightning Network capacity has grown to over 5,200 coins - while that’s certainly not an earthshattering number given the 19.2 million coins in circulation, it’s a start.
Price is price. It can go down or it can go up. At this point in time, Bitcoin offers a way to quickly pay for goods and services without the need for cash, banks, or credit cards. In it’s most basic form, Bitcoin is a digital asset that is not somebody else’s liability. It can not be controlled by any one central bank, government or corporate body. There is quite a bit to like about it if you fear the kind of financial censorship that cashless, CBDC economies will enable.
Disclaimer: I’m not an investment advisor. I share what I personally do and why I do it. I’ve been managing my own investments since 2014. I have good years and bad years. Fortunately more good than bad so far. I personally hold Bitcoin and advocate for the adoption of crypto rails, crypto coins, and privacy-preserving public blockchain technology.
Hopefully, more Canadians will embrace the value of Cryptocurrency, particularly since the country was over-regulated during the pandemic. It's scope should be recognized beyond war-mongering countries ;-)