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Bitcoins are About to Reinvent Banking in Africa

By Aaron Mason on April 8, 2013


If you’ve been paying any attention at all to financial markets over the past several weeks there’s no way you’ve missed the Bitcoin: the unregulated, uncontrolled digital crypto-currency that’s risen over 600% in value in a month. Durable, portable, fungible and unique; the best way to understand exactly what they are is to watch Robert McNally’s slideshow Introduction to Bitcoin.

Speculations are swinging wildly, gold investors are hailing them as the only truly safe commodity, underground markets are starting to form.. Everyone has an opinion. But what does this mean for Africa?

To start with, it’s a completely new kind of digital currency that doesn’t come with the rules, regulation or history of your standard banking system. It doesn’t rely on any capital investment to use – no payment gateways or processing fees – just pure digital capitalism.

Shiny and new, Bitcoin immediately looks interesting considering the challenges facing payment systems across Africa. Reading through a Jenna Burrell’s post on some of the issues that Ghana is facing paints a decent picture. Blocked countries, unavailable credit cards… And solutions like M-PESA still have their challenges, with some users unable to use the service across borders.

Bitcoins, however, are uniquely portable. They are accepted around the world, instantly. BitInstant has opened 700,000 locations to buy Bitcoins across the US, Brazil and Russia. Adoption in China is spiking. BitcoinTrading.com has a list of several hundred online merchants that accept Bitcoins, and a man in Texas recently used them to purchase a Porsche. Currency exchange rates are widely posted.

Then there’s control. Bitcoins are not controlled by any company, bank or government. They cannot (yet) be duplicated. This places them squarely outside the hands of parties interested in manipulating their value. Much like gold they cannot simply be printed and they are not dependant on a single supplier. There are no international restrictions, no tracking methods, no reporting requirements. Even the issue of taxation is up for debate, as the coins are not legal tender or backed by anything tangible.

bitcoin-no-controlImage: bitcoinmagazine.com

This proves challenging as well, as control often comes with regulation. As a completely decentralized, unregulated currency there is no oversight or policy keeping the currency in balance… The wild peaks of the past few weeks have show just how volatile the currency can be, with some comparing the current spike to Holland’s tulip bubble in the 1630’s.

Then there’s the community. While some argue that Bitcoin could undermine the modern idea of statehood, others simply think that it could lead to a massive black market. Shady markets are full of shady merchants, leaving one to wonder how rational it is to base your living on a currency that is mainly used by people who don’t want to be tracked.

The MIT Technology Review ran an article just over a year ago detailing some of the advantages of Bitcoins in Africa, and Afrinnovator ran a similar piece earlier this month. MTR’s article ended with Tonny Omwansa, an academic at the University Of Nairobi, Kenya and author of a book on M-PESA remarking “Hardly anyone I know has heard about it.”

Well, now they have. The question is, how far will it go? Do the risks of instability and shady transactions outweigh the truly borderless economy this could bring into African communities? Will larger entities – multinationals, banks and governments – start to trust Bitcoins as actual tender? Would you?

Filed Under: Economic Development, Finance
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Aaron Mason is a technology and development expert with experience in design, analytics, ICT and disaster response. Follow him on Twitter: @Aaron_Mason
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16 Comments to “Bitcoins are About to Reinvent Banking in Africa”

  1. Aaron Mason says:

    Also interesting: the bar in New York that accepts Bitcoins and the guy who had $500k in bitcoins stolen. At today’s prices that heist would be worth $4.5M.

  2. Commenter says:

    Do you believe that a currency whose smallest unit is currently worth twice the average monthly salary of many Africans has the capability of revolutionizing anything in Africa? Or are you arguing that the sudden, global attention to bitcoins might spur a new wave of currency innovation and policy that might create a currency accessible to the global poor?

    • bitlizard says:

      Bitcoins are divisible to 0.00000001 so the smallest unit is just a tiny fraction of a penny and the transaction cost is practically zero.

    • Topher says:

      The smallest unit is a Satoshi. If you aren’t aware of that then it may be a good idea to learn something about Bitcoin before commenting like you do.

    • Randi says:

      Very ignorant comment. Bitcoins are divisible up to 8 decimal places. This can be changed in the future if necessary. Please do some research before posting.

  3. Adesoji says:

    I like your perspective about Bitcoin but I don’t really think it’s a good thing we should get to use in Africa. We need a currency that can be controlled. Bitcoin is not really a currency.

    You can check out this post that shows why bitcoin is a ponzi scheme – http://makemoneyonlineng.com/top-posts-bitcoin/

    • dgel says:

      I understand why you consider it a ponzi scheme, but I don’t agree with it for one simple reason:

      The way bitcoin is distributed is the only reasonable way to start a cryptocurrency. Anything else would be much more arbitrary.

      Furthermore, regarding the example you gave in your video of being right about the first collapse of bitcoin price: bitcoin sure did stay worthless for long, didn’t it? /s
      For bitcoin to be a ponzi scheme, people need to not be able to get their original wealth out. However, as you probably know, bitcoin might just as well keep its price steady, and bitcoins can be exchanged for goods and services, you know, like a normal currency. If you’re into bitcoin for the ‘returns on your investment’, then you’re looking at it wrong: it’s supposed to be used as money, not as an investment.

      • Adesoji says:


        Thanks. No one can really say what the future of bitcoin will be BUT we would keep ourselves safer if we analyze it based on it’s past and present.

        I agree that it can be a medium of exchange. Afterall, eanything can be a medium of exchange as long as there is a value attached to the thing.

        I’m sure you know that the (hidden) owners started bitcoin for the returns on investment’? – exchanging ordinary coins for dollars!

  4. ignorant says:

    @Adesoji: I advise you to read the white paper, before you comment such silly things. Here’s the link:


    Fiat will enslaves you. Bitcoin sets you free. 😉

  5. I am not sure that the apparent ‘success’ of Bitcoin is particularly good. In recent years, money systems based on fractional reserve banking have been tested and found wanting. Such currencies have tended to get devalued over time, and Bitcoin seems to be heading in the other direction, a result of its ‘formula’ for Bitcoin creation and the resulting scarcity. A good money should not be a place where speculators can play and distort everything.

    If money is to be an efficient ‘medium of exchange’ it should neither be too abundant nor too scarce, and its size should not change with time. I argue that the amount of money should be based on the amount of need and the amount of available (natural) resource that is available to satisfy need. As I understand it, this is radically different from the way quantity of money is determined in the prevailing money system, and different again from what is done in the Bitcoin realm.

    • Aaron Mason says:

      It’s hard to gauge the success of a currency in decades, much less years… It’s impossible in months. Would I want to pe paid in Bitcoins instead of dollars? Definitely not – unless the markup was high enough to negate the risk of the price crashing on my way to the exchange – for dollars.

      Bitcoins are incredibly unstable. They’re uncontrolled. They’re Beanie Babies, Tulips and Tickle-Me Elmo all rolled into one, except that if the bubble crashes you don’t even get something nice to look at. Just 34 characters.

      What they are doing, is rocking people’s idea of what a currency is, and I think that’s where their real strength lies. Perhaps they’re just a beta release of currency 3.0, but they’re disruptive. They question processes, taxation, access… Even if all they do is show us that our current model is better, they’re stirring up the pot a bit.

      Whether or not they’re here to stay only time will tell. But we’ll definitely learn from them.

  6. Aaron Mason says:

    Also, they’re up – way up – over $200 today: http://bitcoinprices.com/

  7. Wayan Vota says:

    I think I agree with Ethan Zuckerman’s tweet:

    Just what Africans need: another currency whose value fluctuates unpredictably.

  8. Photonfrog says:

    How often does any African currenciy fluctuate upwards by more than zero percent per year?

  9. Aaron Mason says:

    If downwards fluctuations are the norm, then the Bitcoin will feel just like home:

  10. mkulaji says:

    I would stay away from BitCoin given the high levels of volatility. Most people in Africa don’t earn enough to one day wake up and find that all their Bitcoin is worth nothing! By the way for more discussion on this piece, see: http://afritech.com/item?id=3412