igital currencies are becoming increasingly popular in Africa. On the continent, private cryptocurrency providers are on the rise, and even Central Banks are ensuring that they do not fall behind by investigating new ways to produce and own virtual money within secure ecosystems.
As the demand for digital currency rises dramatically across Africa, a number of African Governments are considering launching their own virtual money, backed and issued by their Central Banks.
Six African countries are among the 81 countries in the race to transform global finance, according to a Central Bank Digital Currency tracker published by the Atlantic Council, a think-tank in the United States of America.
Nigeria, which has been experimenting with the idea of a digital naira for the past two years, is currently leading the continent, according to the tracker. With that option, the country might establish a pilot program for its citizens by the end of 2021.
Nigeria’s Central Bank has stated that the country wants to increase the effectiveness of overseas remittances, which are the country’s second largest source of foreign currency after oil. It is possible that a digital money can help.
Central banks in Africa are considering launching digital currencies.
Ghana, Tunisia, Morocco, Madagascar, and Kenya along with five other African nations, are still doing study.
Following the commencement of a Fintech regulatory and innovation live testing pilot, Ghana is considering permitting a digital currency trial. From the beginning of the new year, the pilot will prioritize projects that use blockchain technology. E-Cedi is the name given to Ghana’s digital money.
Tunisia is looking into methods to improve the e-Dinar, a blockchain-based digital version of the Tunisian Dinar that has been in circulation for the past five years through the Government’s Post Office.
The Moroccan Central Bank has organized an exploratory group to assess the benefits and cons of a regulated digital currency ecosystem to the Moroccan economy, following a four-year prohibition.
The Central Bank of Madagascar has begun a two-phase initiative to investigate the creation of a digital currency known as e-Ariary, which will include analysis, design, and experimentation prior to deployment.
The “emergence of private cryptocurrencies” has prompted interest in a regulated digital ecosystem in Kenya, with the Country’s Central Bank announcing that it has begun talks with international actors about Central Bank digital currencies.
A major driver for digital currencies is the high cost of sending remittances to Africa
The high cost of bringing cash home from abroad, which is a vital stimulus for development and social uplift, has also emerged as a major driver of virtual currency adoption on the continent.
In its 2020 Geography of Cryptocurrency Report, blockchain data provider Chainalysis found that Africa outperforms the rest of the globe in terms of small-scale cryptocurrency transfers under $10,000. A large element of it is the requirement for remittances. In June 2020, Africa had a 29 percent retail bitcoin volume share, compared to less than 20% in Latin America and other developing regions.
According to the publication, “roughly $3.7 billion worth of bitcoin was transferred to and from abroad addresses to ones situated in Africa over the time period studied,” with $562 million of that coming in small payments under $10,000.
According to the World Bank research, most people pay between nine and fifteen percent in transaction costs to send home remittances of less than $200, compared to a global average of 6.8%.
Tanzania, South Africa, and Egypt are among the countries that are looking into the best options and techniques for implementing a regulated framework.
Tanzania has formed a team to work on President Samia Suluhu’s directive to the Central Bank of the country to “prepare for cryptocurrencies.” The group’s mission is to “advise the government on policy, law, and guidelines for optimal technology use.”
The Egyptian Central Bank has enabled banks to create electronic currencies, subject to its supervision, under the ‘Regulations Governing Provision of Payment Orders via Mobile Phones.’ Each coin in the mobile payment service must equal one Egyptian pound.
“E-Money unit refers to electronic units with a monetary value of one Egyptian pound apiece. These must be issued by a bank registered in the Arab Republic of Egypt and supervised by the Egyptian Central Bank,” it stated.
The South African Reserve Bank (SARB) is conducting a feasibility study to assess the benefits and drawbacks of a Central Bank Digital Currency (CBDC).
According to Bison Trails, a blockchain infrastructure platform, 80 percent of Central Banks around the world are looking into use cases for Central Bank Digital Currencies (CBDCs), with 40 percent currently running proof-of-concept projects.
Even as governments work to create a secure digital currency ecosystem, more people across the continent are turning to private-sector cryptocurrencies.
For example, Luno, a cryptocurrency corporation established in the United Kingdom, reports that Africa accounts for 4.7 million of its 7 million global subscribers, up from 2.3 million in 2020.