It's a revolution for my business. All it took was my smartphone and local government-issued ID and I was able to set up an account with Binance in minutes. Remarkable " Badou’s story reflects a growing wave in The Gambia, where cryptocurrencies are increasingly been seen as a path to financial freedom.
The Global Context
The world of finance has undergone a seismic shift in the past decade, driven by the rapid rise of cryptocurrencies. From India to South Africa, people are embracing these digital assets as alternatives to traditional financial systems. What began as a tech novelty has evolved into a trillion-dollar industry challenging established norms. From Bitcoin to a vast array of other cryptocurrencies, investors worldwide are using them for everything from software purchases to real estate deals, venturing even into controversial territories.
Africa's Embrace
Africa has become a hotbed for cryptocurrency adoption, with countries like Nigeria, Kenya, Ghana, and South Africa leading the charge. According to ChainAnalysis, Sub-Saharan Africa boasts an average monthly transaction volume exceeding US$117 billion, a testament to the region's burgeoning interest in decentralized finance. Nigeria currently holds the second-place ranking on the Global Crypto Adoption Index and leads the region in raw transaction volume. Other high-ranking African nations include Kenya (21st), Ghana (29th), and South Africa (31st).
In April 2022, the Central African Republic (CAR) adopted Bitcoin as legal tender, becoming the second nation in history to do so. It reversed this decision a year later due to the nation's challenging economic conditions, skepticism surrounding its motives, limited access to technology, and unfulfilled peripheral promises. Meanwhile in The Gambia, where traditional banking infrastructure faces limitations, cryptocurrencies present a novel avenue for financial inclusion and innovation.
The Debate Rages On
Cryptocurrency advocates see them as a disruptive force, wresting control of money creation and management from centralized institutions like central banks and Wall Street. However, critics raise concerns about their potential facilitation of criminal activity, support for illicit organizations, exacerbation of inequality, market volatility, and the environmental cost of energy-intensive mining. This ongoing debate has resulted in a patchwork of regulations around the world. Some jurisdictions welcome cryptocurrencies, while others impose bans or restrictions.
Understanding Cryptocurrencies
Cryptocurrencies derive their name from cryptography, the science that secures them. These virtual coins are typically exchanged on decentralized networks using digital wallets. Transactions are recorded on tamper-proof ledgers known as blockchains. Bitcoin, launched in 2009 by the enigmatic Satoshi Nakamoto, is the most prominent cryptocurrency, boasting a market capitalization surpassing US$1 trillion. Other notable players include Ethereum, known for its innovative smart contract capabilities. Users send funds between digital wallets, with transactions recorded in blocks and verified across the network.
While blockchains offer a degree of anonymity, transactions can still be traced if the wallet owner's identity is known. Cryptocurrency mining, crucial for transaction validation, involves solving complex mathematical problems, typically through mechanisms like Proof of Work (PoW) or Proof of Stake (PoS).
The Allure of Crypto
Once a niche phenomenon, cryptocurrencies have surged in popularity and value. Bitcoin's price skyrocketed to a record-breaking US$73,000 in intraday trading (approximately D5 million Gambian Dalasi) in March 2024, surpassing its previous high by a significant margin. "After US$70,000 is breached, the next natural target is US$100,000 and, if history rhymes, we could see bitcoin testing the US$200,000 to US$300,000 range throughout 2025, when—as we’ve seen in the past—another correction will be triggered and will lead to, hopefully, a higher price than where we are today," Samir Kerbage, chief investment officer at Hashdex
On the supply side, Ethiopia has tapped into opportunities presented by crypto mining operations and data centers, coupling them with renewable power plants to address power needs and generate revenue. In February 2024, Ethiopian Investment Holdings (EIH) initially said that a memorandum of understanding (MoU) for a US$250 million project had been signed with a subsidiary of Hong Kong-based West Data Group.
Why Crypto?
The appeal of cryptocurrencies lies in their decentralized nature. They enable fast, anonymous, and cross-border transactions without the hurdles associated with traditional banking. They function as investment tools, offering the potential for high returns and acting as a hedge against inflation. Additionally, they hold particular value in countries with weak currencies and have spurred the creation of stablecoins, which offer more stable value transfers.
Challenges and Regulations
Governments grapple with the challenges posed by cryptocurrencies, including their use in criminal activities, the environmental impact of mining, market volatility, and the lack of robust regulatory frameworks. Regulatory responses vary significantly across the globe, with some countries embracing cryptocurrencies and others imposing restrictions or bans.
Clarity Breeds Growth
However, clear regulations, particularly in countries like South Africa and Kenya, have fostered crypto activity and growth. Local exchanges in these regions have even outpaced international ones in terms of growth.
China and Russia have teamed up to create a payment system based on bitcoin's blockchain technology as an alternative to existing USD-denominated systems —with one respected economist warning it could be "more dangerous for American hegemony than nuclear weapons."
Gambian Possibilities and Prospective Outlook
Cryptocurrencies have gained traction in Africa in recent years, although adoption levels vary across the continent. Growing interest is evident among individuals, businesses, investors, and governments, especially in regions with limited access to traditional banking infrastructure.
Perhaps digital finance could also be a means for the Gambia government to achieve its ambitious goals of Universal Electricity Access and Formal Financial Inclusion of 70% of adults by 2025. Who knows. However, what is certain, is that a growing number of Gambian entrepreneurs like Badou see cryptocurrencies as a tool for financial inclusion, facilitating participation in the global economy, enabling faster and cheaper cross-border remittances, and ultimately wealth creation as cryptocurrency prices climb to new heights.
