Why Won’t Zambia Embrace Cryptocurrency?

There is seldom a spot on the planet where the term cryptocurrency won’t be met with a knowing response. The alternative to traditional financial systems has taken off exponentially since Bitcoin’s inception in 2009 and its slow burn from unknown and untrusted to a viable solution to international finance.

The bandwagon for the alternative currency based on the blockchain functionality is continuing to grow, with Ethereum and Ripple following in Bitcoin’s footsteps and showing through smart contracts more possible uses for the blockchain technology. Since the middle of the 20th century, economists have been searching for a way to make international cross-border trade easier, often with suggestions for all-encompassing currencies (Keynes’ bancor, for example, and the euro). But with cryptocurrency looking to take that mantle, why are some countries, like Zambia, sceptical about cryptocurrency?

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Why Won’t Zambia Embrace Cryptocurrency?

In October, the Zambian Central Bank announced that cryptocurrencies weren’t considered legal tender and that businesses that traded in cryptocurrency are at risk of putting themselves in a difficult position should the market collapse. The scepticism from the Central Bank comes from similar banking cautions throughout the world who are anxious about the unregulated nature of cryptocurrency that seeks to replace one of the functions of the banking intermediary. Cryptocurrency is legal in Zambia, so the Bank of Zambia’s warning can only be that, and may fall on deaf ears given the previous warning not to panic over the state of the kwacha. Those who critique the Bank’s position cite the fact that the digital currency market is out of the bank’s domain and it shouldn’t be interfering without a mandate, which it will likely never get. The Bank issued a warning about potential cybercrime and the increase in nefarious activities that cryptocurrency could allow – but as the crypto giants profess, the blockchain based finance makes it safer and more secure. The Zambian SEC (Securities and Exchange Commission) claimed that due to the peer-to-peer nature of how Zambians trade crypto, it cannot be classed as a security or a commodity based on the wording of the existing laws. Some merely think that the bank is desperate that people are moving away from the existing currency in Zambia, the kwacha, which was recalibrated in 2012 and has been in free fall, with September 2018 seeing the value descend to 11.025 against the USD.

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Where Else Have They Embraced Cryptocurrency?

Despite officials in Zambia having concerns, elsewhere, uptake for Bitcoin and cryptocurrency in general has been strong and healthy. Ripple looks to be replacing SWIFT payments for some banks due to the ease and security that the faster payment method affords. Its credibility is especially increased due to the partnerships with PNC Banks and Santander. Forward-thinking institutions are also suspecting a rise in crypto as a legitimate form of currency, according to Betway, who claim that land-based casinos could end up allowing punters to use Bitcoin as a payment method in the same way that certain online casinos already do. There are also moves to bring investment to footballers through blockchain technology, the underlying focus of cryptocurrency. The technology will be used to revolutionize talent acquisition in the sport. Elsewhere, the Queensland towns of Agnes Water and 1770 have become some of the world’s first digital currency towns, accepting crypto as a payment method across the board. Partnering with Australian startup TravelByBit, the towns hope to increase the flow of tourism by offering digital currency as an option, which could also show others exactly how the cryptocurrency may work in such a fashion and exactly why they should end up adopting it. With legitimate areas of interest rising in cryptocurrency, it helps to give credibility to the fact that cryptocurrency could definitely be a staple in the future.

What are the Benefits of Cryptocurrency?

Despite concerns about the supposed volatility of the cryptocurrency market – which could be said about many other commodities in such tense political times – there are a myriad of reasons why cryptocurrency could end up benefitting the world’s population. Cryptocurrencies are unique and payments cannot be intercepted for fraud, which will save a considerable amount of money that is spent on fraud protection and give peace of mind to a lot of people. Blockchain also invokes smart contracts, which can sometimes bypass lengthy procedures that require notaries, such as buying a property, as the blockchain can smooth the whole system. Cryptocurrency is susceptible to lower fees than traditional financial alternatives, especially when it comes to trading across borders. Some even claim that crypto is more accessible than actual money, as more people have access to an internet connection than a bank account, so could help those who have no access to traditional means of payment. One of the major benefits of cryptocurrency is the fact that there is no external interference and the cryptocurrency can work at a global level, which would balance the playing field tremendously.

The stand-off between banks in Zambia and an eagerly crypto-focussed population comes essentially from panic at what would become of the native currency and whether the economy will be harmed and other economies benefit from this. This may be a legitimate concern, but cryptocurrency can actually work in Zambia’s favour, and potentially increase the value of the kwacha, depending on how officials work to bolster the growing cryptocurrency market. Zambia may be an unsuspecting world stage for the rise in cryptocurrency, but there is potential to grow as a nation, albeit a digital one.