Bitcoin is booming in Africa, and Senegal is no exception. The country of the Teranga lions is one of the African leaders in bitcoin and cryptocurrencies in general. But why such interest from Senegal for bitcoin? What is the role of Bitcoin in Senegal’s economy? Read the rest of this article to find out.
Bitcoin is a virtual currency created in 2009 by one or more hackers under the pseudonym of Satoshi Nakamoto. Unlike other currencies, Bitcoin does not have a central bank behind it that distributes fresh money, but is fundamentally based on two principles: a network of nodes, i.e. PCs, which manage in a distributed manner and the use of strong cryptography to validate and secure transactions.
The peer-to-peer structure of the Bitcoin network and the lack of a central body make it impossible for any authority, governmental or otherwise, to block transfers, seize bitcoins without possession of the corresponding keys, or devalue due to the entry of currency news. This cryptocurrency therefore poses national sovereignty issues for countries around the world, as it is beyond the control of local governments. Moreover, the impossibility of tracing transactions has made it the currency of choice for criminals of all kinds.
What is the role of bitcoin in Senegal’s economy? Senegal hosts a large number of bitcoin miners. Miners are people who offer computing capacity to the Bitcoin network in exchange for remuneration in bitcoins. The country has recently seen the emergence of many bitcoin buying and selling platforms. Online casinos allowing to play with this cryptocurrency have also appeared.
Many young Senegalese have also taken up bitcoin trading. They buy and sell this cryptocurrency on trading platforms in order to make a profit. We have even witnessed success stories of young Senegalese who have become rich thanks to this cryptocurrency.
Bitcoin is also used by Senegalese immigrants to send money home. Unlike official money transfer structures, money transfers through the bitcoin network are cheaper. Using the bitcoin network is also very convenient, since it is not subject to any restrictions.
Despite the large volumes of bitcoins that are traded on the Senegalese market, it should be noted that bitcoin does not benefit the official economy and the Senegalese state derives nothing from bitcoin transactions that it can neither supervise nor tax.
Bitcoin and other cryptocurrencies are unregulated in many countries, and their legal status is unclear. Which means there is no safety cushion. There is also no insurance in case of loss of funds. A large number of users depend on informal moneychangers to exchange local currencies for bitcoins, and vice versa. Prices are volatile, and buying and selling is a complex process that requires technical knowledge. In 2018, the Nigerian central bank warned that cryptocurrencies were not legal tender and investors lacked protection.
Senegal is one of the African countries where cryptocurrencies are the most emulated. At the end of 2016, it was announced that Senegal was developing a national digital currency, called eCFA. This cryptocurrency was to work in conjunction with the CFA franc which is the official currency of the country. The initiative came from the union of the Banque Régionale des Marchés and the start-up eCurrency Mint Limited. The latter had developed the cryptocurrency in accordance with the regulations established by the Central Bank of West African States (BCEAO).
The eCFA did not have the expected success, but it shows the Senegalese government’s desire to control the cryptocurrency phenomenon. As highlighted above, bitcoin and other cryptocurrencies are beyond the control of central banks and states. States cannot even tax transactions, which constitutes a great loss for them.
In 2020, Senegal seemed to be one of the only African countries still geared towards adopting a traditional cryptocurrency. This is largely thanks to singer Akon, who announced the development of a 2000 acre town in Senegal. Worth billion, Akon City’s big attraction is that it will have its own digital currency for commerce and business. Her name will be Akoin.
What makes this token unique is that unlike previous e-money projects, akoin is based on blockchain technology. It does not try to imitate the region’s existing fiat currency. Instead, it will function as a utility-based parallel token.
Monthly cryptocurrency transfers under ,000, typically made by small businesses and individuals, grew in Africa by more than 55% year-on-year, reaching 6 million in June 2020, according to data from Chainalysis. an American company specializing in the investigation of blockchains.
The number of monthly transfers also increased by 50%, surpassing 600,700, according to Chainalysis. Much of the activity took place in Nigeria, the continent’s strongest economy, as well as South Africa and Kenya. This represents a 180 degree turnaround for bitcoin. Although it was born a decade ago as a payment tool, it was used mainly for speculation and by financial agents, not for trading.
Bitcoin users surveyed say cryptocurrency helps people make their businesses more nimble and profitable. Why this boom in Africa? The bitcoin boom in Senegal and other African countries is due to the following factors: