Developing countries are often mentioned as prime places where cryptocurrency could be used to make a difference and help restore ailing economies. Countries like Zimbabwe and Venezuela, whose currencies have been dogged by hyperinflation, and are also subject to authoritarian government rule, could see some value in using a cryptocurrency such as Bitcoin to improve the lives of their citizens.
Bitcoin, beyond being a speculative trading tool, is a tool for liberation. It enables individuals and communities to free themselves from tight regulations from totalitarian states that restrict economic activity.
In the Western world, with freedom of speech, safety, and high levels of wealth, it is relatively easy to free oneself from the banking system. Over the last 30 years, the banking system has evolved into a strict system of national and global regulations and surveillance.
In developed countries with higher wealth, good working banking systems, and inflation rates that are mostly controlled by central banks, a government’s rallying against bitcoin is usually motivated by fears of money laundering and terrorism. However, in developing countries with ailing economies, the modus operandi by the government to tame or control bitcoin may be to try and restrict any chance of financial freedom for its citizens.
Turning to crypto
When Zimbabwe’s inflation skyrocketed in 2015, forcing authorities to print $100 trillion notes, some citizens started turning to Bitcoin as a safety measure.
This practice is becoming more common in the face of this uncertain economic climate; people across the continent have started to transact in bitcoin as opposed to their local currencies, which are plagued with hyperinflation.
The good news for Bitcoin is that governments are simply powerless to regulate it. The Nigerian central bank, who were trying to combat a 12% inflation rate, announced that they could not regulate bitcoin, in the same way as no one could regulate or control the internet, because they have no ownership over it.
The real fear of a collapse in the banking industry in volatile African countries may lead citizens to be attracted to Bitcoin.
What problems could crypto and blockchain solve
Aside from the currency volatility that is rife among many developing economies, financial inclusion is a huge reason to consider Bitcoin. The World Bank suggests that many of the 1.7 billion people worldwide who do not have bank accounts are located in Africa.
In some ways, Africa may be better equipped for a move to crypto than we would think, with mobile money being a key driver in reducing the number of unbanked adults on the continent. Africa is home to all 8 countries where more than 1 in 5 adults solely rely on mobile-only accounts.
Blockchain is also showing a lot of promise for countries in Africa. Ledger technology like blockchain may be instrumental in solving longstanding developmental issues and unlocking much needed economic growth. Nigerian politicians believe that blockchain may drive the world’s fourth industrial revolution, and for the first time, Africa has a seat at the table. Fintech companies are growing substantially, including Cape Town, where the number of startups being established has risen by 23%, and Nairobi, which has seen a 28% lift in fintech startups.
There is also a hope that this technology may help bring about a dramatic improvement in infrastructure around the continent. In Nigeria, companies have been working together to see whether blockchain technology can be used in a push to make the nation’s roads safer, and Sierra Leone has been developing a blockchain-based ID system for its citizens in the hopes of enabling financial institutions to verify identities and build credit histories in ways that weren’t possible before.
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