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What Role Can Bitcoin And Other Cryptocurrencies Play In The AfCFTA?

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Bitcoin and cryptocurrency role in AfCFTA


The African Continental Trade Free Area (AfCFTA), which is projected to swing into action this year, is set to be a game-changer in the affairs of African trade, and even global trade. With the creation of a single market in the continent and uniting 54 African nations, via restriction-free trade and commercial activities, the free-trade area is the largest in the world, in terms of the number of participating countries, since the formation of the World Trade Organization.


At the core of international trade, such as the AfCFTA, lies the dire need for efficient financial systems. Existing traditional financial systems are good for the task, but are still largely deficient. The wide scope of the AfCFTA increases the dependence of its success on a more robust financial system that can cater for such a large-scale international trade system as the AfCFTA. This opens up an avenue for cryptocurrencies to play a vital role in the facilitation of the single-market vision of the African Union (AU).

In previous years, African nations have clamoured for the creation of a single currency within the continent and geographical regions within the continent. As far back as 2003, a single currency, eco, was planned to be introduced into West Africa, by ECOWAS leaders. In similar vein, the African Monetary Union is another of such attempt at creating a unified monetary system, with the aim of creating a new unified currency in Africa, which is similar to the euro.

One of the central ideas behind the creation of a single currency is to facilitate cross-border trade. Considering that the AfCFTA expands the horizon of cross-border trade in Africa, one may begin to ponder if this is not the right time to create a unified currency for the continent, to ensure the success of the free-trade area. However, this is just a slice of the financial challenges that would need to be effectively addressed to ensure the success of the AfCFTA.

Quite interestingly, cryptocurrencies could be the hero of the scene here. Instead of having to deal with different currencies with different exchange rates in the course of trade engagements between the 54 participating countries of the AfCFTA, cryptocurrencies could be used as a universal payment medium. With a cryptocurrency like Bitcoin or simply a stablecoin backed by a basket of African currencies. All participating members can trade with anyone, from anywhere, with just a single currency. With the existence of cryptocurrencies, it would no longer be necessary to create a unified currency to facilitate cross-border trade for the AfCFTA.

Beyond the enablement of transactions in the same currency, cryptocurrencies would also make trade transactions occur almost instantaneously, as opposed to the reliance on traditional banking systems for making payments, which would take days for transactions to be completed due to institutional friction within the financial system. This is possible because cryptocurrencies would eliminate the need for intermediaries in the process, which majorly cause international transactions to take long periods to get processed.

In addition to the speed of financial transactions after the successful trading of goods and services between the participants of the free-trade area, with cryptocurrencies, cross-border transactions would also be completed at a much cheaper rate than alternative traditional financial systems.

Considering that a large percentage of Africans are still unbanked, and many of these unbanked Africans would be major participants in the new free-trade system, cryptocurrencies would also present the most suitable alternative for them to access the financial tools and services that they would require to complete the financial transactions that accompany the exchange of their goods and services within the free-trade area. Right in their pocket, cryptocurrencies can provide them access to a bank and all the financial services that they would be needing, to enable inclusive participation in the AfCFTA.

The security and detailed record of transactions, which are key features of cryptocurrencies, would also play integral roles in making the cross-border trade between the 54 Africans more efficient. The blockchains generated from cryptocurrency transactions create secure records that can be easily traced and validated. Utilizing blockchain supported by cryptocurrencies, it would be possible to track trade transactions and the complex logistics that would be involved in the transportation of goods from one country to another. This would ensure transparency in the trade process and also make the process more efficient.

The AfCFTA would provide a wonderful opportunity to showcase the immense potential of cryptocurrencies. Integrating cryptocurrencies into the financial systems that would support the AfCFTA is critical to unlocking more than what we think is currently possible with the AfCFTA. Bitcoin and cryptocurrencies, in general, could be the game-changers for the AfCFTA.

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Kehinde is a driven human who is passionate about leveraging technology to transform the future of humanity and the way we all live. His interest lies in constantly getting valuable information and being part of a mission that seeks to create a transformative radical shift.

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  1. Caxton

    10 January 2021 at 11:44 AM

    These insights are what we need.We as African continent need to fast track the initiative and handle challenges as they occur.Nothing is impossible.

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Nigeria’s Central Bank Digital Currency e-Naira Gain Traction

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eNaira

According to Governor Godwin Emefiele, the Central Bank of Nigeria’s (CBN) digital currency, the eNaira, which was officially revealed on Monday, has garnered immense interest and a positive response from both within and beyond Nigeria, with 33 banks fully integrated on the platform. The CBN has successfully minted $500 million, with N200 million going to financial institutions, according to Emefiele, who spoke at President Buhari’s historic launch in Abuja.

In addition, over 2,000 clients have been added to the eNaira platform, and over 120 merchants have successfully enrolled. Since its launch, the eNaira website has had approximately 2.5 million daily views. Customers who download the eNaira Speed Wallet App will be able to complete the onboarding process and build their wallet, locate their eNaira wallet from their bank account, transfer eNaira from one wallet to another, and make payments at registered merchant locations.

In terms of maintaining a robust payment system, the Central Bank of Nigeria (CBN) feels that the eNaira will make a big difference to Nigeria and Nigerians. The eNaira will also lower the cost of processing currency, allowing for more direct and transparent welfare interventions for citizens, as well as increased revenue and tax collection, easier diaspora remittances, lower the cost of financial transactions, and improved payment efficiency.

Governor Godwin Emefiele outlined these advantages during the historic debut in Abuja, saying that Nigeria’s Central Bank Digital Currency (CBDC) is the first in Africa and a digital version of the actual Naira. 

What is eNaira?

The eNaira is the same Naira with considerably more possibilities, Emefiele asserted emphatically, guaranteeing that the new payment system is one of the most robust in the world, sufficiently safeguarded, and thus nothing to worry about.

In 2017, the Central Bank of Nigeria (CBN) began an intensive study, consultations, identification of use cases, and testing of the CBDC idea in a Sandbox environment, in response to increased interest in Central Bank Digital Currency (CBDC) around the world.

The goal of the study was to provide a strong argument for the introduction of a digital currency in Nigeria so that all Nigerians can benefit from a more successful and inclusive economy.

Following the completion of preliminary research, the CBN’s researchers and experts were able to clearly establish that a digital currency will promote a more paperless, inclusive, and digital economy, complementing the successes of prior policy initiatives and our rapidly increasing payment systems.

As a result, the CBN decided to create its own CBDC, dubbed the eNaira. Like the physical Naira – eNaira is a legal tender in Nigeria and a liability of the CBN, which will have the same value and always be exchanged at 1 naira to 1 eNaira

To reduce the risk of the process, the CBN has carefully considered the entire payments and financial architecture, and has structured the eNaira to complement and improve these ecosystems, as well as implementing security protections and policies to ensure the financial system’s integrity.

To maintain the integrity and stability of Nigeria’s payment system, strict adherence to anti-money laundering and counter-terrorist financing regulations would be enforced, according to Emefiele.

The eNaira, like other digital revolutions, is a journey, and Nigerians should expect more features in the coming months. Accessibility and onboarding of consumers without BVN, as well as the usage of the eNaria on the phone without access to the internet, are among them. 

Nigeria will be one of the first countries in the world to implement the CBDC using USSD on phones, bypassing the need for internet access. The CBN also plans to use the eNaira platform to onboard revenue collection agencies in order to increase and simplify collections, as well as to create sector-specific tokens to support the Federal Government’s social programs and distribution of targeted welfare schemes in order to lift millions of people out of poverty by 2025.

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Jack Dorsey‘s Square to develop open source Bitcoin mining

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Jack Dorsey Bitcoin

On Friday, October 15, Twitter CEO Jack Dorsey announced that American fintech company, Square, would be looking to get into Bitcoin mining. Jack Dorsey who is also Square’s CEO announced this on Twitter which subsequently sent waves through the bitcoin market, surging its price to almost a record high, rising over $62,000 over the weekend. According to the Twitter boss, Square is looking to building an open source Bitcoin mining system that would be available to individuals and businesses.

Sharing his thoughts further on the initiative, he stated that “Mining needs to be more distributed” and that “the more decentralized [mining] is, the more resilient the Bitcoin network becomes. He also mentioned the apparent inaccessibility of mining stating that “Bitcoin mining should be as easy as plugging a rig into a power source.

Dorsey also believes that bitcoin mining “needs to be more efficient and that “clean and efficient energy use” would be undoubtedly beneficial to the digital currency in the long run.

Dorsey ended the thread by saying that a “technical investigation would be undertaken by a Square team led by Jesse Dorogusker, Square’s hardware lead. If successful, this initiative would be another of Square’s bitcoin focused projects which includes a Bitcoin hardware wallet.

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Financial Leaders from G7 Release Guidelines for Central Bank Digital Currency

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Source: World Atlas

At a meeting that was held in Washington, yesterday, October 13, G7 leaders discussed central bank digital currency and endorsed 13 public policy principles with regards to their implementation. The financial leaders from G7 agreed that CBDCs would complement cash and should not be detrimental to the monetary system. The G7 leaders have been discussing CBDCs this week concluding that they should do no harm and meet rigorous standards.

It should be noted that G7 includes finance leaders in advanced economic nations comprising of Canada, France, Germany, Italy, Japan, the U.S and the U.K. the G7 leaders make it mandatory that any newly launched CBDC should not harm the central bank’s ability to perform its duty of maintaining financial stability. In a joint statement by the G7 finance ministers and central bankers, they said that, 

“Strong international coordination and cooperation on these issues help to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.” 

The joint statement further states that CBDCs are complements to cash and could serve as a liquid or safe settlement assets with an added advantage of anchoring existing payment systems. CBDCs issuance should be entrenched in a long-standing public commitment to transparency, rule of law, and sound economic governance. The statement added at CBDCs must be so efficient that they are fully interoperable on a cross-border basis. 

The G7 leaders agreed that they had a duty to minimize the incidence of ‘harmful spillovers to the international monetary and financial system” 

The G7 statement reiterated a similar statement earlier made by G20 that no global stablecoin project should begin operation until such a token has addressed legal, regulatory and oversight requirements. 

Countries like China and Nigeria are ahead of the pack with regards to the adoption of digital Yuan and Naira respectively. China’s crackdown on cryptocurrency may be a step forward for the country’s plan to promote its digital Yuan. Nigeria, on the other hand, postponed the launch of its eNaira in deference to the 61st anniversary of Nigerian independence on Oct 1. 

However, countries like the US and the UK are dragging their foot with regards to the introduction of CBDCs to their financial system. There are insinuations that America is in danger of being left behind technologically and financially if it doesn’t get serious with the implementation of CBDC in its financial system.

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