Crypto-currencies are changing the way cross border payments
and remittances are being conducted. Crypto-currencies transaction fees are
generally cheaper and more convenient when compared with traditional payment
platforms.
Just like fiat currency, transactions can be conducted via a
mobile phone or desktop computer with the difference being that there is no
central point or authority that restrict payments or imposes limits.
In addition, decentralized
Blockchain technologies like that of Bitcoin make it possible for anyone interested
to verify all the transactions. As a consequence, crypto-currencies are able to
overcome the problem of lack of trust that sometimes bedevils fiat currencies. Often
central banks say one thing but go on to do something else.
However, in spite of this, crypto-currencies are still encountering
problems gaining traction in emerging markets.
And unless something is done to address this, mass adoption will take
much longer to happen, particularly in these vital markets.
There is a general consensus that when enough people are
using these fintechs, the transacting costs, which are already low will only come
down further. Furthermore, cryptocurrencies or tokens will realize their true
potential once enough numbers are using the technology. So what could be hindering
this objective?
Ignorance
To begin with, there is not much being done in terms of
educating potential users or the general person. It would seem that some of those
involved in the crypto business are motivated by the desire to make a big buck
than taking on the exercise of informing and making aware. New enthusiasts (to
the cryptoworld) are repeatedly informed about the Bitcoin price—which is
growing fast—and how even the inexperienced investors are realizing huge gains.
It appears that Bitcoin for instance, is marketed more as a
financial or investment asset rather than as a medium of exchange or store of
value. Yet it is the latter two aspects of this crypto that can potentially
hasten mass adoption (if only someone takes more time in preaching this.)
So after ten years of existence there is just not enough
information on what crypto assets can do besides growing in value. For instance,
in countries where there are harsh foreign currency regulations,
crypto-currencies potentially offer alternatives that allow one to bypass or circumvent
such regulations. This is because monetary authorities have no jurisdiction or
cannot enforce policies over digital currencies like Bitcoin or XRP.
If this is widely known, more people in countries like
Zimbabwe, Venezuela or Iran would be switching to cryptos.
It is the dissemination of such facts that will drive a wider
adoption of crypto-currencies even as their numbers grow. According to coinmarketcap.com,
there are over 2000 such tokens and we can only expect more to come. There are
apparently a disproportionate number of these currencies relative to their time
in existence and the number of people using them.
Now many worry that such an avalanche of tokens/coins issued
without a proper regulatory structure in place could spell trouble. In some
instances this trouble has manifested in the form of collapsed starts-ups.
ICOs and scams
To support this assertion, some point to a noticeable slowdown
in ICOs was observed in 2018. According to the UK’s Financial Conduct Authority
consultation paper, this can be attributed to ‘investor caution as a response
to the large amount of fraudulent ICOs as well as a high failure rate of new
enterprises that use the ICO process.’
Indeed it is the abuse of the ICO process as well as the
packaging of outright scams as cryptos that has invited increased scrutiny by
governmental authorities.
OneCoin is one prominent fraudulent scheme, which was disguised
as a crypto-currency exchange business that fleeced investors millions of
dollars. The media coverage of such failures reinforces the negative stereotypes
about all crypto-currencies.
Cryptocurrencies seen
as Ponzi schemes
Perhaps the biggest test for cryptos, particularly in Africa,
has to be their association with Ponzi or pyramid schemes. Put differently, it
is the failure by the more gullible to distinguish fraudulent schemes from
legitimate crypto-currency businesses.
Ponzi schemes are elaborate undertakings by fraudsters to
steal from unsuspecting people and these are quite prominent in poor countries.
By contrast, crypto-currencies like Bitcoin have been proven to satisfy their core
objectives like acting as an alternative to fiat currency—that is a store of
value or medium of exchange. Bitcoin has been around for 10 years and still
going strong, Ponzi schemes on the other hand do not last that long.
It is only when enough people in these poor countries are
able to make the distinction will crypto-currencies like Bitcoin overcome this
challenge of being associated with Ponzi/Pyramid schemes. But why must this be an
issue of concern crypto stakeholders?
Well, a few years ago a Russia based Ponzi scheme, MMM was
able to con millions of dollars from a number of people in several African
countries. After a while this outfit was busted and the ringleaders were
apprehended.
Interestingly however, that the same luring tactics used by
this now defunct MMM syndicate are being employed by some crypto start-ups on
the continent. This not only raises concerns with members of the public but invites
unhelpful government intervention.
In Nigeria, regulators may have taken a hard-line stance
against cryptos partly because ignorant lawmakers view crypto-currencies as another
repeat of the MMM debacle. For the continent’s central banks, there is no
better pretext in their ongoing fight against cryptos than labeling these
fintechs as a danger to the public!
In spite of this, there is still a window opportunity to
remedy this, the crypto community needs to go back to the basics. More
investment needs to be channeled towards the education part of this business.
Such an investment benefits all players.
For example, if crypto start-ups in Zimbabwe had invested
more towards this effort then foreign currency account holders who are
currently scrambling to withdraw from the banking system will realize they have
an option to protect their savings. However, because this topic remains on
periphery of the country’s national economy debate, many of such account
holders will lose out following the recent foreign currency regulations.
Therefore education and awareness remain important if the
objective of unlocking the full potential of crypto-currencies is to be
realized.
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