SAN FRANCISCO – The International Monetary Fund recently published a document suggesting that banks around the world seriously consider investing in blockchain and cryptocurrencies as a means of adapting to new consumer and technological demands. In a world where more and more governments and public institutions have proven themselves utterly untrustworthy, blockchain answers a need. It’s no coincidence that cryptocurrencies are thriving in developing countries, where accountability, transparency, and a stable political climate remain wishful thinking.
When Zimbabwe’s military seized power in November 2017, the demand for Bitcoin surged amid the shortage of hard currency, driving the price to a record high of $16,500 (165% of the global price at the time). In Nigeria, Bitcoin trading spiked by nearly 1 500% this year, and Ghana is seeing a steady increase in its number of blockchain-based startups, such as Bitland, which uses blockchain to bring clarity to ownership rights in a country where 78% of land is unregistered. Kenya’s BitPesa supports African traders that need to pay suppliers abroad. Closer to home, local startups such as the Cape Town-based Wala are positioning themselves as a financial services alternative to African immigrants who want to send remittances back home without the headache of exorbitant cross-border banking fees. (Take it from someone who knows – as a student abroad I’ll jump at any option that saves me R500 in banking fees every time my parents wire me money.)
How have governments reacted?
Pretty much in keeping with their views on personal freedom. China has banned cryptocurrency exchanges, while Russia has been openly talking about the prospect of creating its own state-controlled cryptocurrency. In April 2016, Japan recognised Bitcoin as a legal tender, and the currency is now accepted at over 260 000 stores around the country. Nigeria already has an agency set up to combat crypto scams, with its government strongly behind all initiatives to help leverage the opportunities presented by the technology. The governments of Ukraine, Estonia, Denmark, and countless others are adopting the technology in numerous projects, including land ownership, identification systems, and humanitarian aid.
In short, everyone seems to be doing their own thing. While some countries are steering clear of the so-called fake money used for shady purchases on the dark web, others see in it the potential to transform financial services and public institutions.
In South Africa in particular, individuals and business are, as usual, way ahead of our government. Thousands are using cryptocurrencies like Bitcoin and Ethereum as a store of wealth against the fluctuating Rand, and companies like Takealot, Bidorbuy and even the Kaizer Chiefs online retail store now accept payments in Bitcoin. Major cryptocurrency exchanges are already targeting Africa as the next big market, hoping to provide cheap and efficient services to a largely under-served population. 2018 will see a massive surge in adoption across the continent.
The South African government, meanwhile, has mostly turned a blind eye to the opportunities the new technology offers. We’ve been among the slowest of relatively advanced economies to develop judicial and financial frameworks to support it; it was only in February 2017 that the Reserve Bank announced its intentions to develop a national virtual currency. Bankymoon, a local blockchain-based solutions provider, has been selected as the first business to trial the new regulations. Few thinkers in government seem much concerned, however, with exploring the long-term implications of the technology and its applications beyond digital currency.
For developers and entrepreneurs, blockchain is on the revolutionary scale of the internet. It will change how we store data, exercise leadership, run elections and view trust. It will be central to every transaction that involves a transfer of value. Imagine a voting system powered by the blockchain – the term ‘free and fair elections’ might finally ring true. SASSA could well do with an overhaul of its system – this is the largest national store of biometric data that is currently the victim of legitimized corporate fraud. Immutable records of Minister’s assets, companies’ environmental records, faster insurance claims processing, decentralized Wifi – all are possible when we create an ecosystem in which blockchain technology thrives.
In the next few years, we will see blockchain disrupt and transform almost every industry we know. It’s not just a technological rise, but an ideological shift – the implications of which we have yet to understand.
Where is South Africa in the midst of this massive upheaval?
Our government seems to be in the twilight zone. Right now, we need visionary leadership that sees beyond the narrow funnel of political musical chairs to far broader fields. We need to start taking proactive steps to create a regulatory environment that supports the adoption of blockchain technology and digital currencies. This will require immense engagement between the public and private sectors, and a general drive for awareness of the technology. The judiciary, the finance ministry, commercial banks, private businesses and young entrepreneurs and thinkers all need to play a part. Much of the success of the tech industry in places like Silicon Valley and Kiev stems from the vibrant communities and public-private engagement that continually drives innovation.
All over the world, blockchain is already changing familiar structures in tangible ways. Here is an opportunity for South Africans to decide what we want our future to look like. How are we going to weave these technological advancements into the drama of daily life? How can it benefit broken communities, speak to the oppressed and impoverished, speed up social services, reduce costs, and hold leaders accountable?
This is about taking initiative, challenging norms, finding links between seemingly disparate elements of life, and embracing the power of technology to bring about the changes we so desperately need.