A barrister by profession, Chris has made it his mission to help bring development mechanisms to Africa which can empower Africans to seize their own destiny. His journey on this mission began during the 1990s when he attended King’s Law College and became a barrister. After graduating, he founded the Trafalgar Chambers in the U.K., and became the youngest head of chambers in over a century.
In 2005, he founded the Made in Africa Foundation, an organization he has guided to fulfill his dream of bringing systemic infrastructure change to Africa. Today, he is CEO of Kamari, a blockchain project looking to build an ecosystem of mobile gaming and payments for one billion people across Africa.
Astronomical hyper-inflation is an unenviable economic outcome that has plagued a number of countries in recent years, notably Zimbabwe, South Africa and Venezuela. But it’s not only fears of ever-creeping inflation that fertilize the imagination of tech-savvy free thinkers in such nations, a group that is collectively driving increased demand for alternative, blockchain-based solutions.
The devastation that hyper-inflation causes, with citizens frantically attempting to preserve whatever value they can in the face of straitened economic circumstances (illustrated by the trope of a shopping cart brimming with banknotes being wheeled down a dusty street), is painful to watch, much less experience. Naturally, heads turn towards sounder monetary alternatives during such episodes, with cryptocurrency proponents positioning blockchain as the solution to inflation across Africa.
The flight from fiat
The tangible benefits of adopting deflationary cryptocurrencies, particularly for African economies laboring under high inflation (and indeed other nations languishing on Bloomberg’s Misery Index), are manifold. The ease with which blockchain-based monetary systems enhance commerce has been demonstrated beyond the African continent and within its borders. South Africa, for example, has permitted digital currency-based payments, trades and investments, making a significant contribution to the global boom. The ability of South Africans to avail themselves of local exchanges and trade fiat currency for bitcoin or other crypto assets at the present market rate contrasts sharply with the misfortunes of citizens in countries like Nigeria, Zimbabwe and Kenya, whose governments have taken a dim view of crypto assets.
This is nothing short of a travesty, because bitcoin offers a great deal of promise for such countries. Consider risk, for example. Because bitcoin is transparent, immutable and entirely unlike any other financial asset – information on its public ledger cannot be distorted, deleted or destroyed – it is the very antithesis of fiat currencies that despotic leaders are prone to debasing at will through wanton printing. And with developing markets including Africa tipped to represent half of all non-cash transactions worldwide by 2021 – in the process overtaking mature markets for the first time – it seems like the time is right for blockchain to get a fair crack of the whip.
A decade in the making
In the recent past, bitcoin has proven entirely capable of outperforming other assets as both an investment vehicle and a store of value, as well as furnishing citizens with a means to transfer funds into and out of their country, as was the case during the Greek bank shut down in mid-2015. Liquidity crises, stock market disruption, asset fire-sales, political upheaval, structural currency devaluations: cryptocurrency has ridden many waves and survived a decade of adversarial testing while gradually accruing trust among initially skeptical parties.
Of particular interest to African citizens is the fact that cryptocurrency can be securely stored, managed and accessed from anywhere in the world. Moreover, non-cash transactions of this nature provide measurable benefits to society, specifically by tackling the persistent scourge of corruption. Imagine the benefits to be derived from replacing a hidebound system wherein the ability to create and regulate money is the self-appointed right of central banks. Oftentimes, blockchain technology is described as a natural response to decades of underhand and unjust financial management. You could scarcely conceive of a better use case than in Africa.
This is borne out by new research by Digital Assets Data, which indicates the usage of bitcoin as a store of value and fiat alternative in high-inflation countries. Indeed, bitcoin trading volume appears to rise in countries blighted by high inflation and unstable banks even as the bitcoin price falls. The precipitous December 2017-December 2018 price drop saw trade volume in low inflation countries drop by some 70%, while for high inflation nations it actually rose by 60%.
Blockchain: a single invention with a myriad number of applications
Another notable advantage of greater blockchain adoption in Africa is increased competition brought about by the proliferation of digital currencies. This competition will not only serve to stimulate the currency market (and the financial market more generally) but also put more power into the hands of consumers and everyday citizens. In this scenario, traditional banks seeking to maintain their status – or simply remain a going concern – must countenance the idea of better serving the consumer via a process of innovation and progressive reform.
Naturally the decentralized nature of fixed supply cryptocurrencies is incredibly appealing in an inflation-blighted African context due to a combination of familiar political instability, corruption, disastrous central bank policies and procedural bottlenecks that circumscribe traditional financial services.
Of course, there are prevailing headwinds that threaten peer-to-peer digital currencies such as bitcoin, regardless of the burgeoning interest from the populace. The pushback comes from power brokers of the global financial system, namely governments, central banks and regulators, none of whom are keen to break up the age-old currency-issuing monopoly. But the simple truth is that blockchain technology offers the possibility – perhaps the best, most realistic one – of a brighter future for African nations crippled by hyperinflation.
A recent speech by Bank of England Governor Mark Carney alluded to the potential of digital currency to disrupt the dominance of the US dollar, noting that the stockpiling of dollars has become a major barrier to global trade. Such an outcome could prevent Africa suffering from being “pegged” in terms of imports and exports in US dollars (and the Euro via the CFA), although any nascent digital currency must take account of African internal commerce and intra-continental trade to avoid the aforementioned eye-watering inflation. The great thing about blockchain is that it permits the unpegging of currencies to each other as well as the creation of new digital value stores underpinned by global baskets of underlying currencies. Such local digital currencies rely on local values and transactions, thereby immunizing national economies from swings elsewhere.
As noted by Carney, “reducing the influence of the US on the global financial cycle… would help reduce the volatility of capital flows to emerging market economies.”
Perhaps when he said this, Carney did not envisage the launch of the digital yuan, as a way of protecting China’s foreign exchange sovereignty so soon after. The digital yuan has the potential when combined with China’s far reaching “Belt and Road”, economic expansion and investment program to bypass and dominate the dollar. When future historians review the strange death of the American empire they may well lament the moment that the Federal Reserve killed off Facebook’s Libra, instead of recognizing that it was their only defense against the digital yuan. However, many commentators believe that there will be no one coin to rule them all! But rather a proliferation of tokens and blockchains – interoperable and satisfying different needs.
Blockchains can be used to simplify the need for national fiats but can also consider the complexity of local economies – it’s all in the design. Perhaps this is why 15 cryptocurrency-related operations have been initiated in Africa in the past year alone.
Many of the citizens of African countries have lost confidence in the traditional banking system, and eagerly await a day when financial freedom and security become a basic human right rather than a luxury for the elite. There is still significant work to be done in ensuring that blockchain technology realizes its full potential in Africa, as a medium of exchange, store of value and means of remittance. As economic crises intensify and national currencies further falter, however, the case for crypto becomes more compelling. Blockchain is not a panacea to all Africa’s problems. Rather, it’s a practical solution to a real world problem that will resonate with anyone living in a inflation-hit country in the continent of 1.2 billion.