How China’s digital currency can affect the African crypto space
China has been working very closely with African countries and their tech startups. Africa has become a home to a lot of unicorn startups with a net worth of over $1 billion and the rest of the world is catching up to the phenomenon. Africa has one of the most advanced mobile money ecosystems and multiple fintechs that are drawing in millions of dollars from investors show no sign of stopping any time soon. Another field that has really shaken up Africa is Forex that has been very popular in South Africa, Kenya, and Nigeria.
If you look over the Kenyan Forex brokers here, you will see that there is no shortage of options when it comes to brokers in these countries. While some people chose to focus on the positives that come from having a strong fintech startups scene, like the flow of investors and the general benefits that the everyday consumer gets from these innovations some people are now questions how China’s strong presence will affect different countries on the continent. And with the recent announcement from the Chinese government about the regulated government-issued cryptocurrency now the question is how will this affect the African crypto scene.
Number one investor
Out of all the countries that have expressed their interest in the African startups, China definitely stands out. It invests hundreds of millions of dollars into these innovations but it will be interesting to see if China will start paying in its new regulated cryptocurrency in 2020. China has recently changed its approach to crypto and blockchain in general. They have issued a ban on all online content that bashes blockchain and has started a collaborative project with HUAWEI, a Chinese telecommunications giant and the People’s Bank of China to work together on this government-issued cryptocurrency. Considering the strong presence of the country throughout the African continent it’s safe to assume that this launch will also have an effect on the country where China has invested the most in these fintechs.
It may start paying in its crypto and increase the adoption of it throughout the continent to possibly rival all the other well-known cryptocurrencies. China has made it very clear that it wants to become a leader in this field and has been working very hard to secure its place among the most developed countries when it comes to fintech.
It has changed its previous approach to cryptocurrency and while it still doesn’t favor it and has no plans to promote cryptocurrency, unless it’s, of course, the regulated, government-issued crypto, the approach to blockchain is different. It’s safe to assume that the same approach will be passed onto the regulated currency said to launch in early 2020. Africa is the perfect market for it and it’s safe to assume China already knows that
The perfect Market
One of the things that makes Africa a perfect place to flush crypto into is the lack of regulations. A big part of why Fore took off in Africa and why so many European firms migrated to Africa is because the regulations are either nonexistent or very very liberal and leave a lot of room to abuse the existing laws.
This tendency has slowly been changing in some African countries but not the others. Cryptocurrency which in its original form should technically be unregulated can actually find the space it needs to flourish in African countries. Now, this goes without saying, but this lack of regulations has cost a lot for Africa. A lot of people, especially the citizens get scammed by unregulated and untrustworthy brokers and firms and ended up losing their assets. So while an unregulated financial ecosystem might sound like a dream it actually brings about a lot of unpredictability and increases the risks.
Bringing cryptocurrency into this system, so bringing the regulated crypto into n unregulated market will surely bring something interesting in the end. It is not yet confirmed the release date of this product, or how china plans on using it. The concept itself is pretty unheard of and it could entail a lot of different things. How will China manage to regulate cryptocurrency without taking away the essential characteristic of it is still a mystery.
Africa in the meantime is using cash less and less, promoting mobile-money and creating fintechs that rival those born out of Silicon Valley. The concerns over the overwhelming Chinese presence in the region is not baseless. Considering the vulnerability of the region in other aspects it needs to be strictly regulated that China doesn’t try to use this opportunity to its own advantage.
African fintech scene has impressed everybody and has become an example of what it looks like to have a high functioning startup scene. Some of the major technology firms are choosing to move their facilities to Africa and hire locally. The potential is definitely there but some risks still remain. Whether or not China will manage to create a market for its cryptocurrency in Africa is still undecided but there’s definitely enough of the base for it to become a reality.
