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African countries have often trailed behind other regions in technological innovation. From the adoption of the telephone, electricity, and even the Internet, the continent frequently lags in embracing new technologies that could spur its development. It’s as if Africa needs the West’s endorsement before engaging with new advancements.

While cost barriers certainly exist in adopting these technologies, there is a rising technological wave that requires no massive investment and could change Africa’s developmental trajectory: Bitcoin.

When I discovered Bitcoin in 2013, from my background in IT, it led me into the world of finance and the international economy. Through my journey, two realizations struck me about Bitcoin’s potential positive impact on Africa. Bitcoin can solve two major problems that are interconnected:

• The non-convertibility of most African currencies
• The scourge of crippling inflation rates

CFA Franc Currency Non-Convertibility

Most African currencies are worthless on the international market and aren’t easily convertible to reserve currencies like the US Dollar or Euro. In West and Central Africa, 14 countries use a common currency called the CFA franc, however, even here there are issues.

The CFA franc is used in two distinct currency unions: the West African Economic and Monetary Union (WAEMU) and the Central African Economic and Monetary Community (CEMAC). Both the West African CFA franc and the Central African CFA franc are guaranteed by the French Treasury. While they share the same name and are of equal value, they are used in different regions and are not interchangeable. Both types of CFA franc currency only holds value only within that union’s borders and cannot be used internationally or outside that region.

This currency inconvertibility creates a challenging environment to Africa’s development. While governments issuing hard currencies such as the US Dollar (USD), Euro (EUR), and British Pound (GBP) can print money to purchase goods on the international market, most African countries use currencies like the CFA franc and cannot just print money – or they could but with immediate inflationary consequences to their local economies.

International trade primarily uses reserve currencies, and developing countries need these currencies to buy anything internationally. The main way to acquire hard currency is through exports of natural resources. This. In sum, while the West can print currency to purchase goods internationally, Africans must sell their natural resources to obtain hard currencies for the same purpose.

Crippling African Currency Inflation Rates

Another problem is inflation. Inflation acts as a “tax” inherently built into the economy, but countries experience it at different rates. Developing countries face inflation rates from 10% to 15%, while industrialized countries see rates from 1% to 3%.

Inflation can stem from various causes, including government spending, monetary policy, and external factors like rising exchange rates. This instability can impoverish populations. Last year, Congo experienced an inflation rate of 45.8%, Nigeria 38.06%, Zimbabwe 49.7%, and Ghana 23.1%. For Congo, it represents about 50% of purchasing power lost from one year to another.

Bitcoin as a Development Tool

Despite efforts from the industrial world to help developing countries pursue developmental goals such as health, economic growth, education, and water sanitation, African countries still have a long way to go to reach emergent country status. One unexplored opportunity is cryptocurrencies, particularly Bitcoin and stablecoins.

I published an article in 2016 titled: “Can Bitcoin Free West Africa From CFA Franc Tyranny?” With my growing understanding of the economy, I must say Bitcoin could give an edge to Africa and developing countries in the world.

Will ICT4D actors leverage this new technology to propel Africa into potential economic development and if so, how?

Let us start the conversation because we should not be afraid to explore every development tool at our disposal. While the regulation of Bitcoin and stablecoins is currently a work in progress in many industrialized countries, should we let Africa wait for the West’s green light?

If African countries delay in participating in this nascent economy, they will miss out on significant opportunities. Bitcoin’s goal isn’t to make anyone rich quickly, but late adoption by African countries will certainly make them poorer. If they do not start participating in this emerging economy, they will miss out on shaping its rules and opportunities.

Here are a few examples of what could be done:

• Leverage the growing market of P2P crypto transactions in developing countries based on Bitcoin and stablecoins. NGOs could use existing platforms to send money to beneficiaries, allowing them to receive more of their funds and avoid hefty transaction fees. If they choose to keep their money in cryptocurrencies, they could shield themselves from local economic risks.
• Educate the elite and key actors in developing countries about cryptocurrencies and Bitcoin. Highlighting the direction of the world economy and encouraging them to save a small percentage of their wealth in cryptocurrencies.
• Educate central banks and bankers in Africa on how Bitcoin could be used as a reserve currency to protect their economies.
• Train security agencies on protecting their economies against illicit transactions using Bitcoin.

How We Can Use Bitcoin Today

A possible concrete strategy on which I would like to elaborate is the following:

Developing investment strategies for developing countries that involve holding stablecoins with yields of up to 5% per year and creating mixed portfolios of crypto assets as a hedge against inflation can be a starting point. This concept is not entirely new.

When I lived in Lomé, the capital of Togo, I observed savvy citizens crossing the border into Ghana to convert their CFA francs into Ghanaian cedis when the cedi was low compared to the CFA. They would then sell the cedis when its value rose against the CFA, thereby generating more CFA. This is essentially investment through currency exchange.

Providing investment playbooks based on Bitcoin and stablecoins could offer a viable solution to empower Africans with economic knowledge that is accessible to anyone with a connected phone.

This certainly is not a panacea, but starting the conversation on this topic could lead to productive outcomes. In the West, the most common strategy is to hold assets such as stocks and ETFs to protect one’s wealth against inflation. As Charlie Munger, Vice Chairman of Berkshire Hathaway, said: “If you own common stocks, you have a hedge against inflation.”

Development Risks with Bitcoin

While the benefits (there are many other benefits that we did not explore here) of adopting Bitcoin could be significant for African countries and their populations, there are also risks.

One risk is the potential disruption of local currencies, which may be abandoned in favor of Bitcoin and other cryptocurrencies. However, this transformation is likely to happen worldwide, not just in Africa. Many historical empires have experienced the rise and fall of their currencies, and Bitcoin, along with the emerging cryptocurrency environment, might offer a solution for a global currency controlled by no single state.

This could protect against inflation since it can’t be printed and could provide reserve status to all its participants. This vision might seem utopian, but major changes are often doubted until they become reality. With Bitcoin, the world could enter a new era of relative peace and equitable development, with every country operating on the same currency.

By Sewa Agbodjan a systems analyst from Togo