West African countries seem to be facing challenges in embracing Bitcoin and cryptocurrencies.

By PHIL VECCHIO

Translated by: Luffy, Foresight News

The recent coup in Niger has highlighted many challenges faced by West Africa, especially the Francophone African countries. France and the United States have intervened in the region, claiming to help develop the economy and combat corruption in West Africa. As the situation in Niger escalates, we should consider the role played by the West in the region. Can Bitcoin achieve what the United States and France have failed to do for decades?

Many people believe that France's involvement in the African Financial Community (CFA) is a way to control its former colonies by controlling the exchange rate. They are able to devalue the CFA franc relative to the French franc (now the euro), thereby increasing their purchasing power for African raw materials, and then selling back the finished products at a high price. This means that France is diluting the purchasing power of some of the poorest countries in the world through its monetary policy.

Currency War

The Central African Republic was the second country in the world to adopt Bitcoin as legal tender. A year later, due to various reasons such as lack of internet access, the country changed its stance on Bitcoin.

Since the end of French colonial rule, the Central African CFA franc has been the main currency, replacing the earlier French colonial currency, the French Colonial Franc (F.CFA). Some believe that this currency, compared to other African currencies, promotes better trade between West African countries and provides more reliable stability. At the same time, many African countries have not moved beyond being mere raw material export countries. Relying on export of raw materials also means that they are particularly vulnerable to price shocks and events in other parts of the world, such as when oil prices fall, oil-exporting countries lose export revenue.

Many increasingly view the CFA franc of the African Financial Community as a mechanism for wealth transfer from these poor African countries to France. Even the Italian Prime Minister has stated that France's exploitation of these countries' raw materials has driven immigrants to Europe in search of a better life.

Despite the increasing adoption of Bitcoin in many African countries, any attempts to transition to Bitcoin have been suppressed.

Using Bitcoin to Combat Corruption

Over the years, security incidents involving cryptocurrencies have occurred repeatedly, such as the Mt Gox hack or the FTX embezzlement scandal. These issues have dominated the headlines, and the complex truth behind them is often elusive. Decentralized networks like Bitcoin make it more challenging to provide safeguards similar to traditional finance. It is well known that Bitcoin emerged on the Silk Road, a dark web online marketplace where people could buy anything they wanted. Transactions here were often conducted using Bitcoin, allowing people to purchase harmless items available on eBay, as well as drugs and other illegal items.

As a result, people have developed a fear of Bitcoin. However, when investigating the use of Bitcoin in crime, it is not necessarily worse than the current financial system, and may even be better. The IRS and other law enforcement agencies use the public nature of the Bitcoin blockchain to their advantage. The blockchain records the transfer of Bitcoin from one wallet to another. While all wallet addresses are anonymous, once a wallet address can be linked to an individual, every transaction associated with that address can be easily traced in the blockchain ledger.

This is a long-standing story, where politicians embezzle funds from public finances for personal gain. Many governments have put safeguards in place to prevent this, but in Africa, these safeguards are often either non-existent or easily circumvented. As a result, many politicians transfer funds meant for projects like roads, electricity, and clean water to secret bank accounts overseas.

Over the years, some solutions have been continuously introduced. For example, multi-signature, which requires approval from multiple users to sign off on the use of funds. This allows auditors and public oversight committees to be directly notified before any funds are spent.

Bitcoin could potentially become the primary weapon against corruption. If a country were to use Bitcoin as its official currency for public finances, there would be a public ledger tracking government wallet expenditures. The media, political opposition, and every citizen interested in this could access this ledger. This could track corruption and malfeasance within the government in real time.

Bitcoin could also be a double-edged sword. In the United States, once an individual is linked to a wallet, law enforcement can track the amount in the wallet and all transactions.

Unethical public officials could potentially use information about their citizens' Bitcoin balances to extort individuals or institutions.

Fair Free Trade

One of the challenges faced by many post-colonial countries, especially in West Africa, is the failure to fully utilize their natural resources. West Africa has resources such as gold, oil, diamonds, and uranium, but has failed to translate them into long-term sustainable economic growth. Some hindrances come from domestic corruption issues. Stringent regulations make conducting business difficult, often openly attempting to obtain bribes.

But this is not the only reason. One major problem in West Africa is the forced implementation of the African Financial Community CFA franc by France. The French often devalue this currency to gain trade advantages. As the CFA franc devalues relative to the euro, the same amount of euros can purchase more African goods. The longer these countries hold the CFA franc when they want to purchase finished products from France, the fewer goods they can buy from France, as the currency continues to devalue.

For decades after independence, these countries were required to deposit their cash reserves in the Bank of France. This has been a boon for France, but of little benefit to these countries. While there may be some reasons for this, including expediting international settlements and combating corruption, in most cases, this has led to a loss of power for local banking infrastructure. This also means that the Bank of France can charge transaction fees to these countries, further leading to wealth loss.

Bitcoin solves this problem. Independent of central banks, Bitcoin allows for easy international transactions without intermediaries. With relatively lower transaction costs, this would enable West African countries to engage in commerce with any country in the world without having to go through France as an intermediary.

West African countries would be able to directly purchase finished products from other countries without the need for multiple currency exchanges. This would also make it easier for them to import semi-finished products or other items, allowing them to build their own local infrastructure and industries, such as mining equipment, refining equipment, sawmills for logging and processing timber, and glass manufacturing machinery.

Providing Banking Services for the Unbanked

An important advantage of Bitcoin for individuals is its permissionless access. Many people in Africa and developing countries often face challenges in the banking sector, which we in the first world often do not consider.

First is obtaining identification. When you take your child to a local bank to open their first savings account, they will ask for your US social security card and birth certificate. Many people in developing countries do not have these. They are often born at home with the help of a local midwife, and registering births with local officials can be expensive or not worth it. This means that millions of people worldwide are unable to use the banking services we are familiar with.

Many Africans have already been able to engage in banking to some extent through their mobile phones. Smartphones are widely adopted and used throughout Africa. To purchase data or airtime, people buy SIM cards with cash and then insert the new SIM card into their phones. Many people buy a new SIM card every week. This is very different from how we conduct background checks and pay bills at the end of the month in many Western places.

The opportunity for people to use mobile payments is limited, and it is still subject to certain restrictions, often in local currency and with high transaction costs. Bitcoin allows people to use their wealth as they see fit.

This becomes more important in times of turmoil. Due to sanctions faced by some countries, individuals can use Bitcoin as a way to circumvent sanctions. Banks are often unwilling to transfer funds to or from uncertain areas, and Bitcoin has and will continue to enable people to access the goods and tools needed for business growth.

Challenges of Bitcoin

Bitcoin can effectively replace bad currencies, but that does not mean it is a perfect solution.

While there are solutions that allow the use of Bitcoin without internet access, most Bitcoin transactions still require access to the blockchain and the internet to verify transactions. However, this is improving, as many Bitcoin advocates have been working on systems that allow people to use Bitcoin without direct internet access.

The volatility of Bitcoin also makes it challenging as a daily transaction currency. Severe price fluctuations may make it a better international settlement method, but may not be conducive to daily use.

Another less friendly aspect of Bitcoin as a currency is the lack of a military or global bureaucratic institution behind it. This is something many people like about Bitcoin, but it is also the source of conflict with international organizations and countries like the International Monetary Fund, France, and the United States, who are angry at the idea of a new global currency not under their direct control.

There may be better options for West African countries. The best approach would be to use a basket of commodities as a currency guarantee. Many West African countries have enough gold to issue gold-backed notes, including using blockchain to verify gold deposits and track their transfer. Some economists suggest using multiple commodities to avoid the impact of price fluctuations of any single commodity on the currency value. These commodity-based currencies may be more valuable internationally, as the blockchain gives these currencies more credibility.

The Central African Republic has been trying to issue its own cryptocurrency, and a few years ago, an attempt to involve the entire West Africa has ended in failure. Can Bitcoin succeed in these aspects? Let's wait and see.

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