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Cryptocurrency: an untraceable money exchange

05.04.2019
Article from AFRIC editorial
In simple terms, cryptocurrency is a digital currency that enables the secure payments of online transactions without the need of a middle man, such as a bank. Cryptocurrency transactions are registered in a public ledger through cryptography. It is controlled by its users and computers algorithms, which prevents the interference of any government body.

The first cryptocurrency; Bitcoin, was launched in 2009 by a group under the pseudonym Satoshi Nakamoto, and has remained the most popular of all cryptocurrencies.  Today, there are over 18 million bitcoins in circulation, with a market value of about 63 million dollars. Other Popular cryptocurrencies include; Litecoin, Namecoin, Peercoin, Ethereum, Cardano and EOS.

Cryptocurrency gaining grounds in Africa

Though cryptocurrency is legal, and have become popular in many African countries such as Nigeria, South Africa, Kenya, Egypt and many others, the central banks of most of these countries are yet to regulate its use. The Central Bank of Nigeria (CBN) is one of the central banks that openly distanced itself from the “bitcoin movement” in 2017. Despite the fact that the bank warned its citizens that Bitcoin investments do not have any legal cover, Bitcoin trading continued booming in Nigeria.

So far, the South African government seem to be the friendlies African government to the cryptocurrency revolution. In this light, the South African Revenue Service (SARS) in a bid to find ways through which cryptocurrency investment could yield taxes said in April 2018 that all citizens must declare any income acquired from cryptocurrency investments as part of their capital gains statements.

Despite these restrictions start-ups and commercial actors on the African continent are more and more inclined to carrying out transactions with the different existing cryptocurrencies. These could be for the following reasons.

Cryptocurrency transactions are fast and secure

One of the main reasons why start-ups are more inclined to using cryptocurrencies is the fast and secure nature of transactions. Bank-to-bank transactions can take up to 7 working days in situations where there are complains of poor network connections. For many, using cryptocurrency is a better option, as blockchains have great computational power that enables transfer of cryptocurrency in less than one minute, and there is no need for a confirmation from a central body that manages transactions. This makes the network difficult to hack.

Blockchains offer flexible and transparent management

The blockchain is the basis of some cryptocurrencies. It enables start-ups to reduce great cost in transactions, since they are basically data. Cryptocurrency transactions reduce or completely clear management mistakes thanks to its automation. It also promotes mutual trust between business parties making it easier for them to do business without suspicions.

Cryptocurrencies offer bigger investment opportunities

One good thing about cryptocurrencies is that they can be used to preserve and increase companies’ financial assets. For example, those who bought Bitcoins in 2010 must be extremely rich today. One Bitcoin was less than a dollar back then, and today it is over 5000 dollars. The good thing is that big institutions like Barclays, IBM and Bosch among others are adopting cryptocurrencies. If big corporations can adopt cryptocurrency then it’s a signal for start-ups to do same.

Can Cryptocurrency be a means of funding for organized crimes?

Cryptocurrencies come with a lot benefits for individuals, governments, financial institutions and public and private sector institutions, such as increasing financial empowerment, facilitating access to financial products and minimizing fraud and corruption during transactions. Despite all these good things, cryptocurrencies are becoming more famous for nefarious transactions between criminals and criminal organisations.

According to a study carried out by researchers from the University of Sidney and the University of Technology Sydney, 44% of Bitcoin transactions and 25% of all other users were associated to illegal activities. Findings from April 2017 showed that about 24 million Bitcoin market participants used the digital currency primarily for illegal purposes.

There are a few terrorist organisations that have openly solicited funding through cryptocurrency, like the Jahezona (“equip us”) in 2016, when a terrorist organisation solicited funding through Bitcoin for the acquisition of weapons. Also, the pro-Islamic State website Akhbar al-Muslimeen (Arabic for “News of the Muslims”) published a link for Bitcoin donations in 2017, though it did not last long.

Though cryptocurrency transactions are public, that is they are registered on the blockchain and can be verified, the fact that these transactions are anonymous makes it easy for criminals and terrorist to use, since exchanges cannot be traced back to them.  Their untraceable nature also promotes other crimes such, scamming, smuggling and drug trafficking.

Article from AFRIC editorial.

Credit image/google images.

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