Global S&T Development Trend Analysis Platform of Resources and Environment
DOI | [db:DOI] |
The Train Is Leaving the Station: Digital Currency in Sub-Saharan Africa | |
Judd Devermont; Topaz Mukulu | |
2020-12-03 | |
出版年 | 2020 |
国家 | 美国 |
领域 | 地球科学 ; 资源环境 |
英文摘要 | The Train Is Leaving the Station: Digital Currency in Sub-Saharan AfricaDecember 3, 2020 The predictions were dire. In the early stages of the Covid-19 outbreak, the World Bank predicted a 23.1 percent drop in remittances to sub-Saharan African countries. With the region’s economies and households accustomed to receiving as much as $48 billion in remittances, a substantial decline—combined with disruptions in trade, suspensions of investments, and cratering oil prices—posed an existential threat. And yet, despite forecasts, remittances have continued to flow. The dip turned out to be considerably less steep, even though sub-Saharan Africa is expected to enter a recession for the first time in 25 years. The World Bank revised its projections for remittances, estimating they would decline by 9 percent in 2020 and 6 percent in 2021. Total remittances to sub-Saharan Africa, judging from the new estimates, should hover around $44 billion this year. Why did these dismal predictions not match reality? It seems possible that the decade-long trend toward mobile money adoption and the nascent surge in digital currency usage were at least two factors that prevented a worst-case scenario. This points to the potential of these technologies to be a game-changer for the continent. A Boom during the PandemicIn the first half of 2020, Africa’s central banks and telecommunication companies, as well as research firms tracking digital currencies, have reported a significant jump in financial transfers. This money has been transmitted via electronic or mobile payments—linked to commercial bank accounts—and digital currencies, which Harvard Kennedy School senior fellow Timothy Massad defines as “government or non-government issued digital payment instruments.”
The uptick in mobile money and digital currency use is the product of telecom and banking policies to reduce fees, as well as an imperative to weather the negative economic effects of the Covid-19 pandemic. When the region started to record infections, e-commerce transactions quickly skyrocketed, with millions of first-time users. Many companies slashed fees associated with setting up accounts and transferring money to spur more adoption; MTN Uganda and MTN Cameroon, for example, eliminated some charges on its mobile money platform, including on money sent between customers. Safaricom, Kenya’s largest telco, in March announced that all person-to-person transactions under $10 would be free for 90 days. The Central Bank of West African States (BCEAO) also temporarily waived fees for mobile money transactions in several of its member states. African businesses and individuals thus flocked to mobile money and, to a lesser extent, digital currency, to stay afloat during the economic crisis and continue to send money to family and friends in need. Digital currency users interviewed by Reuters, based in five countries from Nigeria to Botswana, shared that the technology was essential for continuity of operations. The Balance SheetThese technologies, especially digital currency, have positive and negative selling points. On the plus side, they have the potential to solve persistent problems hindering the flow of remittances, namely cost and reputational risks.
Nonetheless, digital currencies pose new challenges. As a nascent industry, there are “first mile, last mile” problems with digital currencies. According to an EU report, it is difficult to access a broker who can convert local currency into specific digital currencies. The same challenge exists in the receiver’s country. Some digital wallets, for instance, don’t include stablecoins backed by African sovereign currencies, raising questions about the ease of conversion. In addition, there are persistent worries about fraud and criminality. The G20 finance minister has warned that while stablecoins could have potential benefits of financial innovation, there are significant public policy and regulatory risks. According to Chainalysis research, fraudulent digital currency platforms received just over $8 million from users in Africa in June alone. The Future is Here (Let’s Make it Work)Digital currencies almost certainly will become more common in general and in sub-Saharan Africa in particular. With more individuals using digital currencies and many countries, including China, developing central bank digital currencies (CBDCs), it is imperative to establish government frameworks and public-private partnerships to regulate and support this wave of innovation. The promise of cheaply and seamlessly transferring remittances and, ideally, increasing financial inclusion, is worth the effort. There is growing momentum behind digital currencies. With foreign counterparts unveiling new policies, multinational corporations launching digital wallets, and African consumers and businesses participating in transactions, the region’s governments should leap into action. It is very feasible to take measures to shape the region’s digital financial future, including mobile money, mobile banking, e-commerce, and digital currency. The region’s governments need to establish how and under what conditions digital currencies evolve and support longstanding economic and development goals, including reducing the cost of remittances. Below are six recommendations to hasten the secure and safe adoption of digital currencies and expand the use of mobile money.
Judd Devermont is director of the Africa Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Topaz Mukulu is program manager of the CSIS Africa Program. This commentary is made possible with support from Novi. Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2020 by the Center for Strategic and International Studies. All rights reserved. |
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来源平台 | Center for Strategic & International Studies |
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文献类型 | 科技报告 |
条目标识符 | http://119.78.100.173/C666/handle/2XK7JSWQ/306409 |
专题 | 地球科学 资源环境科学 |
推荐引用方式 GB/T 7714 | Judd Devermont,Topaz Mukulu. The Train Is Leaving the Station: Digital Currency in Sub-Saharan Africa,2020. |
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