An emergency meeting of the central bank’s monetary policy committee on Wednesday increased policy rate by 300 basis points to 22% -- the third ... time since January -- as the country struggles with rising inflation and the downward spiral of the cedi.
Binance is the world’s leading blockchain ecosystem and cryptocurrency exchange, trading $76bn daily according to CryptoCompare.
Now, Binance director for Africa Emmanuel Babalola says that 2022 is the year for “taking crypto mainstream”.
To do that, Binance will have to face down a range of skeptics: from those who see it as a way to commit fraud or avoid tax, central banks that are concerned about unregulated capital flight and policy-makers who are increasingly worried about the impact of currencies like Bitcoin on the environment.
Others argue crypto is already mainstream on the continent.
Consultancy ChainAnalysis points to more than $100bn worth of cryptocurrency exchanged in Africa in the year ending June 2021. The Wall Street Journal claims 11m clicks were made from Nigeria on the Binance platform in the first half of 2021 alone.
In 2021, Binance recorded an increase of 3,435% in peer-to-peer (P2P) users across Africa and a 1,502% increase in P2P trading volumes on the platform.
There was also a 480% increase in the number of Africans trading crypto on Binance and a 589% increase in the trading volumes of African users, according to a report made available to The Africa Report by the company.
These figures were not an anomaly: “Binance has always experienced exponential growth … for the past four years [the age of the company] this has been the case,” says Babalola, thanking the community and the hard work of the Binance team across the world for their efforts.
In Africa in particular, Babalola tells us that Binance “experienced significant growth”.
The company has been paying attention to the continent since the very beginning.
In an interview with TechCrunch, Binance founder Changpeng “CZ” Zhao said: “Even from the first day when Binance launched, we had users from Africa, and they were actually relatively active. And so, I think it was early 2018 that I visited Uganda, Togo, Nigeria at the same time — and also Ethiopia. So, I had a little tour around Africa just to learn a little bit more about the market, and soon after that, we opened Binance Uganda, which was our first fiat gateway.”
Binance wants to continue to develop its activities in Africa. The exchange has partnered with the Confederation of African Football (CAF) as an official sponsor of the TotalEnergies Africa Cup of Nations (AFCON) tournament that is currently underway.
The company “will be funding African projects, training more developers and [driving] adoption in the continent as a whole”, says Babalola.
He notes that the company “has been known to invest in a bunch of African companies through Binance Labs, for example, Bundle Africa [a social payments app for cash and cryptocurrency]. Investing in Africa is not a conversation we have to start having, it’s one we have been having since 2019.”
Innovation versus regulation
Traditional banking regulators worldwide are mostly against cryptocurrencies, either banning or limiting their deployment.
Babalola says that “Binance takes a collaborative standpoint when looking at regulations for cryptos.”
He says regulators and the crypto industry have mutual goals, as “anyone that is willing to pay in crypto should be interested in protecting users”.
Although many in Africa are quick to call out their governments and regulators for not understanding virtual currencies, and thus trying to ban them, Babalola “won’t blame a regulator that says ‘I don’t understand, just wait’.”
He notes that even fintech companies still have hurdles to overcome in certain countries. Binance continues to try its best to collaborate with law enforcement and governments around the world, he says.
“As an example in leadership, we recently began a push for industry players to be long-term driven, in addition to the standard KYC/AML [Know your customer/anti-money laundering] procedures”, Changpeng “CZ” Zhao told TechCrunch. “We are pushing for longer unlocking schedules for founder tokens, from 2-4 years to 8-10 years. This is something that no regulators have asked for, but we believe it will help the industry become healthier. We are always looking for ways to protect users.”
Talking about the Central Bank of Nigeria (CBN) in particular, where the regulator has ruled that virtual currencies are issued by unregulated and unlicensed entities, and therefore crypto trading is illegal, Babalola does not think there is a “sinister plan” by the government against the citizens.
Diaspora remittance inflow into Nigeria declined by a chunky 27% to $17.2bn from $23.5bn last year. Is Bitcoin to blame? Nigeria’s CBN thinks so.
For Babalola “it is really about understanding. The CBN released the eNaira [its own virtual currency] recently, showing that regulation is slow but not static.”
Reporters at the Wall Street Journal point to one issue: Binance’s lack of a fixed location, which “has puzzled regulators because they don’t know who would be responsible for overseeing it. Parent company Binance Holdings Ltd. is incorporated in the Cayman Islands. According to the Cayman Islands financial regulator, Binance isn’t registered or licensed to operate a cryptocurrency exchange from the country”.
Increased risk of fraud?
One reason given for banning cryptocurrencies is that the lack of regulation and official channels increases the risk of fraud.
Babalola disagrees as, in his opinion, “crypto is the worst way you can commit fraud – it is easier with cash. Crypto is a transparent, trackable way of moving resources. I can literally track back to see the first Bitcoin transaction ever.”
He continues: “Looking at the chain analysis report of 2020, less than 2% of crypto transactions that happened in Africa were fraudulent.”
The Bitcoin network is said to use as much energy as entire countries. Kosovo recently banned crypto mining because of Bitcoin miners taking advantage of cheap power and draining the grid.
Babalola says that blockchains work in different ways, with some networks “that are not consuming energy at all.”
He continues: “For Bitcoin specifically, most of the mining that is going on is actually green. The fact that it consumes energy does not mean it is carbon emission energy.”
Despite negativity, digital currencies can only grow
There is a great deal of skepticism in the media surrounding virtual currencies, but Babalola says that “it used to be worse.”
He “cannot count the number of times that news headlines have said Bitcoin is dead.”
For him, this brings back memories of “the early days of the internet [when] on national TV they were saying that the internet would not work.”
While “some people think Bitcoin is only used by fraudsters, this will change”, he argues. “Look at how long it took our parents’ generation to start using ATM cards.”
Babalola makes the analogy with the technology behind clicking a link on a phone, which millions of people do daily without understanding the technology behind it.
In the same way, “you do not need to know how the blockchain system works, you just have to use it.”
He does not underplay the risks but argues crypto will continue to become simpler for people to understand and use.
“Digital currencies are likely to take over,” says Babalola. “The CBN in Nigeria announced a cashless Nigeria years ago. Cash is bad because it doesn’t leave a trail and is expensive to maintain. When you have digital footprints, you can trail.”
He concludes: “Virtual currencies will become more popular, whether on blockchain or not.”
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