US Dollar Losing Dominance as a Means for Settling Transactions in Africa

US Dollar Loses Dominance As A Means For Settling Transactions In Africa

The dominance of the United States dollar as a settlement currency in Africa is being challenged by emerging payment methods in financial technology and by native African fiat currencies. In the four years to 2017, fewer people in the continent of 1.2 billion transacted via the US dollar than they did with their local currencies or mobile money, and perhaps cryptocurrency.

Also read: Steve Hanke: Central Banks Fuel Wealth Loss And Inflation – The World Needs Less Of Them

Digital Transactions Rise As US Dollar Slowly Loses Its Hegemony

At one time gold was the world’s most preferred currency before it was replaced by paper money. After World War II, the United States dollar became the backbone of the world’s reserve currency system due to its strength and stability. But that is beginning to change.

According to a new report by SWIFT, the USD is losing its hegemony as an inter-continental, cross-border settlement currency in Africa. The use of the US dollar has dropped as a share of payments from Africa from 50% in 2013 to 45.1% in 2017, it says.

US Dollar Losing Dominance As A Means For Settling Transactions In Africa
Africa’s currency usage for cross-border commercial payments, 2017

More people are switching to local currencies, and some others to mobile money, for cross-border payments. Payments in the West African franc – used by 8 countries – increased from 4.4% in 2013 to 7.3% in 2017 while transactions in the South African rand – used mostly in Southern Africa – rose to 7.2% from 6.3%.

The report, which maps commercial payment flows against financial flows in Africa, highlighted that since 2014, the percentage of Sub-Saharan Africans with traditional financial accounts has not changed.

US Dollar Losing Dominance As A Means For Settling Transactions In Africa
Africa’s currency usage for cross-border commercial payments, 2013

But the percentage of mobile money users has doubled, to 21 percent. This is shown by an increase in financial payments made through mobile money from 5.5% in 2013 to 6.4% in 2017.

SWIFT, which connects 11,500 financial companies in 200 countries, forecast that financial technology “will play an increasingly important role in defining Africa’s financial landscape.”

“While the US dollar still dominates, it is releasing its hold,” said SWIFT in its latest report titled “Africa Payments: Insights Into African Transaction Flow.”

About about 20% (16.7% four years ago) of “all cross-border commercial payments were credited to an African beneficiary,” indicating “that more goods and services are being bought and sold within Africa.”

Intra-African clearing of payments has also increased, from 10.2% in 2013 to 12.3% in 2017, which shows that an “increasing number of payments are being routed through Africa instead of via a clearing bank outside of Africa.”

Cryptocurrency ‘Goldfield’

US Dollar Loses Dominance As A Means For Settling Transactions In Africa
Digital payments

It is difficult to work out how cross-border payments are going to play out in Africa in future. But the trajectory points towards an escalation in mobile-based settlements.

SWIFT data shows that about 6.4% of all payments within, or from Africa, were done by means other than any form of fiat currency. This includes peer-to-peer digital payments over the phone that may expand to cover cryptocurrency, which is not necessarily captured in mainstream data.

But more than a dozen African countries have plugged into cryptocurrency in the last couple of years, with one crypto-focused operation or another launched, even though regulation remains an area of uncertainty.

According to GSM Association, which represents mobile operators globally, there will be 725-million mobile phone subscribers in Africa by 2020 – a development that is seen as key to driving the adoption and development of cryptocurrency on the continent while boosting intra-African trade.

“With mobile money and other digital financial services, people can store money securely, spend it effortlessly, and afford the small fees charged by their providers,” SWIFT says.

Trade Dynamics Are Changing Within Africa

The report comes at a time when most of Africa is investing in financial market infrastructures (FMIs) that are linking up many countries within the continent. Policymakers recognize that payments systems and other infrastructure are an enabler for economic growth.

US Dollar Losing Dominance As A Means For Settling Transactions In Africa

Early this year, African leaders launched the continent’s biggest free trade agreement since the establishment of the World Trade Organisation in 1995.

The African Development Bank expects that the Continental Free Trade Area will stimulate intra-African trade by up to $35 billion per year, generating a 52% increase in trade by 2022 and a $10 billion decrease in imports from outside Africa. These efforts will continue to push up intra-Africa payment flows and its impact is being felt in the world as reflected in change in the use of currency.

How far could cryptocurrency go in challenging the status quo in Africa? Let us know what you think in the comments section below.


Images courtesy of Shutterstock


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Bitcoin’s Hopeful Numbers: 70% Familiar in the United States

Bitcoin’s Hopeful Numbers: 70% Familiar in the United States

This week Yougov Omnibus released a host of encouraging new survey data, new numbers, and among their findings “48% of millennials would be interested in using cryptocurrency primarily…A vast majority (79%) of Americans are familiar with at least one kind of cryptocurrency.”

Also read: Square’s Big Week: Crypto Patent, Shares Leap, and Lightning Plug

Some Encouraging Bitcoin & Crypto Numbers

Amid sagging crypto market prices, it’s heartening for enthusiasts to receive survey data like that recently released by Yougov Omnibus. Their findings concluded, “By far, the most well-known cryptocurrency among Americans is Bitcoin, with 71% of people saying they’ve heard of it. The next best-known is Ether/Ethereum, with 13% saying they have heard of it. Overall, men are more likely than women to have heard of almost every kind of cryptocurrency. About three in ten (27%) women say they have not heard of any cryptocurrency, compared to only 16% of men who chose the same answer.”

Bitcoin’s Hopeful Numbers: 70% Familiar in the United States

Yougov is a London-based internet market research firm. For nearly two decades, it has mostly been known for its UK political acumen, but of late has taken on a more international scope. It largely employs online methodology, involving surveying users based on demography. It can draw from as many as 5 million people across the globe, with nearly ⅕ of those from the UK alone. Since not everyone uses the internet, even in 2018, the company is sometimes criticized for a lack of boots on the ground, as it were. Though for cryptocurrency it does seem to be a tight way to gather attitudes. Poll analysis specialists Fivethirtyeight graded Yougov a “B”, having called nearly 90% of political races without bias. Since 2007 they’ve gobbled up US research firms in Palo Alto, CA, Princeton, NJ, Connecticut, and Portland.

The less than enthusiastic deeper dive within the present crypto survey shows that even though Americans have heard of bitcoin, “87% have had no interaction with it, meaning they haven’t bought, sold, or mined it. About half (49%) in this group say ‘I’m glad I didn’t buy Bitcoin earlier, and I don’t plan to buy it,’ while 15% say ‘I wish I had bought Bitcoin earlier, but I feel like it’s too late now.’ About one in five (21%) people between 35 and 54 chose this response, while only 11% of people 55 and up did,” Yougov detailed.

Half Empty, Half Full

On a slightly more positive note, “more than one-third (36%) of people think that cryptocurrencies will become widely accepted as a means of transaction for legal purchases within the next 10 years. Millennials (44%) are the most likely of any age group to say cryptocurrency will be widely accepted. About one-third (34%) of Gen X’ers and 29% of baby boomers agreed,” which could bode very well for both the immediate and longer term future.  

Bitcoin’s Hopeful Numbers: 70% Familiar in the United States

There is still a stigma when it comes to cryptcurrencies, a battle enthusiasts have been waging against since decentralized money’s founding nearly a decade ago. “One quarter (25%) say they think cryptocurrencies are used more for illegal purchases rather than legal ones,” Yougov stresses.”Only 17% think they’re used more for legal purchases, and 19% think cryptocurrencies are equally used for legal and illegal purchases. Hispanic Americans are particularly likely to believe that cryptocurrencies are mostly used for legal purchases.”

On a cup half empty, cup half full tone, the survey reveals, “Of the people who believe that cryptocurrencies will become widely accepted, over one-third (36%) say they would be interested in converting to primarily using a cryptocurrency rather than the US dollar. However, a majority (57%) say they would not be interested in converting away from the US dollar. Millennials are almost equally split between being interested (48%) and not interested (50%).”

ls the future bright for cryptocurrencies? Let us know in the comments section below.


Images courtesy of Shutterstock, and Yougov.


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Global Data Report: Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale

Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale

Cryptocurrencies – Thematic Research, a report recently issued by Global Data, is attempting to smash what it views as myths and huge untruths about the hype surrounding crypto. Among their findings, the company concludes cryptocurrencies are expensive, slow, mostly unspendable, and cannot scale to meet their projected demand.

Also read: Troll Slayer: Derek Magill Defends Peer-to-Peer Electronic Cash Against Defamation

Cryptocurrencies Expensive, Slow, Unspendable, Cannot Scale

Talk about kicking a fellow when he’s down (assuming cryptocurrencies are male). London-based research firm, founded in 2006, Global Data, released a 34 page study on exactly why they believe crypto won’t ever live up to its hype or promise.

Its Chief Analyst, Gary Barnett, gets to the heart of the matter, “Many of the most basic claims made by proponents of cryptocurrencies simply are not true. We are told that cryptocurrencies speed transfers up, that they help to eliminate middlemen and that they are free of cost, but none of this is true.” Anecdotes abound as to the veracity of his claim, especially as it relates to bitcoin core (BTC), the world’s most popular cryptocurrency, and the most well known. The ecosystem has famously chosen to employ ‘middlemen,’ the very same Satoshi Nakamoto’s white paper was written to avoid, such as banks (Coinbase) and other exchanges that are allowed to hold full control over a user’s coins and tokens.

Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale

“Cryptocurrency transactions are not free,” Mr. Barnett continues. “For example, at its peak the per transaction cost for bitcoin exceeded $50, which is not exactly a great way to buy $25 worth of groceries. While the cost per transaction hovers around $1 when the bitcoin network is not under load, it will inevitably rise if transaction volumes grow again.” Here again, the whipping boy is BTC, and no mention is made of viable alternatives in this regard like bitcoin cash (BCH) or others.

Perhaps most damning, when considering just what the ‘currency’ part of cryptocurrency means, Mr. Barnett fires “no cryptocurrency is widely accepted and transacted. The number of retailers and businesses that accept cryptocurrencies as payment for goods and services is vanishingly small, and those that do typically report very low volumes of cryptocurrency transactions by comparison to other means of payment.” This somewhat begs the question, but it might require Mr. Barnett and Global Data to be a little hipper when it comes to the more recent history of BTC in particular. Enthusiasts have taken nuanced sides as to the importance of claims like Mr. Barnett’s, and the differences are so profound in the crypto space entire projects exist to prove the others wrong. Plus, it is early days with regard to merchant adoption — constant mainstream media hectoring, along with governments the world over threatening ever tighter regulation, doesn’t help matters.

The Scaling Issue Continues to Haunt

Global Data hammers home a key bugaboo with regard to crypto, scaling. For ‘big blockers,’ this issue seems to trump most. With the advent of bitcoin cash (BCH), larger blocks allow for more transactions, less congestion, and ultimately lower fees and faster confirmations, at least in theory and so far.

Nevertheless, the report concludes “cryptocurrencies cannot scale. The Visa payment network is capable of supporting 24,000 transactions per second (tps) at peak rates and regularly averages in the region of 1,500 tps. Bitcoin, meanwhile, struggles to achieve a transaction rate over 10 tps, while bitcoin cash can handle around 60 tps. The only cryptocurrency which comes close to Visa’s average is Ripple, which is capable of 1,500 tps.”

Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale

And so, mainstream research firms such as Global Data are left to muse about the current state of crypto valuations. As “currently applied to cryptocurrencies,” Mr. Barnett stresses, they “have no basis in fact; cryptocurrencies represent a classic bubble, in which valuations are purely the result of speculation on the likely behavior of the market rather than a clear-eyed assessment of underlying value.” No mention is made of it being only near a decade in arriving at valuations, and how currencies such as BTC are up thousands of percents since their inception. Bubble doesn’t seem, yet, to describe crypto prices well.

The report’s lone sober take, though still mired in mainstream cynicism and assumptions, comes as a preface. “In fairness,” researchers note, “all currencies are a confidence trick. The US dollar, British pound, and the Euro all depend on nothing more than market confidence for their value. The extent to which a currency works effectively is a function of a range of factors and this report sets out to determine whether cryptocurrencies represent a serious alternative to the established fiat currencies.” Few crypto proponents would claim decentralized money to be quite there, but, then again, government money has had a huge head start.

Is crypto a failed, over-hyped experiment? Let us know in the comments section below. 


Images via the Pixabay, Global Data, Shutterstock.


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Federal Reserve Pres: People Want Dollar, Not Volatile Crypto

Federal Reserve Pres: People Want Dollar, Not Volatile Crypto

St. Louis Federal Reserve President, James Bullard, was recently interviewed at this year’s Consensus conference in New York City. That a top US economic policy maker was in attendance is victory enough; however, he was asked his opinions on cryptocurrency going forward by CNBC Global Markets Reporter Seema Mody. He explained he found the phenomenon “interesting,” and how more cryptos being issued all time necessitates keeping an “eye” on them. Mr. Bullard also compared the use case for cryptocurrencies with that of the dollar, and whether the former posed a threat to the latter.  

Also read: Bitpay Enables Bitcoin Cash (BCH) and Bitcoin Core (BTC) for Tax Payments

Federal Reserve President Attends Crypto Conference

Federal Reserve President, James Bullard, gave a presentation at this year’s giant Consensus conference in New York City. Reread that sentence. A sitting Fed policy maker thought it important enough to attend a crypto soiree. That’s news enough. But more importantly, President Bullard gave a presentation on the government’s current thinking about cryptocurrency.

In his talk, he acknowledged crypto is facilitating trade that might otherwise not occur. He couldn’t help himself by mentioning illegal activity (and we all know fiat currencies are never used in illegal activity), but he did describe decentralized money’s lean toward frictionless transactions (especially with regard to costs/fees) as being an advancement.

Federal Reserve Pres: People Want Dollar, Not Volatile Crypto
Mr. Bullard and Ms. Mody

The Fed policy maker reserved the bulk of his comments, both in the presentation and during a post-game interview with CNBC, to talk about the problems in crypto as he sees them. One issue is simply the number of currencies being offered. The 12th St. Louis Fed President feels this over complicates matters, especially with regard to exchange rates and volatility.

Asked if cryptocurrencies pose a threat to the dollar, Mr. Bullard, 56, answered he didn’t think so. Global Markets Reporter Seema Mody, who is covering Consensus for CNBC this year, quickly followed up with a “but it could be?” The Fed President was noncommittal, choosing instead to shrug and give the pat answer about no one really knowing what the future holds. He emphasized how since its creation the US dollar has vanquished nearly all currency competition due to its being backed by the world’s strongest economy. It’s abundantly clear, Mr. Bullard suggested, people want the dollar and not crypto … at least at the moment.

Fed Coin on the Horizon?

Ms. Mody pressed Mr. Bullard about his presence at the conference, asking if this was a hint of things to come with regard to a future coin birthed by the Fed, a Fed Coin? Interestingly he didn’t dismiss the idea outwardly, and instead said they’d for sure look at the possibility, as the Fed does with many different types of financial innovations. He also assured there wasn’t any plan being hatched at the moment, no imminent Fed Coin coming. Mr. Bullard also wondered aloud what the gains would be by creating such a coin. He smiled subtly, assuring he’s keeping an “open mind.”

Federal Reserve Pres: People Want Dollar, Not Volatile Crypto

His comments seem to be less strident than statements issued by the St. Louis Fed on the very subject not even one month ago. “The St. Louis Federal Reserve has published an essay critically evaluating the notion of cryptocurrencies that are issued by central banks,” we detailed. “The article is highly dismissive in presenting what it describes as ‘the non-case for central bank cryptocurrencies,’ concluding that ‘a central bank will not issue cryptocurrencies in the sense of a truly decentralized and permissionless asset that allows users to remain anonymous.’”

A rather curious fact about the St. Louis Fed, one of twelve jurisdictions in the Federal Reserve system (the 8th district serves Indiana, Kentucky, Missouri, Illinois, Tennessee, Louisiana, Mississippi, Arkansas), is how it has recently become very chatty about crypto. As these pages reported back at the beginning of this year, “Aleksander Berentsen and Fabian Schär of the Federal Reserve Bank of St. Louis have recently published an article that emphasizes many of the benefits of cryptocurrencies. The article states that ‘cryptoassets are well suited to become an important asset class,’ in addition to offering praise regarding a number of the major applications associated with cryptocurrencies.”

Do you think a Fed president attending a crypto conference is meaningful? Let us know your thoughts in the comments below.


Images via Shutterstock, Pixabay, Twitter.


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Circle Raises $110Mn With Plans to Launch USD-Backed Coin

Circle Raises $110Mn With Plans to Launch USD-Backed Coin

The cryptocurrency based firm Circle announced it has raised $110Mn USD in a Series E fundraising round led by the Chinese firm Bitmain Technologies. Circle now joins Coinbase as one of the most well-funded cryptocurrency companies in the U.S., and the Boston-based firm has announced plans to issue a dollar-backed cryptocurrency called USD-C.

Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space

Circle Raises $110Mn Plans to Launch Stablecoin

Circle Raises $110Mn With Plans to Launch USD-Backed CoinCircle has big plans ahead for its latest mobile project called ‘Centre’ while also revealing its plans to create a stable coin much like the currency Tether (USDT). Furthermore, the firm has raised $110Mn in a Series E funding round that included investors such as Bitmain Technologies, Blockchain Capital, Pantera, Digital Currency Group and other venture firms. In addition to the injection of capital, Circle says it is planning to launch a new cryptocurrency that is backed by the price and reserves of USD.

The company’s new token will be called ‘USD-C’ and based off of the Ethereum network. According to the Circle, the firm’s subsidiary ‘Centre’ project will manage the USD-C protocol. Circle feels a cryptocurrency that is tied to a fiat currency can add more value to the blockchain ecosystem.

“It is difficult to use something like bitcoin if the volatility is so high,” Circle’s founder and CEO Jeremy Allaire explains. “Something like this makes it more possible.”  

A Partnership With Bitmain

Circle Raises $110Mn With Plans to Launch USD-Backed CoinCircle also detailed that Bitmain will also be helping with the Centre project and the USD-C launch. “Bitmain will help Centre introduce multiple fiat stablecoins in a variety of geo-currency zones,” the company explains. Moreover, the company takes a jab at other ‘stablecoins’ utilized in the markets right now that lack transparency as the firm states:   

Existing fiat-backed approaches have lacked financial and operational transparency, have operated in unregulated jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed proprietary technologies.

Circle says despite celebrating their fifth anniversary this fall they feel like they are just getting started. In addition to Centre and the new USD-C token that will launch this summer, Circle says it also has plans for Circle Invest, Circle Trade, Circle Pay, and the newly acquired Poloniex exchange.

“We see the future of the global economy as open, shared, inclusive, distributed, and powerful — not only for a few chosen gatekeepers, but for all who will connect,” Circle adds.

What do you think about Circle raising $110Mn in a funding round led by Bitmain? What do you think about this new USD-C idea they have? Let us know your thoughts on this subject in the comments below.


Images via Shutterstock, Bitmain, and Circle. 


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Venezuela’s Petro “May Help the Global Currency System”: Chinese Credit Rating Giant

The post Venezuela’s Petro “May Help the Global Currency System”: Chinese Credit Rating Giant appeared first on CCN

Dagong Global Credit Rating, one of China’s biggest credit rating agencies, recently published a report commenting on Venezuela’s oil-backed cryptocurrency, the Petro (PTR). Per the report, the cryptocurrency “may help the global currency system return to its basic value.” While the agency doesn’t assert whether the Petro can help Venezuela’s economy, it points out the

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