Blockchain transactions are immutable and offer end-to-end transparency. FILE PHOTO | NMG
There is no doubt that
cryptocurrencies and blockchain, the technology behind these virtual
currencies, is set to disrupt every industry - especially the financial
sector. We have previously seen waves of disruption: the computer, the
internet and the mobile phone.
At first, they were
criticised and rejected, but sooner it was a matter of embrace or die.
At the advent of mobile money service M-Pesa, banks were up in arms
saying the platform exposed users to great risk, with some senior
bankers asking where exactly money in a mobile wallet is held. We all
know what followed. I predict a similar curve for crypto and blockchain.
Adoption
of cryptocurrencies would go a long way in enhancing financial
inclusion not only in Kenya but across sub-Saharan Africa where many
remain unbanked.
Today sub-Saharan Africa remains the
global leader in the use of mobile money: 21 percent of adults in the
region have a mobile money account, according to the World Bank 2017
Global Findex Report.
With seven out of every 10 adults
in Kenya using mobile money, a switch to cryptocurrencies is likely to
be smooth. The costs would be lower, and settlement is real-time, for
virtual currency users to make both peer-to-peer and merchant payments.
As
argued by World Bank, diaspora remittances to developing countries also
stand to gain massively from adoption of blockchain technology.
Sub-Saharan Africa remains the most expensive place to send money to,
where the average cost is 9.4 percent.
Cryptocurrency-based
diaspora remittances and cross-border payments bypass the barriers of
traditional banks which expose users to high transaction fees, delays in
settlement and losses incurred in forex conversions.
Virtual
currencies are also a good store of value - especially for Africa's
volatile economies where inflation can wipe out ones savings. We have
experienced hyperinflation in Zimbabwe and South Sudan. In such cases,
crypto would be a good bet to safeguard one's cash from the vagaries of
inflation. Key to the adoption of cryptocurrencies in Kenya is a trading
platform where users can buy and sell their holdings.
There is also need for cash-in and cash-out services - and
Kenya's vast network of mobile money and bank agents would be a good
fit. Contrary to concerns that virtual currencies such as bitcoin are
largely untraceable and anonymous hence making them susceptible to abuse
by criminals in money laundering and financing of terrorism, blockchain
transactions are immutable and offer end-to-end transparency.
The
financial services sector in Kenya is ripe for blockchain adoption,
with news that commercial banks have applied to the central bank seeking
approval to roll out blockchain-backed products and services.
And
just the other day, a UK-based blockchain fintech announced its buying a
stake in a tier III bank in Kenya and transform it into "the world's
first fully licensed crypto bank with low-cost funding availability."
There
are other use cases for blockchain that would greatly impact the
banking sector. Think about a distributed ledger of credit scores that
would great a global credit bureau where all lenders and borrowers can
plug in.
SHAUN BURROW, Founder, DeMars (DMC)
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