Bitcoin Adoption In East Africa Presents Challenge To Planned Unified Currency

Bitcoin Adoption In East Africa Presents Challenge To Planned Unified Currency

The East African Community’s (EAC) plans to launch a unified currency in the region has an additional challenge to overcome, as bitcoin adoption continues to grow in Africa.

Six nations which fall under the intergovernmental central bank organization are currently planning a unified currency that would be considered legal tender in Burundi, Rwanda, Tanzania, Kenya, Uganda, and South Sudan, according to AllAfrica.

In November the organization announced the plan, with the agreed aim to launch the currency by 2024, as a way of mitigating the effects of a declining economy and volatile national currencies.

There is a new challenge to this mandate, however, as the popularity and continued adoption of bitcoin and other crypto currencies in the region poses a hurdle to any potential unification of respective currencies currently in use across the six countries.

In order to create and sustain a unified currency, an East African Central Bank would need to be established, with monetary and fiscal policies, financial, payment and settlement systems, as well as financial accounting and reporting practices standardized.

Currency concerns and political uncertainty across numerous African countries has driven the demand for bitcoin, with Zimbabwe, Sudan, Kenya and South Africa having experienced a surge in bitcoin use over the past year, according to the WallStreetJournal.

Digital currency bitcoin, the most popular of the crypto currencies, saw a massive 1,375 percent gain in value during 2017, and this surge is part of the reason for its popularity, but it is also a point of concern for those in charge of the East African central banks who are considering a combined currency.

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Bitcoin and a unified currency in East Africa

Bernard Dadi, the Bank of Tanzania’s national payment system director, recently spoke about the concerns that he shares with fellow banking authorities in the region.

“The objective of Bitcoin founders is quite different from that of community member states on establishing a single currency. As we’ve said, the process to have a single currency is still underway with consideration of available challenges including the growth of Bitcoin,” Dadi said, according to Tanzania’s DailyNews.

“Not just in Kenya … South Africa, Swaziland, Namibia, Uganda and other African nations have since warned their people over Bitcoin,” he added.

Dadi went on to say that the Central Bank of Uganda has also warned its people about digital currencies.

Two unified currency systems based on region already operate in Africa, with the West African CFA franc and the Central African CFA franc successfully implemented.

As bitcoin adoption grows in East Africa, so too does the public interest in a unified currency across the region, and perhaps the two can coexist without negatively affecting the other.