eBitcoinics News 08 Nov, 2019 news.eBitcoinics.com Views: 142
The call for Africa to look in adopting cryptocurrency is gaining grounds amongst the crypto-community. Industry player and a co-founder of Blockchain African Ladies group Doris Ojuederie in a Press Release had challenged African Leaders to look into what stablecoins are and the advantages when applied in the continent she said;
WHY IT IS IMPORTANT FOR AFRICAN GOVERNMENTS TO CREATE ITS STABLECOINS
Across the globe, efficient and effective financial systems are being adopted and implemented in countries and most countries in Africa are still trying to crawl their way out of debts and financial turmoil. Some African countries are neck-deep in financial difficulties that the poorest citizen lives on less than a dollar a day. Finance is important for economic development and poverty alleviation especially in developing countries within Africa. African financial systems are among the least in the world.
In times past, Africa has adopted various forms of money as legal tender for exchange of goods and services, Money as a universally accepted means of exchange of value for goods and services, Money as a means of exchange involves lots of trusts.
In the centralized modern practice, banks and governments regulate a specific currency as the legal tender for exchange of goods and services. Citizens rely on them to main the supply and secure their funds. Trust in the financial system, as well as the government, took a hit during the financial crisis of 2008 and this birthed the era of cryptocurrency with Bitcoin as the first cryptocurrency built on Blockchain Technology.
The aim of blockchain technology and cryptocurrency is to build a decentralized system where anyone and everyone can be in charge of their funds at every given time. As blockchain technology continues to emerge, STABLECOIN, a class of cryptocurrency continue gaining grounds. Stablecoins are targeted towards resolving and bridging gaps created by Fiat currencies.
For Africa, the stability and valuations of the Sovereign currencies have become a fundamental factor in analyzing the strength of the economy and sustainable development. Stablecoins seems like a probable solution for cryptocurrency adoption in Africa.
What is Stablecoin?
According to Investopedia, stablecoin is a new class of cryptocurrencies that attempts to offer price stability and are backed by a reserve asset. Stablecoins have gained momentum as they attempt to offer the world the best of instant processing, security or privacy of cryptocurrencies with volatility free stability conferred by Fiat currencies.
Bitcoins and other cryptocurrencies undergo volatility in valuations in that the price can be low today and tomorrow, it has skyrocketed. A currency should maintain its value long enough for it to be used as a store and exchange value. This volatility affects daily use by the general public and increases the need for stablecoins which will maintain its value irrespective of the market fluctuations. Ideally, Stablecoins will solve the problem of adoption whereby people will be encouraged to adopt these currencies, spend and save them.
Stablecoins maintain their valuations because of the reserves backing them up and regulations from the controlling authorities like central banks. Also, Fiat currencies backing these stablecoins are attached to assets like gold which helps to maintain their prices and preserve it from being volatile in spite of market changes.
Stablecoins are an attempt to bridge the valuation gap between Fiat and cryptocurrencies.
Examples of stablecoins are Tether (USDT) and True USD which have equivalent valuations as the U.S. dollar.
Why Africa needs to create its stablecoins:
Generally, stablecoins gives stability alongside decentralization and redeemability with scalability to legal tenders. Therefore, it will do a lot of good for Africa to adopt technology shortly.
Here are some reasons why Africans need to adopt stablecoins:
With the rate at which inflation affects the value of currencies especially in some countries within Africa, it is needful to have safe have an asset like stablecoins that are unaffected by the market instabilities.
Stablecoins gives the individual full custody of their money without losing value in the face of economic crisis.
Stablecoins will give full control to the owner.
Stablecoins also serves as a cheaper way to pay for goods and services, because corporations can easily escape transaction fees imposed by third-party financial organisations.
Sending and receiving money across countries and continents accrue exorbitant fees which stablecoins can solve without losing its inherent stability. Credit card companies like Visa, MasterCard and so forth charges lots of processing fees, that stablecoins will circumvent and still deliver value to the users.
Recently, banks and financial institutions have experienced delays and failures in meeting up with the demands of people as regards to their money. Most times, there are issues with transfers, debits, credits, limited bank hours and these increases waiting time for the people.
With stablecoins, individuals don't necessarily need a bank account to access their funds, they can control and access their funds when they want to. Stablecoins are backed by physical assets of value and will increase adoption of blockchain technology and cryptocurrency while protecting the users through smart contracts.
Stablecoins are the blockchain solution to lots of Africa's Financial Problems because it is fast, borderless and transparent. As much as stablecoins are still under centralized 3rd party regulations, they will solve a lot of finance-related issues Africans face with their local currency.
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