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January 13, 2019
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CoinDesk recently featured an editorial highlighting the growing counternarrative from banks trying to catch up to the cryptocurrency phenomenon.
Why the banks are scared
Those of us who have been interested in cryptocurrency for a while know the benefits of digital coins. There is increased safety, no central authority, more anonymity, and greater convenience. Banks and other financial institutions have largely been very skeptical of cryptocurrency. It’s obvious why they would be: cryptocurrency poses a threat to the status quo of the financial system. Banks are losing money every single time a Bitcoin transaction is made. Why? Because they could’ve been charging a transaction fee for that transfer. However, cryptocurrency as a concept is not going anywhere, which is why the banks are now trying to catch up.
The new counternarrative
The banks have now finally acknowledged the value of cryptocurrencies. Some have even reached the point where they want to launch their own coins and tokens. However, there is still a certain kind of arrogance emerging from their camp. They feel entitled to lead the way in cryptocurrency because the public supposedly has confidence in the banks. Part of the new counternarrative is that blockchain technology does not have all the solutions to financial challenges. The banks claim that they do much more to secure the confidence of the public.
Why they’re wrong
Bitcoin and other cryptocurrencies are making lives easier for people across the globe. It’s quick and easy to make a transaction. Merchants can easily accept payments without having to pay a single dime up front. More importantly, cryptocurrency removes the monopoly of money-creation from the central banks. That means banks are under great threat to their status in society.
In defense of central banks
With all that said, central banks still are the foundation that underpins the global financial market. Private banks are notorious for not trusting each other, and central banks are the mediators that make things run smoothly. Furthermore, central banks do have an important role to play in societies. Frauds and hacking attempts are constantly made on citizens, and the central banks are currently the thing keeping us safe from these risks.
Why there is a need for open cryptocurrencies in Africa
Not all nations are equally fortunate when it comes to their central banks. Countries like Zimbabwe, which has suffered from hyperinflation for years, stand only to gain from cryptocurrencies. The Reserve Bank of Zimbabwe (RBZ) engaged in quasi-fiscal activities a decade ago, which resulted in hyperinflation of a staggering 500 billion percent. Things have not improved significantly since 2008, and public trust in their central banks is at an all-time low. There is a need for open cryptocurrencies in countries like Zimbabwe, Zambia, Nigeria, and Mozambique. The availability of private cryptocurrencies will provide much-needed competition to the central banks. This kind of competition will, in turn, force them to improve and win back the public trust.
