Africa -- the next frontier for virtual currency?
If you’ve heard of Bitcoin, you might be a computer geek. The virtual money aspires to become a universal currency that doesn’t depend on governments or banks.
Cutting out the banks results in cheaper transactions, Bitcoin backers say. Online payments pass from person to person without using a bank as the middleman. And unlike electronic payments with ordinary currency, governments can’t halt Bitcoin payments, an idea that appeals to libertarians.
So far, Bitcoin hasn't made its way into the mainstream. It is still a relatively fringe idea viewed skeptically by many economists.
Yet Bitcoin has surprised some of its critics, stabilizing in value after its price peaked and plummeted last year. Bitcoin backers insist that despite its past troubles, the digital currency will prove itself. And they’re now hoping to take their virtual money to a somewhat surprising new market: Africa.
German software developer and Bitcoin exchange consultant Rudiger Koch recently pitched the idea in Nigeria, arguing that Bitcoin has advantages for African countries. Bitcoin has no inflation tax, unlike ordinary cash. It could be spent and shared using cellphones, which are ubiquitous in much of Africa. Cellphone systems that let people transfer money by text message are already used in Kenya.
That last point relies on Bitcoin increasing in value with time as it becomes more popular -- the exact idea that is disputed by skeptics who say the digital money will simply fizzle out.
So far the idea hasn't caught on in Africa. Though Bitcoin is based on free software that anyone can use, “we have to admit that Bitcoin is at this point a currency that's almost exclusively used by computer geeks and libertarians,” who are more common in the developed world, Koch wrote in an email. “You can count African Bitcoin users on two hands, literally.”
Koch theorizes that Bitcoin could spread in Africa from the top down instead of the grassroots. An African government could catapult Bitcoin onto the market by buying up a stash of the digital money, then announcing that it could be used to pay taxes, he explained. Companies could also foster it.
Are Nigeria or other African countries interested? Koch says he hasn't gotten any takers so far.
“But then -– I might not know,” he said. “As Bitcoin is completely open, it doesn’t require the cooperation of anyone in the Bitcoin community, including myself.”
-- Emily Alpert in Los Angeles
Photo: People shop at a market in Bamako, Mali. Credit: Habibou Kouyate / Agence France-Presse