The new broom that’s sweeping across Tanzania, in the shape of President Samia Suluhu Hassan, tossed out another shibboleth this week when she announced that the country ought to be considering the possibility of adopting cryptocurrencies as legal tender.
It’s early stage yet for Tanzania, and a decision along the lines of the one taken by El Salvador just last week looks some way off for the time being.
Nevertheless, the news boosted bitcoin again, allowing it to claw back just a little bit more of the ground lost when entrepreneur Elon Musk announced that he was freezing Tesla’s interests in the cryptocurrency until environmental concerns had been addressed.
At this stage President Hassan has instructed the Tanzanian central bank to “be ready” for the adoption of cryptocurrencies, and warned that it ought not to be “caught unawares.”
This leaves plenty of room for manoeuvre, but is nevertheless a fairly unambiguous signal that the momentum lies with crypto.
What the benefits of adopting cryptocurrencies into African economies will be remains to be seen. But most African countries, with the possible exception of South Africa, have weak currencies that are subject to the whims of the international foreign exchange markets.
The adoption of cryptocurrencies, which are less open to price manipulation by central banks and foreign governments could arguable provide some insulation against speculators and other bad actors.
Another motivation might be that since many currencies trade predominantly in relation to the US dollar first and other currencies second, adopting cryptocurrencies might allow some defence against the US financial establishment’s apparent addiction to money printing.
Back in the early 2000s inflation in Zimbabwe grew so rampant that its currency eventually had to be abandoned as wholly worthless. The replacement was the US dollar, which worked well enough after a fashion, but had several disadvantages, not the least of which was the wholesale physical degradation of the actual banknotes that were in circulation.
Since Zimbabwe had no power to print new dollars of its own, shortage of cash dollars only ended up adding another layer of problems to an already dysfunctional economy.
Cyrptocurrencies weren’t available back then, but if they had been it’s arguable that they would have been adopted very swiftly as an alternative currency.
Fast forward a decade or two, and it’s noteworthy that Tanzania is not the only country in Africa that’s having a high-level cryptocurrency conversation. There’s also talk about adopting crypto in Nigeria, although at this stage no official government source has commented.