On June 18th, Facebook released the whitepaper for its cryptocurrency, codenamed “Libra coin.” This announcement drew the attention of the entire crypto space.
Many altcoin promoters were excited (and still are) about the possibilities of an altcoin dethroning bitcoin. However, for bitcoin enthusiasts, the event was simply the launch of another altcoin. Some have gone as far as referring to Libra as “PayPal with the blockchain.”
I’ve previously written on the reasons why people should avoid Facebook’s cryptocurrency, and after reading the Libra whitepaper, I stand with the bitcoin enthusiasts.
Libra is the furthest thing from Satoshi’s vision of a decentralized global financial system.
This is because Libra coin isn’t really a cryptocurrency. Unlike the Bitcoin network, which is really decentralized (anyone can join and run a full node), Libra will be a permissioned blockchain, governed by a consortium of 100 organizations. Currently, 27 companies have joined the Libra Association, with each being required to invest $10 million.
This consortium type of governance will result in decisions being made in board room fashion, making Libra prone to censorship and control.
Libra is also a stablecoin, meaning its monetary policy will be under the control of central banks. It can be controlled and monitored just like fiat and is prone to the problem of a single point of failure, which is common in many fiat or gold backed systems.
Despite falling short to being a cryptocurrency (when compared to Bitcoin), Libra coin’s utility value is not something to assume—especially if you live in Africa.
With inside reports claiming that Libra coin will be highly marketed in developing countries, questions on how Libra will affect Bitcoin in Africa are fast coming up.
For us Bitcoin enthusiasts in Africa, Libra is a double-edged sword. On one end of the spectrum, some of the Libra applications may negatively affect bitcoin use in Africa, but on the other end, its use is likely to streamline the way for bitcoin adoption in Africa.
In this article, I give an introduction of the possible impacts of Libra coin to bitcoin adoption in Africa.
How Will Libra Coin Affect Bitcoin’s Use in the Remittance Market?
“Bitcoin will revolutionize the remittance industry in Africa.”
This is one of the most common statements when discussing the benefits of bitcoin in Africa.
Startups such as Bitpesa, Paxful, and Coinpesa are just a few of those utilizing bitcoin to facilitate faster and cheaper remittance services in the continent. Through these companies, business people in the continent have been able to make cross border payments faster and at lower costs.
Africans working in the United States or European countries have also benefitted from being able to send payments home using bitcoin.
Most of these crypto-based remittance services normally charge a transaction fee of 1-3%, which is way lower than the 10% bank fee or the 7% charged by remittance services such as Western Union.
Libra coin hopes to achieve a similar fate as these Bitcoin-based remittance companies. According to the Libra whitepaper, the Facebook cryptocurrency is looking to be the most effective cross-border money transfer service by promising increased speed and lower costs.
This is simply what Bitpesa and other bitcoin-based remittance companies have been doing since 2013.
However, altcoin promoters have maintained that Libra will experience more success as a remittance service due to the widespread use of Facebook apps in the continent.
In the best case scenario, Facebook and WhatsApp popularity in the continent will promote the widespread use of Libra coin, which will be detrimental to traditional remittance companies and stable coins.
As opposed to traditional remittance services, companies such as Bitpesa stand to benefit from Libra’s use in remittances.
Currently, the use of Bitcoin for remittance services is not as widespread. Part of this is due to the high level of mistrust and lack of information on digital currencies. However, Facebook’s popularity status will promote discussions about cryptocurrencies, and in the process, bring companies like Bitpesa out into the limelight.
Impact on Bitcoin’s use in e-Commerce
Ever tried explaining Bitcoin or Ether to anyone? What is the one question they always ask?
“So, what do I use it for?”
If you’re in the US or Europe, you can use Bitcoin for buying Microsoft or Amazon products or getting a cup of coffee.
However, for many Africans, Bitcoin is rarely used for e-commerce. For example, In Kenya, less than five businesses accept bitcoin. In some African countries, zero companies are willing to accept Bitcoin as a payment method.
This is another area where Facebook Libra will help to promote Bitcoin adoption in Africa
Most of the Libra founding partners are likely to accept the coin for payments. Once it’s launched, it will be possible to use Libra to pay for services provided by these companies.
Libra users will be able to use the coin to pay for Uber taxi services, buy music on Spotify, or even pay for goods on e-bay. For many African’s, this will act as a gateway to using cryptocurrencies for online purchases.
By introducing digital currencies as a payment method for companies operating in Africa, people are more likely to start using and accepting cryptocurrencies as payments.
With bitcoin being the most famous coin in Africa, it’s natural that businesses will want to use the grandpappy of crypto together with Libra (If they decide to accept it)
Although it may mean that Bitcoin will have fewer people using it for e-commerce purposes, Libra will undoubtedly smoothen the way for Bitcoin use in business within the African continent.
Libra Coin May Promote Friendlier-Crypto Regulations in Africa
The existence or lack of regulation has had a major impact on Bitcoin adoption.
Some African countries have taken a strong stance against Bitcoin, with countries such as Zimbabwe going as far as banning the use of the cryptocurrency in the country.
The existence of these regulations will hinder Libra use in African countries. Through Libra, Facebook will create a powerful digital currency that is not controlled by a central government. This takes power from central banks, and it’s hard to imagine any African government being friendly to a technology that is likely to take away their power.
Regulators in the United States and certain European countries have already started thinking of regulations against Libra, and African countries may soon follow.
In the last senate proceedings, bitcoin took over the conversation after Libra was explained as being similar to PayPal. During these hearings it was revealed that the movement that Satoshi started is slowly taking over and is here to stay.
With these statements, it may mean that US regulators may start looking in the possibilities of embracing bitcoin, which may mean better regulation on Africa.
Libra Use will Reduce Skepticism and Distrust in Digital Currencies
Other than a few millennials, most Africans distrust cryptocurrencies. In most occasions, discussions about Bitcoin mainly dwell on how some people have lost their money after falling for Bitcoin scams. Such discussions have deterred many individuals from buying Bitcoin.
However, Facebook is a largely trusted organization in Africa. With WhatsApp and Messenger being the most used messaging apps in the continent, it would be easy for Facebook to promote a mindset shift to one where cryptocurrencies are seen as a legitimate store of value.
Some of the people using Libra are likely to get curious and invest in Bitcoin, which will drive up adoption levels in the continent.
Libra coin is not a true cryptocurrency. It’s centralized, which creates a risk for censorship. It’s fiat-backed, which makes it prone to the inefficiencies of a centralized banking system.
Despite these shortcomings, Libra coin will have a major impact on Bitcoin’s uptake in Africa. Libra coin will be a competitor to Bitcoin (in certain industries), but will also promote increased adoption of the king of crypto