on the crypto
In Africa there is a competition to define a digital currency standard for the emerging digital economy. So far, there are three possible contenders (given that there is currently no scenario for a pan-African central bank digital currency): Bitcoin (quotation BTC), a form of decentralized digital currency; Facebook's Libra, now Diem, a digital currency issued by individuals; the Chinese DCEP, a digital version of the legal tender Chinese currency, the yuan. Of the three, the People's Bank of China DCEP is the main favorite thanks to a 20-year time advantage.
African technology stack
China-made cheap phones are the norm in Africa nowadays. More than 50% of smartphone users in East and West Africa use Chinese-made phones. Sometimes the procurement of Chinese equipment is strategically packaged together with long-term intergovernmental financing at extremely low interest rates from the China EXIM or the China Development Bank.
About 70% of 4G base stations in Africa are manufactured by Huawei (US, Australia and parts of Europe have banned Huawei equipment out of national security concerns). China practically subsidized Africa's connectivity and that didn't happen overnight. It took 20 years to get to this point.
Original sin
Over the past 15 years, mobile chip payments such as M-Pesa have become the de facto digital standard for 400 million non-bank telephone subscribers in Africa. Due to a historical combination of poor bank account diffusion and a lack of formal credit history, credit card adoption at significant levels has been hampered.
In Western digital commerce, however, the only existing payment integration methods are for credit cards. This leaves millions of Africans excluded from the global economy. And that's original sin, and no one knows it better than Chinese apps and venture builders. With the power of distribution and its collective influence on the stack, China has come up with a plan to push a new digital currency standard.
The great plan of China
The Chinese plan is to incorporate a hardware wallet standard that supports digital currency in every smartphone shipped to Africa. Meanwhile, Facebook's Diem digital currency and Satoshi Nakamoto's bitcoin have encountered a number of problems.
Diem's ambitions in Africa have been scaled down by a fragmented regulatory regime for mobile money, as well as a non-existent framework for digital currencies. So Facebook (FB) was forced to reconsider its plans. Bitcoin has also encountered a similar adverse regulatory regime.
Despite this hostility, bitcoin's decentralized characteristics have met Africa's informal trading culture. But China has the upper hand. Due to its political influence and debt obligations owed to it by African governments, Beijing has pushed for reserve currency status. Already 14 African central banks have considered adopting the yuan as a reserve currency. This would also contribute to China's plan on digital currency in Africa.
