Can bitcoin be the savior of African immigrants?

Can bitcoin be the savior or African immigrants?

by Claire L.

There are more 30 million Africans living in diaspora. They are sending their income to home and it is almost $40bn per year, which is continuously growing. Most of African countries rely pretty much on this international remittance and it takes about 5% of each countries’ GDP.

Western Union and MoneyGram, which is dominating the African international remittance, charges about 12.3 percent to send $200. Let’s say you are one of the African immigrants and sending money to your home. How will you feel if about 12 percent of your income should be taken away every time you send your money? If you earn $3,000 per month, you should pay another $360 to send your money, as the ‘international remittance fee.’ Total annual fees reach to $1.4bn.

Sounds not that bad? But there is another problem: the unbanked population in Africa. Less than three percent of Africans own credit cards. Recipients often don’t have bank accounts so they have to get the money by cash, which is not comfortable and expensive, and also not secure.

What can save African immigrants from the high remittance fee? Should they just rely on the major remittance corporates which is monopolizing more than 50% of the market? Well, maybe they can find a solution from the cutting edge technology: Bitcoin.

What is Bitcoin?

Bitcoin is the decentralized, peer-to-peer digital currency which doesn’t exist in physical form. It is not censored by any government, banks, authorities, or by anyone. Bitcoin is generated by internet, by anybody. It makes some exclusive benefits. By using bitcoin, you don’t have to use the bank to send your money because it is peer-to-peer base transactions. There are just senders and recipients between transactions. Even government and banks can’t see your private account information. This means the fees are much lower (almost zero), and you can transfer it internationally without any regulations with the lowest fee, no frozen account, no transaction limits, no pending periods.

Bitcoin generating process is called bitcoin mining, which requires tremendous computer power. Mining computers have to solve complicated encrypted math problems, and the first computer which solves the problem gets a block of bitcoins as a reward. At the same time, verification of every transaction is conducted by this bitcoin miners automatically.

Because bitcoin is transmitted by internet, every transaction is logged on network. It is called ‘the public ledger’ and it can be shown by anybody. But you don’t have to feel cautious about it, because you can just create a bitcoin wallet (which stores your bitcoin) by using your nickname or alias. There is no need to submit your ID or phone number. So basically every transaction is completely ANONYMOUS and ENCRYPTED. It is considered as the most secure and transparent way to lock money.
It may sounds too unrealistic, but some of the world’s biggest banks and even NASDAQ and New York Stock Exchange are investing hundreds of millions of dollars into Bitcoin and Blockchain technology.

How can it help African immigrants?

There are 4 ways to transfer money to Africa from a foreign country.

1.    Western Union or MoneyGram, which charges you almost 12.3 percent of the principal.

2.    Bank transfer and remittance, which is two or three times more expensive than any other methods. Also, less than 3 percent of the population have credit cards and the recipients in Africa often don’t even have bank account.

3.    PayPal, which is not available in many African countries and in some occasions, more expensive.

4.    Bitcoin, which charges almost zero remittance fees and enables to transfer money within 1 minutes.

The answer looks quite obvious.

Bitcoin has no regulations and doesn’t need any trusted third parties (banks) between transactions. Which means, anybody can send their money to everywhere in the world with almost zero remittance fee.

Elizabeth Rossiello, CEO of African bitcoin remittance service Bitpesa, allows senders to send money home to Kenya and Ghana with 3 percent flat fee. “The number of our users is growing by 60 percent every months,” she said. Especially, Kenyans alone transferred over $11bn by mobile money services in the first half of 2014. Safaricom, the Kenyan mobile network operator estimates almost 43 percent of Kenya’s GDP flows through the mobile transfer. Which means, Africans are quite familiar with the mobile money services. Bitcoin is suited in mobile environment more than any other currencies.

Does it have any value?

Think about the paper money we use every day. Who gives value to it? It is just a piece of printed paper. People give value to that piece of paper because they want it. If nobody wants gold, it would be just a piece of stone. How about water? Could anyone even imagine buying a bottled water 100 years ago? It was not even considered as a ‘product’, but it became valuable because people want it.

Just like this, value is not decided by certain authorities, governments, or banks. Nobody announce that ‘gold has value.’ People defines value.

Bitcoin is just same with those examples. Actually, it is the commodity that is similar to gold. The amount of bitcoin is limited as 21 million bitcoins and it is being generated lesser and lesser as time goes by. And its price is decided completely by the basic law of demand and supply.

In last July, when Greece was struggling with its financial crisis, and it shut down its banks and stock exchanges, when it regulated people to just withdraw only 60 euros a day, bitcoin price popped up from $276 to $316 per coin. Why? Because people thought they needed a commodity which is not controlled by government policy or bank regulations, the commodity which can protect their money safely. People bought tons of bitcoin at that time and the price soared high. Like this, bitcoin is valued by people like any other commodities.

Is it actually usable?

Bitcoin startups in African region are increasing too. On January, the first Nigerian bitcoin exchange ICE3X was launched. It allows people to buy and sell bitcoins by using Nigerian local currency naira. Founder Gareth Grobler said Nigeria has massive potential in bitcoin business.  “Nigerian online consumers don’t have the same access to goods and services from international vendors due to credit card fraud. And bitcoin can solve this problem easily,” he said. Also, Nigeria has the biggest economy in Africa and it has one of the largest youth population in the world. Young Nigerians who are savvy and interested in the new technology can easily adjust to bitcoin.


Kenyan bitcoin exchange BitPesa

 There is also South African bitcoin exchange BitX. The co-founder Timothy Stranex said bitcoin could be the primary online payment method for many people given the low credit card penetration and unbanked population. “In this global world, international payments are being more important than ever. Bitcoin provides much easier way for businesses and consumers to participate in the global economy than traditional systems,” he said.

The primary Kenyan and Tanzanian online payment service provider M-Pesa, which has been expanded to South Africa, India, Afghanistan, and even to Eastern Europe, also allows its users to transfer their bitcoin into Kenyan shillings immediately.

Another bitcoin exchange in Africa, Igot, has also counted more than 200,000 transactions since its launch in early 2014. Rick Day, co-founder of Igot, said “more people will be inclined to use bitcoin because the speed of its transaction and the low cost are so attractive to most of Africans.”

What are the risks?

 Well, bitcoin is the cutting edge technology so it may not be accepted by many businesses. Its liquidity is still low because the number of bitcoin exchanges in Africa is still small so far. But more startups and bitcoin services are launching every day, and the businesses which accept bitcoin are exponentially growing globally. Over 100,000 businesses now accept bitcoin, including Microsoft, Dell, Wikipedia, Twitch, Greenpeace, Expedia and PayPal. Even the number of small retailers and merchants accepting bitcoin is also increasing every year. This is a great news for Africans who have troubles in using foreign goods and services. Given the fact that bitcoin-accepting businesses are significantly increasing, maybe there would be even no need to change bitcoin into local currency in near future.

There is another concern about bitcoin: high volatility. The price of bitcoin fluctuates day by day because its price is decided by basic demand and supply, just like gold and any other commodity. But bitcoin exchanges say it is no more a problem because they immediately convert transfers into the currency of the recipient. “Once we send bitcoin, it is instantly changed into local currency and delivered locally. So the price shown before the transaction to the customer, is the one the recipient receives,” says Ms. Rossiello of BitPesa.


There are still many controversies and mainstream media is writing negative articles about bitcoin. Some people say bitcoin will change the current world economic system entirely, and some people say it is just digital codes and too risky.

Well, bitcoin can be used as money laundering method or can be used to buy illegal products because it is anonymous. Some people call bitcoin “criminal’s money.” That can be true at some point.

But think about regular currencies. Is it not used by criminals? Is it not used to buy drugs? Or any other illegal products? Didn’t they do money laundry before bitcoin was invented? What kind of people used internet, cars, and any other cutting edge technologies excellently from the first time? : Criminals.

Bitcoin can be used to save African immigrants who are being tortured by the high remittance fees and at the same time, it can be used for some illegal activities too. USD can be used to save children who are suffering from starvation. But it can be used to buy weapons for terrorism activity also. They are all same. Its value and usage completely depends on people who use it. It is each other’s choice to use bitcoin properly, or not.

Now, let’s get back to our first question: Can bitcoin be the savior of African immigrants?

 A : YES. If you use it properly and smart.

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