Political Economy of Digital Currency in Africa: stairway to heaven or road to nowhere?

International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue X, October 2021 | ISSN 2454–6186

Political Economy of Digital Currency in Africa: stairway to heaven or road to nowhere?

Nantogmah Danaa¹, Sampson Vivian Esumamba², Alexander Abeiku Odoom^3
1, ²Faculty of Accounting and Finance, University of Professional Studies, Accra
³Software Engineer, EYO Solutions Ltd

Abstract: The main purpose of the paper is to assess the nature and types of digital currency and the potential impact of digital currency adoption on African economies. The paper is based on a review of various articles, working papers, books, policy documents and legislations, and relevant websites of central banks as well as other international institutions which provide public information regarding digital currency. A qualitative descriptive design has been adopted in this study. Qualitative content analysis of documents was carried out and semi-structured interview conducted to elicit the views of five (5) key informants.
From the political economy perspective and in the light of prevailing economic conditions of chronic inflation and national currency volatility with the prospects of ‘digital dollarization, the paper argues that Africa ought to launch a single regional digital currency or a digital currency payment platform to address its negative impact rather than the issuance of national CBDCs which has the tendency to magnify the national fiat currency volatility in the digital economy. Additionally, the paper shows that digital currency average per transaction cost is 103.5 times cheaper than Sub-Saharan Africa average cost. It is also 65.5 times and 51.4 times cheaper than the digital remittance index and the global SmaRT average cost respectively. Furthermore, the paper demonstrates that digital currency adoption and spread in Africa is irreversible and Africa governments and regulators should adopt a regional approach to regulation, rather than regulate against digital assets, embrace and invest in robust research into digital currency ecosystem. Finally, in view of the limited research into digital currency adoption and its impact, design and technology options in Africa, the need for future research agenda to focus in these areas cannot be over emphasized.

Keywords: digital currency, political economy, financial services, regulation, Africa

I.INTRODUCTION

Cryptocurrency remains a hotly debated concept in board rooms, among academics, as well as national and international policy makers. One area of concern is the impact of cryptocurrencies on national economies in general but more specifically on developing and transitional economies. Some scholars maintain that the emergence of cryptocurrencies in Africa will mitigate currency instability but others argue cryptocurrencies may lead to “digital dollarization” and this could adversely affect the monetary policy independency of nation states.
Digital currency adoption is gaining grounds across Africa and a little over a dozen African countries have expressed

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