Crypto Currency is coming

The Central Bank of Nigeria, CBN recently announced plans to launch digital currency in the country. The announcement took many Nigerians by surprise as the apex bank had in no distant past moved against digital currency. Mrs Rakiyat Mohammed, Director, Information Technology at the CBN, at a media briefing disclosed that the apex bank plans to launch the virtual currency before the end of 2021.

Nigeria is not alone in the sudden interest in crypto currency. A fortnight ago, the President of Tanzania, Samina Suluhu Hassan, directed bank chiefs at the country’s central bank to necessary preparations for the introduction of crypto currency in the country.  Suluhu Hassan said the Tanzanian Central Bank “should be ready for the emerging financial technology (Fintech) by paving the way for crypto currency so that the country will not be caught unprepared in the near future”.

The wave of crypto currency is fast blowing rapidly across the world. According to Mohammed, about 80 per cent of Central Banks in the world were exploring the possibility of issuing Central Bank digital currency and Nigeria could not be left behind. Already, El Savador has approved Bitcoin as a legal tender in the Latin American country. Bitcoin and the United states Dollar would now be legal tender in the country.

The adoption of Bitcoin as a legal tender in Elsavador has ignited a wave of interest across Latin America. As at last week, about six countries in Latin America have shown strong interest that it may go the way of El Savador. The countries include Paraguay, Argentina, Panama, Brazil, Mexico and Tonga.

What really is Crypto Currency?

According to Engr Henry Ohakwe, an expert in Information and Communication Technology (ICT) and well versed in crypto currency,  cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.  Ohakwe said that “many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers”

A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation. This defining feature of crypto currencies might change as governments across the world develop interest in the virtual of digital currency.

It is worthy to note that Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.

Types of Crypto Currencies

There several types of digital currency. But according to Investopedia, the most popular of virtual currencies is Bitcoin launched in 2009. It is difficult to pinpoint whether it was an individual or group that launched the Bitcoin. However, whether it was an individual or a a group, the launching was done under a name known as Satochi Nakamoto. Bitcoins has over 18.6 million coins in circulation across the world with a value put at over $927 billion. The success of Bitcoin led to the launch of other forms of crypto currencies such as Litecoin, peercoin, namecoin, Ethereum, Cardano and EOS. In all, the aggregate value of all crypto currencies is about $1.5 trillion with Bitcoin having 0ver 60 per cent total value.

Key highlights of Crypto currencies

The major highlights of Crypto currency include

·        Crypto currency is a computer data in simple terms

·        It is based on blockchain technology, a method of ensuring transactional data integrity

·        It cannot become a store of value as there is no concreteness behind it.

·        As at today, it is not under the control of any government as it is distributed over many networks across many places in the world

Advantages of digital currency

One of the major advantages of digital currency is that

·        It is not within the reach of any government and therefore can only be demand driven as it cannot become a fiat currency

·        The blockchain technology which is the main underlying tool is so secured that it is near impossible to duplicate it or double spend the money.

·        It is very versatile and does not require you carrying either a check book, a coin, or a note

Disadvantages of digital currency

Like every human invention, digital currency has its own bad side which include

·        It is extremely volatile and can wipe away your money in a twinkle of an eye

·        It is not environmentally friendly as the massive computers being used consumes a lot of power thus contributing to global warming.

·        It is difficult to classify it as a store of value due to the fact it is volatile, lacks concreteness and is a mere computer data

·        Inheritance is a near impossibility. If the owner dies either in an accident or suddenly, the entire currency is lost as there is no way another person can access this data. There is no bank that can help, and there is no control system that will allow family members claim the money.

 Now that government is showing interest

No doubt, the world of crypto currency would change now that governments across the globe are beginning to look into the direction of virtual currency. As observed by the CBN director of Information Technology, already, “about 80 per cent of Central Banks in the world were exploring the possibility of issuing Central Bank digital currency and Nigeria could not be left behind”.

She disclosed that the Nigerian apex bank would be making a definite special announcement and possibly launching a pilot scheme in order to be able to be able to provide this kind of currency to its populace,” she said.

The apex bank director further explained that the planned  “Central Bank digital currency will just be as good as you having cash in your pocket and even as you have the cash in your pocket, you are going to have the cash on your phone.”

Mohammed had expressed strong confidence that the planned digital currency by the Nigerian apex bank would further deepen the financial inclusion drive of the bank. “We also know that recent report by EfiNA was that our target was to achieve 80 per cent financial inclusion. We are about 60 per cent and at the rate at which we are going, we are not going to meet this target. Central Bank digital currency will accelerate our ability to meet this target”, she further stated.

Experts are of the opinion that government interest in crypto currency would to a very large extent alter the way and manner digital currency is seen and perceived by the public. Already, just few days after El Savador announced that Bitcoin will form part of the country’s legal tender, Elon Musk, one of the major holders of Bitcoin, outlined plans by Tesla to resume accepting Bitcoins as a form of payment. The action of El Salvador and the immediate response by Elon Musk goes to confirm that government participation in digital currency would be a game changer.

The greatest game changer  in virtual currency as governments plan to get involved would be that it would transform into a concrete store of value. This is as a result of government guarantee  of any value attached to it. Perhaps, with government backing the digital currency issued by it, it may become possible for the asset to be inherited by relations of dead digital currency holders. That way,

However, Ohakwe has warned that once government through the various Central banks come into the issuance and management of crypto currencies, the digital currency would the met with the fate of currencies issued and managed by various governments through their apex banks. And one of such fates would be that digital currency would be subject to government manipulation and regulation.