Bitcoin hobbyist Duncan Arthur looks back on the development of Bitcoin over a year that has seen its value skyrocket and the launch of its first ATMs, discussing its relevance to Africa and looking at the future of the borderless digital currency.
Bitcoin Comes of Age
Two years ago I stumbled across bitcoins for the first time. I was so amazed at the concept’s disruptive potential that I demanded a speaking gig at the Compliance Institute of South Africa’s annual conference. This gathering is where groups of financial services professionals charged with protecting the integrity of the financial industry get together. Their roles begin and end with keeping the financial system clean and making sure that financial regulation is enforced.
What I’d found was a means of bypassing just about every banking control there was. No audit trails, completely anonymous transactions and no way of shutting it down. Instead of the excitement I expected, I was met with blank stares. Few in the room believed that anyone would use a currency not backed by a state. I doubt that most of those there understood the concept, let alone how a bitcoin could be worth a dollar. One bank, to their credit, immediately began assessing the impact.
Two years later and a bitcoin is worth near a thousand dollars. Regulators (none in Africa I should add) have begun realising the impact of value they can’t monitor or control and bitcoins have gone mainstream. In a year when the currency recovered from having one of its busier routes shut down – the notorious ‘Silk Road’ – and its sheer genius discovered by parties from German tax evaders to clever Russians in Cyprus looking to protect their deposits, bitcoins are part of the mainstream. Add shadow banking and you have an alternative financial system that bypasses anything policed.
Is this a good thing? Not necessarily for law enforcement in Africa. From what I’ve seen, our regulators and agencies have no idea what they’re up against. I have heard investigators say that they know so-and-so is a crook but they cannot find the money moving. They can’t see the money but they know it flows. The enforcers battle however to grasp that value can move without it being money. Just how mp3s killed CD, bitcoin gives crooks a whole new way of evading African law enforcement. Our statutes and prosecutors are stuck fighting yesterday’s battles.
It is of course easier to ‘fight money laundering’ by preventing someone from opening their first savings account and depositing two dollars by preventing them from opening an account since they don’t have a permanent address than hiring professionals who can work out new money laundering typologies on a brand new platform. Someone arrived at a tank battle with the cavalry.
Do Africans use bitcoins? Oh yes. The first bitcoin ATMs were invented by South Africans. Lagos, Nairobi and Johannesburg boast multiple exchanges advertising on the dark internet. Interoperability between mobile platforms and banks is being explored by hobbyists with bitcoin forming the basis of exchange between systems.
Where there are crooks, there will be bitcoins. What there won’t be in Africa anytime soon are regulators and law enforcement agencies who understand that by not keeping up with technology, they become part of the problem they were founded to address.