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Tanzania Signals Support for Cryptocurrency

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Tanzania is on its way to becoming the first African country to embrace digital currency. Their central bank is working on creating defined crypto regulations following the recent endorsement by President Samia Suluhu. Coming days after the declaration by El Salvador to make bitcoin a legal tender, the show of support elevated bitcoin prices further. The push to keep up with the emerging technologies and prepare for cryptocurrency provides a glimmer of hope in a country with a checkered history with crypto. Besides, it might open doors for crypto trading in Africa, which has been sceptical about adopting digital currencies.

The announcement by the president was surprising since the country banned the use of cryptocurrencies. In November 2019, Tanzania’s central bank clarified that the local legislation didn’t recognise digital currency. The push for banks to establish guiding laws for crypto hints at the possible reversal of the ban, especially with financial institutions promising to work on the president’s directive. While Tanzania did not specify whether they will adopt the existing digital currencies or create their cryptocurrency like china, the open attitude ramped up support for crypto. Within 24 hours of the announcement, bitcoin gained 10%, with its price hitting $40,000.

While Tanzania’s economy still relies heavily on cash transactions, gradual preparations for crypto allows the central bank to find ways to assess the risks and find solutions. Mainstream adoption of cryptocurrencies in Tanzania can bolster diaspora remittance. With the transaction costs of international transfers to the country at 19.73 % compared to Kenya’s 9.54%, crypto can reduce the commissions and incentivise remittance inflows.

Unfortunately, many Tanzanians are yet to embrace decentralised finance, but the crypto activity has increased over the years. Since Tanzania has a youthful population, digital currencies have a promising future in the country. However, there is a need for education to increase the acceptance of crypto in the country.

Uncertainty on Adoption

Adopting crypto is an intelligent move by the Tanzania government since it improves its economic viability in the modern geopolitical landscape. However, it is early to celebrate the president’s endorsement since many countries have made similar declarations and are yet to take concrete steps to adopt crypto. For instance, Uganda’s President Yoweri Museveni showed support for digital currencies in 2017, and up to date, their central banks is yet to lift the ban on cryptocurrencies in the country. Therefore, the change in tone by Samia Suluhu does not guarantee that the central bank will embrace crypto.

Apart from the slow adoption by financial institutions, the socio-economic issues in the county can slow down crypto. For instance, Tanzania has low internet connectivity rates and making crypto a legal tender will lock many people out. A select few will enjoy massive benefits from digital currencies.

Financial institutions and government has been a significant hindrance for crypto adoption in Tanzania since the former president, John Magufuli, barred access to the Tanzania market. However, despite easing the regulations, crypto still faces many entry barriers to Tanzania’s market. The country is likely to make Bitcoin a reserve currency and not a legal tender.

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