Tanzania President, Samia Suluhu Hassan has directed the country’s Central Bank to begin looking at the feasibility of adopting the widespread use of cryptocurrencies in the East African nation.
Hassan stated the Central Bank should be open to the idea of embracing digital currency as the world continues to evolve with innovation around payments and financial transactions.
We have witnessed the emergence of a new journey through the internet. The Central Bank should be ready for the changes and not be caught unprepared.Samia Hassan, President of Tanzania
This marks the first time the president of an African country has openly acknowledged the acceptance of cryptocurrency.
Coming a few days after El Salvador became the first country to adopt Bitcoin as legal tender, Samia’s stance may hint at the probable mainstream adoption of Bitcoin and other cryptos in the country.
We examine possible reasons the Tanzanian government is planning to embrace Bitcoin and other cryptos.
Tanzania may be working to bolster diaspora remittances into the country through cryptocurrency.
According to the World Bank findings, Tanzania’s remittances stood at $430 million in Q1 2020, representing only 0.8% of its GDP ($53.75 billion). In fact, Tanzania is one of the least remitted countries in Africa.
The cost of diaspora remittances into the country is also among the highest in Africa, according to World Bank figures. The average transaction cost of sending remittances to Tanzania was put at 19.73% in 2020, way higher than Kenya’s 9.54% and Ghana’s 8.16%.
Hence, it shows that nationals have to pay exorbitant charges to send money back home. However, cryptos could help cut down costs due to much lower commissions and help incentivise greater remittance inflows.
Besides, cryptos involve US dollar-denominated investments which may increase foreign exchange circulation.
Perhaps the government of Tanzania could be trying to create more jobs and alleviate poverty by mulling the official adoption of cryptos.
Crypto trading is not banned or illegal in Tanzania but the central bank had declared in 2019 that cryptos were not authorised as legal tender in the country.
Data from the World bank and International Labour Organization show that Tanzania’s unemployment rate reached 2.16% in 2020, increasing for the first time in 8 years (since 2011). Another study estimates youth unemployment rate to be 57.3% in Tanzania’s largest city, Dar es Salaam.
As a result, several people in the country could be leveraging cryptos to earn a living by trading part-time or as a full-time job. For context, Tanzania’s P2P Bitcoin trading value has grown by about 42% from $2.9 million to $5.08 million in the past year.
While many in Tanzania have not yet embraced decentralised finance, crypto activity has steadily grown in the past few years. The country has traded over $2.5 million worth of Bitcoin P2P in 2021 so far.
Although Tanzania may not go the El Salvador route by accepting Bitcoin as legal tender, the country’s central bank might be contemplating the adoption Bitcoin as a reserve currency.
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