Crypto In Africa: A Policy-Centric and Historical Approach Focusing on Regionalization

By Brooke Baxter

In Robert Kaplan’s 1994 Atlantic article “The Coming Anarchy,” a piece that lacks both context and nuance about Africa, he identified the factors that he believed would fuel violence and chaos in what he terms “the underdeveloped world.” Such factors included, “the withering away of central governments, the rise of tribal and regional domains, the unchecked spread of disease, and the growing pervasiveness of war.”¹ Not only did he incorrectly define African identity as primarily “tribal,” but he also mistakenly identified regionalization — the arrangement of geographic areas into cohesive regions — as a negative development in Western Africa and the rest of the continent.² In 2020, in fact, numerous economic policy scholars such as Director of the United Nations African Institute for Economic Development Diery Seck recognized regional economic integration as a crucial component of sustainable financing, financial innovation, and development on the continent in the future.³

Why do these policy recommendations focus so heavily on regional integration, in stark contrast to Kaplan’s denunciation of it? The necessity of regional integration becomes clear when one abandons a Eurocentric lens of viewing African economic history, which is dominated by the assertion that the nation is a critical element in a functional economic system, particularly a capitalist one.⁴ Once this lens is abandoned, it becomes clear that highly efficient, regional, long-distance trading networks existed before the rise of the slave trade, capitalism, and colonization.⁵ Thus, modern policy makers who recommend regionalization have historical, Afro-centric models that support their proposals, lending them more legitimacy in the long arc of global African history. These historically backed models of African regionalization create a pressing need for easily accessible, secure and, ideally, apolitical financial institutions that can transcend borders. Cryptocurrency is ideally positioned to fill this need.

In Seck’s collection of economic policy scholarship regarding sustainable African development, numerous articles assert that regional economic integration of financial markets and infrastructure will be conducive to more sustainable economic growth throughout the continent. Seck himself demonstrates through regression analysis that “geography is a determinant of aggregate income,” with landlocked countries facing significant challenges to economic growth due to their distance to seaports. Thus, he encourages cross-border trade and the pooling of resources across countries to decrease the disadvantage of this geographical factor.⁶ Multiple scholars recommend integrating economic institutions — such as credit and stock markets and banking systems — across regions in the African Franc Zone and the Economic Community of West African States (ECOWAS).⁷ One paper proposes that private-public partnerships (PPP) are utilized in building cross-border transportation and information and communications technology (ICT) systems so that crucial infrastructure projects do not rely primarily on government funding and bureaucracy, which can limit such projects.⁸ For example, PPP could prevent governments from undermining regional ICT availability to control free press because private companies — who have incentive to build these systems to achieve profit — would lobby against such measures.⁹ In the final assessment of how to improve ECOWAS growth, every recommendation involved closer regional integration: common investment law, freer movement of persons and goods, networked infrastructure, and the creation of a region wide financial system.¹⁰ Experts on African economic policy overwhelmingly agree that greater regional integration of commercial and financial institutions will be one of the determining factors of sustainable economic growth in the future.

Policy scholars currently recommend economic regional integration as a necessity for the future of African economic growth, but they do not acknowledge that regionally integrated economic systems existed on the continent centuries ago. A variety of African “world-economies,” which sociologist and economic historian Immanuel Wallerstein defines as regions with single divisions of labor, existed before the emergence of the more permanent, capitalist, European world-economy in the sixteenth century.¹¹ One example of these African world-economies were coastal societies and “their hinterlands” in West Africa, which engaged in regionally integrated, long-distance trade. These systems of trade, which transcended various political systems, enabled the West African region to capitalize on varying “population densities and natural resource endowments,” which propelled economic growth in the early 1400s. Some of these regional markets also connected with and benefitted from external markets.¹² This is the same type of long-distance, regional trade that the scholars above hope to facilitate with their policy recommendations. Additionally, the West Africa region even developed its own integrated financial systems undergirded by “a variety of currencies,” such as gold, cowries, small copper rods and other metals, mirroring the specific proposal of integrated economic institutions proposed above.¹³ These West African regional trading networks were just one component of a larger dynamic and innovative precolonial African economy.¹⁴ To ignore the their efficiency and success is to ignore a useful historical model for the policy recommendations of today’s scholars.

The “novel” policy recommendation to regionalize African economies has roots in precapitalist and precolonial long-distance trading routes. Now, however, these uniquely African economic systems are being reconstructed and improved. Nations have already moved towards Afro-centric regional trading models such as ECOWAS, and specialists on African economic policy are thinking deeply about how to finance these regional models and improve them even more. Additionally, “pan-Africanism” and understanding Africa within an international context has become a hallmark of twenty-first century scholarship regarding the continent.¹⁵ This trend towards pan-Africanism in the intellectual, academic and policy-oriented realms indicates that economic growth via regionalization — perhaps at some point involving the entire continent as one such region — is an evidence-backed path towards sustainable economic development.

Cryptocurrency can bolster efforts to regionalize the continent, thus filling an urgent unmet need and creating immense sustainable economic growth. The long-distance trading routes in West Africa used a variety of currencies that transcended political systems, and cryptocurrency could serve as an efficient, digitally native version of this system. Because many cryptocurrencies are secure, can cross borders easily, and do not require advanced, resource-intensive financial infrastructure, the technology has the potential to push towards better pan-African economic integration. The adoption of crypto could later evolve into the creation of an integrated decentralized financial environment and economy, which would fill policy recommendations for the creation of regional financial institutions noted above. Some countries are already catching on. On April 27, President of Central African Republic Faustin-Archange Touadera adopted bitcoin as legal tender, which chief of staff Obed Namsio stated was “a decisive step toward opening up new opportunities for our country.” Some even argue that the country’s adoption of bitcoin is a sign of regional displeasure with the Central African CFA franc, which is a holdover from France’s brutal colonial rule over Central Africa.¹⁶ Thus, the adoption of cryptocurrency can also help African countries break the shackles of colonialism that persist in various sectors throughout the continent. There are infinite means by which cryptocurrency can improve not only the African economic system but the global one.

Unlocking the sustainable economic growth of Africa, a landmass that spans 11.6 million square miles with the most ecological, biological, genetic, and cultural diversity in the world, has the potential to change the entire globe. And the historically proven, Afro-centric method of regional integration is one way to do it. An important component of successful regional integration will be the adoption of a currency that can facilitate it. Cryptocurrency, especially new layer 1 projects with high transaction speeds and low transaction costs, is the answer.

¹ Robert D. Kaplan, “The Coming Anarchy,” The Atlantic, February 1994.

² Many scholars have addressed African tribalism and ethnicity recently, attempting to discredit the colonial narrative that the idea of a tribe or ethnic group is primitive and prevents effective exchange between groups.

³ Diery Seck, “Introduction,” in Financing Africa’s Development (Cham, Switzerland: Springer, 2020), i-x.

⁴ Paul T. Zeleza, “The Decolonization of African Knowledges” (2017), 1–2. Zeleza asserts that Eurocentrism frames “African humanity and history as less than… and becoming Europe” and calls for a refashioning of these Eurocentric narratives. This paper strives to do so within the realm of economic history.

⁵ This paper focuses on these networks in Western Africa, but they existed throughout the continent.

⁶ Diery Seck, “Economic Distance and Regional Integration in Africa” in Financing Africa’s Development (Cham, Switzerland: Springer, 2020), 4–11.

⁷ Yann Nounamo, “Does the Quality of Economic Institutions Influence the Link Between External Debt and Growth? Evidence from the African Franc Zone,” in Financing Africa’s Development (Cham, Switzerland: Springer, 2020), 78, 80.

⁸ Lionel Effiom, “Transport and ICT Infrastructure Development in the ECOWAS Sub-Region: The PPP Funding Alternative,” in Financing Africa’s Development (Cham, Switzerland: Springer, 2020), 160–177.

⁹ Amanda Leigh Lichtenstein, “Pricing Blogs off the Screen: The Tanzanian Government is Muzzling the Nation’s Bloggers Through Stratospheric Fees,” Index on Censorship 47, no. 3 (September 1, 2018). Tanzania’s government has attempted to restrict internet usage via prohibitively expensive fees. If the government collaborated with a private company to increase internet functionality, the private entity would likely lobby against these restrictions in the interest of profit.

¹⁰ Ernest Ortsin, “The ECOWAS Common Investment Market Vision: A Conceptual Preview,” in Financing Africa’s Development (Cham, Switzerland: Springer, 2020), 225–238.

¹¹ Immanuel Wallerstein, “Africa in a Capitalist World,” Issue: A Journal of Opinion 3, no. 3 (1973), 26–27.

¹² Morten Jerven, “The Emergence of African Capitalism,” in The Cambridge History of Capitalism (Cambridge University Press, 2014).

¹³ Joseph E. Inikori, “Africa and the globalization process: western Africa, 1450–1850,” Journal of Global History 2, no. 1 (2007), 72; Robert Harms, Africa in Global History with Sources (New York: W. W. Norton, 2018), 126–145. For more information on West African precolonial trade, see Robert Harms’s section on the histories of Ghana, Mali, and Songhay.

¹⁴ Tiyambe Zeleza. “The Development of African Capitalism (Book Review),” Africa Development 17, no. 1 (January 1992), 135.

¹⁵ Paul Tiyambe Zeleza, “African diasporas: toward a global history,” African studies review 53, no. 1 (2010), 17.

¹⁶ Judicael Yongo, Tom Wilson and Rachel Savage, “Analysis: Bitcoin adoption by Central African Republic baffles crypto verse,” Reuters, April 28, 2022; Tawanda Karombo, “Bitcoin becomes the official currency in the Central African Republic,” Quartz Africa, April 29, 2022.