Experts: Why Tanzania is not ready for cryptocurrencies

Dar es Salaam. Many observers have expressed concerns on Tanzania’s competency in the hard-to-trace transactions following President Samia Suluhu Hassan’s call for the central Bank of Tanzania (BoT) to begin the necessary preparations for virtual-cum-cryptocurrencies.

“We still have a long way to go - and for the central bank to go recklessly into the business would be suicidal. Apart from very limited knowledge on cryprocurrencies, the biggest issue is that we do not as a country have a broker or even investment and trade advisers to facilitate going into blockchain or cryptocurrency as a nation,” commented Mr Ismail Sabuni, a cryptocurrency trader.

Mr Sabuni added that, on top of not having competent brokers, cryptocurrency is volatile and expensive - which could adversely affect the inflation rate.

He said “Tanzania will be required to print more money to facilitate such trade as a country and enable its citizens to engage in crypto markets. Such that, as of Monday, one bitcoin was worth $40,300 (About Sh93.895 million). Just before President Hassan’s speech, a bitcoin was worth $39,000 (Sh90.86 million)”.

Experts say crypto markets are volatile because there’s no central authority to stop them from being so, if it were to be used as cash flow organization, government or individuals would have to write of loss if the value of a crypto coin decreases.

“Public awareness also is much needed,” he added.

Speaking on the same subject, Mr Jeff Denis - another trader - said “Knowledge on cryptocurrency and block chain should start from the central bank itself passed by to citizens who are the traders. It is a decentralize finance, involves a technology which is way advance for Tanzania,”

In the line of creating awareness to the public, Mr Dennis also advised the government to invest first in getting expertise like investment and financial advisers as well as legal advisers that will guide and oversee trading in the crypto markets. According to experts there is also a security risk, such as the scamming of potential investors and the hacking or theft of data. Regulators such as BoT will be unable to monitor or protect users of the cryptocurrencies.

“Central banks use monetary policy to regulate the economy, can also dictate how fiat currencies can be transferred, track currency movement, collect taxes on it, and even trace criminal activity. But with visual money banks loose such control,” said Mr Ezekiel Lengaram

Transactions in virtual currencies are largely untraceable and anonymous all around the world making them susceptible to abuse by criminals in money laundering and financing of terrorism.

Mr Denis added that the country still has a long way to go since such trading would still require stable power, accessible internet connections, and smartphones to facilitate businesses using crypto markets.

“Tanzania is not ready yet let’s not kid ourselves and will probably take longer to get there. Right now not everyone has access to smartphones to access trade markets or even make payments, internet connectivity is mostly in urban areas and haven’t covered large part either,”

Statistics show about 46 percent of households in the country have internet access whereas over 95 percent access the internet via mobile phones.

He added that running the cryptocurrency requires more energy that Tanzania cannot afford currently, “Cryptocurrency trading is energy consumption, running one cryptocurrency truncation requires heavy computer calculations to run it and hence much energy is needed,”

Data shows that cryptocurrency transactions can consume around 121.36 terawatts per hour in a year. Tanzania had the capacity to generate 1,601.84MW of power as of April 2020.

Mr Kenneth Batanyika said “Cryptocurrency trading is not environment-friendly. Apart from energy consumption, it can also generate around 11.5 kilotons of e-waste every year.”

Another concern was on revenue that Tanzania might lose, since virtual currencies are not legal tender - and are unregulated in Tanzania.

“Taxation is also another issue when it comes to cryptocurrency. In US you pay tax from the money you have gained after converting cryptocurrency into the US dollar,” said Mr Jones Mrusha, founder of Hub255.

With all the concerns and country’s unreadiness highlighted for Tanzania to take a step change in global attitudes towards banking other players suggests

Blockchain but not cryptocurrency says it may beneficial to the country’s economy to allow regulated use of cryptocurrency drawing example from mobile money adaptation in the country.

Mr. Mrusha, “I think the country is ready for Blockchain but not cryptocurrency, Furthermore its vital the Authorities and government engage on both, for blockchain continue investing beyond financial systems; there is use case with Legal and Land registry to list a few. And for cryptocurrency to continuously monitor the market and intervene in potential illegal schemes and fraud conducted with the technology as an excuse.

He added that since it is not advised to simply leave the crypto market unregulated, and it also not recommended banning the use of crypto coins then the best choice is to regulate the markets

“On market that is conversant with Mobile Money like Tanzania, it’s about time we start looking into Central Bank Digital Currency (CBDC),”