We dive into the world of crypto and digital currencies and take a close look at two countries approaching them in very different ways in this episode of The Conversation Weekly. And if the latest Matrix film has left you wondering whether we are really living in a simulation, we talk to a philosopher on the long history of that idea.
Nigeria is Africa’s largest economy and its most populous country. El Salvador is a small republic in central America. But despite their many differences, they have two economic problems in common. First, a large proportion of their populations don’t have access to bank accounts. Second, their economies rely heavily on remittances, money sent back by people living abroad. But the money transfer companies that facilitate these cash flows can be slow and costly.
In 2021, both countries turned to the fast-moving world of digital currencies in an effort to tackle these, and other problems. But they’ve taken very different routes.
Nigeria banned bank trading of cryptocurrencies in February and then launched its own central bank digital currency, the eNaira, in October. Nigeria was only the second country in the world to launch a central bank digital currency, after The Bahamas. More may soon follow suit, including China, which in January expanded the pilot of its digital yuan to more areas, including the major cities Shanghai and Beijing.
Nigeria’s decision to launch its own digital currency came as a surprise to many, says Iwa Salami, reader and associate professor in law at the University of East London in the UK and an expert on digital currencies. Initially, eNaira wallets are only available for people with bank accounts, but the plan is to extend access to anyone with a phone number in the future.
One of the questions, Salami says, is whether Nigeria will be able to “fully achieve financial inclusion in the way that it’s been promoted.” There are a number of risks involved, she says, including to financial stability if those with eNaira wallets start using them as a deposit account. “Therefore, rather than using commercial banks, people actually use eNaira wallets to store their savings, which then means that the relevance of banks becomes redundant,” she says.
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