The Breakdown - What Are the Prospects for a Bitcoin Standard in Africa?

Starting point is 00:00:04 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexus.a.o and BitStamp and produced and distributed by CoinDess. What's going on, guys? It is Saturday, June 19th, and that means it's time for the weekly recap. And let's this week actually do a true weekly recap flitting across a number of topics. Starting with the latest from institutional Bitcoin. You've heard a number of times on this show that there feels like a lack of momentum, and I think that that's true.

Starting point is 00:00:45 However, if we dig one layer deeper, there are definitely still institutional moves being made. Nidig and FS investments are teaming up for a second Bitcoin fund for Morgan Stanley. This comes from a recent SEC filing. Their first fund with Morgan Stanley came in March and was a major demonstration of how mainstream Bitcoin has become for. traditional investors. Goldman Sachs, meanwhile, remains the most confused company when it comes to crypto. A report from May 21st was titled Crypto, a new asset class. Then, at the beginning of this week, a new report came out titled Digital Assets, Beauty is Not in the Eye of the Beholder, which had this conclusion, Bitcoin is not a long-term store of value or an investable asset class. They also said,

Starting point is 00:01:27 quote, we have refrained from repeating the positive and negative hype that surrounds this ecosystem because we do not want clients to be seesawed, even swayed by a cacophony of assertions, many of them unsubstantiated. Frankly, it all sounds to me like they switched because a bear market might be starting. But wait, that's not where the saga ends. Today, here's a headline from CNBC. Goldman Sachs ramps up Bitcoin trading and new partnership with Mike Novogratz's Galaxy Digital. Yes, of course, a firm like Goldman Sachs has multiple divisions and different groups could have different opinions and strategies, but it's pretty hard for your advisory and wealth management business to be out there telling everyone this is not an investable

Starting point is 00:02:06 asset class while your traders are building partnerships to invest in the asset class. Anyway, let's go to Fuddland and check out the latest there. The Wall Street Journal's heard on the street section featured a piece this week called Why Crime Could Kill Crypto. And so if you're looking for me, I'll be walking sadly into the nearest ocean. The piece dragged up a totally specious and thoroughly debunked 2019 research paper suggesting that 46% of Bitcoin transactions between 2009 and 2017 were for illegal activity. Shockingly, it failed to mention, you know, on-chain studies that show that the total percentage of crypto that was used for crime was about 0.34% in 2020 down from 2.1% the year before. Big surprise, I know. So clearly, the

Starting point is 00:02:49 crypto is just for criminals meme is back on the menu. What about China? Over the last few weeks, we've seen mining shutdowns in a couple of provinces, but mostly those were miners that used coal. One question has been whether areas where the mining happens with hydro power would face the same action. Well, we learned that the answer is yes. Sishuan, a major hydro hub is targeting 26 mining farms for shutdown. So based on this, it's looking more and more like it's mining in general that China is going after rather than just coal-powered mining. What we don't know yet is the extent to which this will impact Bitcoin negatively. Hash rate decreases, sure, but the network is insanely secure, so that's not really an issue. What about narrative questions? On the one hand, it could be

Starting point is 00:03:32 negative because it seems to be confirmation of a government taking umbrage with Bitcoin, particularly because the stated reason is environmental concerns, and to the extent that there was geopolitical game theory that Bitcoin was something China was focused on and so, so too should the US, it hampers that, although I'm not sure how big a thing that was. On the flip side, decentralization of hash power is absolutely a positive for Bitcoin. Also, there was meaningful fud at times around China's potential to try to control Bitcoin, and that will no longer make any sense at all. So it sort of feels in the long run to be a bit of a wash, although the environmental piece is certainly something to keep an eye on. Looking for the best way to unlock your

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Starting point is 00:05:23 First, in Twitterland, there continues to be big debate around the compulsory nature of the law that merchants have to accept Bitcoin. On one side are folks who say basically, like, yeah, that's what legal tender means. And by the way, they're making provisions for those who don't have the technology to accept it. And also, by the way, they've got a $100 million fund to instantly convert anyone who doesn't want to take on the risk of Bitcoin to traditional money. On the other side, are those that don't think that Bitcoin should ever be imposed. CoinCenter, for example, is coming down hard on that side. Jerry Brito, the executive director of CoinCenter, said,

Starting point is 00:05:56 quote, while I haven't been shy with my views on the El Salvador Bitcoin law, I feel I really haven't said my piece, so I'm going to get it off my chest now. Perhaps one has a duty to speak out or else be complicit in sorry outcomes. Al Salvador's Bitcoin law is a disgrace. As written in statute, it forces citizens to accept Bitcoin whether they want to or not. This is intuitively wrong to any liberal. I'm surprised that so many smart and principled people have nevertheless applauded and defended this law. They are confusing the ends of liberty with the means of Bitcoin and I hope they're doing so merely in error. It's especially disappointing that in response to criticism, defenders of this law have resorted to what aboutisms and moral equivalence. And I'm astonished

Starting point is 00:06:33 how much trust and deference so many are willing to give to a politician. This will not end well. I hope its defenders will take a second look at what this law does, reflect on our shared principles, and reevaluate accordingly. I tend to think that the devil is in the details of implementation. Right now, we're having a philosophical debate around the nature of state power, which is fine, but ultimately doesn't really matter relative to the lived experience of Salvadorans. For that, we're just going to need more time. However, that wasn't the only conversation this week around El Salvador. As I discussed on the show a couple of days ago, the World Bank turned down a request from El Salvador to help them implement the Bitcoin plan. They cited concerns about the environment as well as transparency issues.

Starting point is 00:07:12 The transparency issue is particularly laughable given the nature of public blockchains. Overall, it's disappointing but telling in how institutions of the U.S. economic world order are going to respond to Bitcoin ascending. What about countries that seem poised? to follow El Salvador's lead. Paraguay is certainly getting some buzz. In the hours following the bill passing, Paraguay and Congressman Carlos Riala announced his intentions to attract crypto businesses to Paraguay.

Starting point is 00:07:37 This week, Paraguay's largest entertainment company, Grouposinco, said that it will start accepting crypto payments at its 24 businesses, which include nightclubs, restaurants, and more. These businesses serve a combined 50,000 customers per month. 80% of those customers are between 18 and 25, which they say makes this a natural fit. I've also been keeping an eye on Africa. According to data from useful tulips.org,

Starting point is 00:08:01 sub-Saharan Africa leads the world in peer-to-peer Bitcoin exchange this year. Sub-Saharan Africa also has a legacy that one might think would lead to favorable conditions for a non-global power-aligned monetary option. And indeed, there are the beginnings of rumblings. Russell Okung wrote an open letter to the president of Nigeria. Here's how he closed it. The Nigerian government, along with every government in the world, has a once-in-a-generation opportunity to claim global prominence by rising to the occasion.

Starting point is 00:08:26 Many other politicians in Latin America have signaled their intention to pursue similar moves as El Salvador. In leading the next global financial shift, Nigeria can create prosperity for its citizens in a manner that requires no bloodshed, no election, and no resistance. Such a proposition may seem too good to be true, and these ambitions certainly require thorough investigation, scrutiny, and debate. Conversely, a delay in pursuing a national plan for Bitcoin adoption will risk a scenario where Nigeria is left behind, and its citizens excluded from the possibility of significant wealth creation and preservation. As world leaders become more aware of the chance to make history,

Starting point is 00:08:59 pursuit of Bitcoin will be widespread. We offer our full support, a willingness to voluntarily consult, and commitment to activate every resource available to us in order to see Nigeria pursue a Bitcoin standard. Other Bitcoiners that I saw on Twitter were discussing the CFA currency countries in the economic community of West African states. Here's a thread from Jesse Hoddle. In sub-Saharan Africa, a currency union exists between Mali, Benin, Burkino Faso, Ivory Coast, and, and Guinea-Bissau, Niger, Senegal, and Togo. The currency of these countries share is the CFA franc, or XOF. The XOF is currently pegged at 655 XOF to one euro. After Bretton Woods, the currency was introduced for the first time. While in 1945, one CFA franc was equal in value to 1.7 French francs,

Starting point is 00:09:43 it was merely equal to 0.01 French francs in 2002. Cause, devaluation of the French francs by the French government. The XOF lost 17,000 percent of its value in 52 years. years. Over the last 10 years, these countries have seen a steep increase in migration to Western nations. Political instability, wars, corruption, and the potential for a better life elsewhere are causes for this. In 2019, 5.4 billion USD were sent in remittances from outside these countries. Estimates for 2020 show a minor decrease due to the pandemic. 5.4 billion USD make up about 3.6% of collective GDP, which is approximately 150 billion. While this number certainly is not as high as in El Salvador, which has 20% of GDP as remittance inflows,

Starting point is 00:10:27 the absolute numbers are staggering. Average remittance fees charged by common service providers are 8%. $453 million per year are paid in fees to send remittance payments. The Bitcoin Network fixes this. Internet access and smartphones are widely spread. Bitcoin and Lightning would change the lives of around 130 million people, enormous. This needs to happen. It will happen.

Starting point is 00:10:48 These countries, among many others, will leapfrog entire decades of financials of financial development. Currently, there is no exchange that offers a BTC XOF currency pair. Volume is too low. People access Bitcoin via local Bitcoins or Paxful. I have professional ties to Mali and a network of young, highly educated colleagues who caught the Bitcoin bug. Sending permissionless instant free payments globally is magic to us. All that is needed is an exchange as well as a lightning wallet able to hold digital XOF. How do we get there? Finally, there is a group out of Ethiopia that is trying to put Bitcoin on the agenda as well. For the last six months or so, we have been trying to push the Ethiopian government to consider mining and storing Bitcoin to combat the rising inequalities in global inflation.

Starting point is 00:11:29 We have now mobilized like-minded Ethiopians to start Project Mono. Project Mono has many phases and plans. It has multiple suggestions that could assist the National Bank to escape the foreign exchange shortage crisis it's in. The project is open source so anyone can add to it. We welcome all. In our research, through the mining initiative, Ethiopia could easily multiply its export earnings without third-party involvement. billions more in short term with minimal investment. The project aims to publish more detailed plans both for the government and interested private parties on how they could change to a new

Starting point is 00:11:58 volatile culture and establish a colorful future for Ethiopia. We are confident the project will succeed. These are all nascent ideas, small startup projects. But at the same time, it's hard for me not to think that these are going to be some of the most exciting initiatives around the world to watch in the coming months. I appreciate you hanging out and watching along with me. So until tomorrow, guys, be safe and take care of each other. Peace.

The Breakdown - What Are the Prospects for a Bitcoin Standard in Africa?

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