ALTHOUGH cryptocurrency is relatively unknown in Namibia, it is the method of exchange for the future.
This is according to Windhoek forex trader Giannilo van Wyk, who describes cryptocurrency as a digital financial system based on a computer software and which accumulates value through its popularity.
“The more people buy the cryptocurrency, the more it accumulates value,” says Van Wyk, who said cryptocurrency, which comes in countless forms, including Bitcoin, is available on the market through brokers.
Windhoek-based economist Theo Klein says cryptocurrency is like the digital currency people use when doing electronic transfers with normal banks, but it is specific to a group of computers across the world that are linked to one another and make a specific private platform.
“On this private platform you are then able to transfer currency to other people using the same platform. For example, people on the Bitcoin platform are only able to transfer Bitcoins to one another in payment of goods and services, as long as their online accounts, called wallets, are connected via the internet to the Bitcoin platform,” Klein says.
He adds that these networks also allow for instant transfer of coins from one person to another, no matter where in the world you are.
“In this way, cryptocurrencies aim to address inefficiencies in the traditional banking sector by increasing the speed at which international or cross-border payments are made, reducing transaction costs and being more inclusive,” Klein says.
Van Wyk says cryptocurrency is a new generation currency that has made money more available in the digital space.
“Although anybody can use cryptocurrency including in Namibia, it is not accepted in the country’s banks, including the Bank of Namibia. But as the world moves forward with crypto, Namibia will also be inclined to move towards the currency,” Van Wyk says
He, however, says presently the problem is that cryptocurrency is unregulated and there is no traceability, making it easier for criminals to use it in scamming people and money laundering.
Klein says the cryptocurrency market is rife with speculative investment behaviour, where cryptocurrencies are seen as an alternative investment instrument to traditional shares, bonds and foreign exchange.
“This naturally distorts the value of cryptocurrencies and makes their prices very volatile so that a fundamental price based on demand and supply cannot always be reached. In other words, the demand and supply forces of individuals who make use of a coin purely for transactional purposes are distorted by speculative investors,” he says.
The economist says although a digital currency has efficiency gains that make it more attractive than normal flat currency, there is a need for adequate telecommunications infrastructure and for all citizens to have internet access before a country like Namibia can use digital currency.
Questions sent to the Bank of Namibia were not responded to by the time of going to print.