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Digital Currency: The Future of Money or Just a Speculative Bubble?

While digital currency such as cryptocurrencies can offer Tanzanians some efficiency by reducing bureaucracy they also have their dark sides like the potential of attracting security challenges from hackers and malicious agents.

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For almost a decade now, there has been a tremendous growth of people around the world engaged in activities related to the usage and trading of digital currencies, especially cryptocurrencies like Bitcoin, Litecoin, Ethereum and thousands of other cryptocurrencies and blockchain assets, making them outperform traditional assets, such as global stocks and bond.

This growth might be the result, first and foremost, of the role played by digital currency in just a few years in changing how society thinks about money. It seems that people are impressed by digital currency’s virtue of a ‘user to user’ payment system that does not involve third parties, like financial intermediaries or central authorities. In cryptocurrency, for instance, the alternative of the central bank are cryptographers and the alternative for owners of financial infrastructure are the holders of the cryptocurrency which could be everybody. Secondly, this growth may be perceived as an economic phenomenon in which people always become optimistic about any exciting new asset in the market which leads them to invest in that asset merely based on technical analysis without sufficient understanding of its value and risks before it diverts resources toward unproductive pursuit which might lead to financial instabilities and economic inefficiency.

Tanzania, like many other developing nations, lagged behind on traditional banking but thanks to technological innovations in the banking industry, the introduction of an electronic version of fiat currency that has dominated the world’s financial systems made it possible for people at any place, urban or rural, to use devices like a mobile phone to conduct financial transactions. So the introduction of cryptocurrency and blockchains assets make people think they are the newest and promising assets not only to the speculation markets but also to the general economy.

Yet, three to five years before the Bank of Tanzania (BoT), which is the sole institution mandated to issue banknotes and coins and to declare a legal tender in the country, warned Tanzanians that virtual currencies are not legally authorized in Tanzania, there was already a tremendous increase of people engaged on trading of cryptocurrency in urban areas. BoT maintained that usage, marketing, and trading of cryptocurrencies contradict with existing country’s foreign exchange regulations, setting back many actors involved in digital currency at the time.

But the recent directive by President Samia Suluhu Hassan to BoT on digital currency is a new milestone on the country’s approach to digital currencies. Speaking during an event in Mwanza on June 13, 2021, President Samia emphasized on the Central Bank preparedness, ‘In financial sector we have witness the emergence of new currencies used digitally that is blockchain [assets] or  cryptocurrencies, I know many countries including Tanzania have not adopted or accepted the use of these  currencies but I urge the Central Bank to start working on this new development just to get prepared, to make sure we are not caught unprepared’. President Samia also underscored the fact that in many developments,  the government appears to lag behind, ‘because we [the government] may not be ready, but our citizens may move past us and join those systems and use them in other countries and when they do that it will eventually get here. So I ask the Central Bank to get ready on those issues as because of globalization, it will not be a surprise for Tanzanians to be ahead of the government. To make sure we are not caught unaware or our citizens move past us, it’s better we get prepared early’.

The speech came four days after El Svador adopted Bitcoin as the country’s legal tender, while some actors may have translated the President’s speech too optimistically on the adoption of cryptocurrency in Tanzania, the President was cautious in her remark but also forward looking. The directive set a new course for the country to look at these new developments with keen eyes. There are also many countries that are researching the possibility of establishing a legal and regulatory framework for managing digital currency while trying to launch their own digital currency controlled by their own central banks.

The potentials of digital currency in Tanzania or other countries offer a new arena of reduced bureaucracy and transparency in operation and they guarantee somehow security to final customers depending on the computing power of the digital currency miners. But introducing digital currency has its dark sides, such as attracting security challenges from hackers and malicious agents. The digital currency is also more inclined to fluctuations and money laundering due to its decentralized nature and may even lead to the collapse of a foreign exchange system that is fundamentally operated on the traditional financial system.

But who knows if digital currency will dominate the finance industry despite its vices? Was there anyone ten years ago who thought that companies like Google, YouTube, Facebook, Instagram and Twitter would dominate the media and advertising industry? It is, therefore, important to study the trend carefully and understand its social-economic implications before we take any step forward. The purpose, in other words, should be to improve the quality of life and human well being rather than economic growth for its own sake.

Joel Ntile is a Pan-Africanist and socio-economic analyst based in Dar es Salaam, Tanzania. He can be reached through his e-mail address which is or you can follow him on Twitter at @Ntilejoel. These are the writer’s own opinions and they do not necessarily reflect the viewpoint of The Chanzo Initiative. Want to publish in this space? Contact our editors at for further inquiries. 

Digital Freedom and Innovation Day
The Chanzo is hosting Digital Freedom and Innovation Day on Saturday April 20, 2024 at Makumbusho ya Taifa.

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