By Yande Nomvete, Operations Manager for Binance
In recent months, Ghana has been on a gradual, but steady, path to economic recovery. It’s a positive trend that has citizens looking forward to a more stable and prosperous future. After years of economic turmoil that culminated in inflation levels of over 50% in 2022, the government secured a US$3 billion investment from the International Monetary Fund (IMF) to stabilise the country’s finances. Less than two years later, the outlook for the country is much more optimistic, with the IMF having revised Ghana’s 2024 growth forecast upward from 2.8% to 3.1%. Increases in foreign exchange reserves and improved business sentiment are also fuelling optimism.
However, the local currency still faces challenges, and inflation remains high, at more than 23%. To ensure these challenges don’t derail Ghana’s recovery, the country needs to find ways of entrenching economic resilience and sustainability – and to do that, it needs to look beyond traditional economic levers. Cryptocurrencies, which have already shown promise in other African nations, could be crucial in reinforcing and expanding Ghana’s recovery efforts.
Crypto’s potential to empower consumers
For many Ghanaians, the volatility of the cedi and the persistently high inflation associated with the currency remain serious concerns. Cryptocurrencies can offer a relatively simple alternative, particularly by delivering a more stable store of value through assets like Bitcoin, or stablecoins that are pegged to major global currencies, making them less volatile.
Cryptocurrencies also present a significant advantage in terms of remittances. These are a vital source of income for many Ghanaian households, but traditional services can be slow and often charge high fees. Cryptocurrencies have the potential to ease the burden through low transaction costs, fewer intermediaries and the ability to facilitate faster payments, but widespread adoption and infrastructure are key factors in realising these benefits.
Cryptocurrencies also have the potential to expedite all-important financial inclusion. A large portion of Ghana’s population remains unbanked, or underbanked, particularly in rural areas. While traditional banks are working to rectify this, the process is slow. Crypto allows people to leverage mobile technology to instantly meet their financial requirements without the need for traditional bank accounts or expensive branch infrastructure. This, in turn, stimulates economic activity and broadens participation in the formal economy, which is an essential underpinning to sustainable economic growth.
Crypto as an enabler of business innovation and growth
For Ghanaian businesses, especially small and medium-sized enterprises, cryptocurrencies have the potential to open new avenues for growth. Many SMEs in Ghana face difficulties accessing credit or investment capital due to limited financial infrastructure and high interest rates. Cryptocurrencies, through mechanisms like Initial Coin Offerings or token-based fundraising, provide an alternative way to raise funds without relying on traditional banking institutions.
Cross-border trade, which is a crucial aspect of Ghana’s economy, also stands to benefit from cryptocurrencies. By potentially reducing the need for currency exchange or traditional cross-border payment processes, crypto could make international trade more efficient for most businesses. This is especially relevant given the Ghanaian government’s stated intention to diversify its economy beyond commodities like gold and cocoa.
Another advantage for businesses lies in the transparency and security of blockchain technology, which powers most cryptocurrencies. Blockchain’s decentralised ledger system ensures that transactions are recorded and cannot be altered, reducing the risk of fraud. For sectors like real estate, where issues of land ownership and documentation fraud are still a challenge, blockchain offers an excellent solution to secure records and streamline processes.
A tool for government efficiency
The Bank of Ghana is exploring the possibility of launching a central bank digital currency (CBDC), offering a digital version of the cedi that would enhance control over monetary policy while providing citizens with easy, affordable digital transactions.
Cryptocurrencies and blockchain technology can further support these efforts by reducing corruption and improving transparency in public funds. At the local government level, blockchain can also streamline administrative processes, lower costs, and build trust between citizens and the government. Crypto exchanges, like Binance, can work symbiotically with the CBDC, running alongside it to enhance the broader financial ecosystem by complementing the central bank’s digital currency with innovative, inclusive solutions.
Charting the way forward
As promising as cryptocurrencies are, some hurdles need to be overcome. For one, the volatility of many cryptocurrencies could deter widespread adoption. Fully harnessing the potential of crypto as an economic growth and stability lever would also require the Ghanaian government to establish a robust regulatory framework designed to manage risks while still fostering innovation.
Education is also critical. Many Ghanaians are still unfamiliar with cryptocurrencies, and misconceptions could limit their adoption. Public awareness campaigns and partnerships between the government and financial institutions would be essential in helping people understand how to use these tools safely and effectively.
By embracing cryptocurrencies, Ghana has the potential to empower its citizens with better financial tools, create new avenues for businesses to thrive, and enhance government efficiency ensuring that the country’s economic recovery not only stays on track but is sustainable into the future.
