The World’s largest economy by purchasing power parity (PPP) is China, well ahead of the United States. But the #1 on nominal GDP is the United States – and that is expected to move to China’s trophy table in years. But China is not just coming for the GDP crown, but a likely massive dislocation of the global economy: “The United States government has been rattled by China’s push to develop a digital alternative to its currency yuan. Bloomberg reported that the Biden administration is stepping up scrutiny of China’s plans for a digital yuan, with some officials concerned the move could kick off a long-term bid to topple the dollar as the world’s dominant reserve currency, according to people familiar with the matter.”
Honestly, imagine if Africa is pushing this, bringing its dozens of currencies under a unified supranational digital-based banking ordinance that would make commerce to work more efficiently. This is not even about monetary union with its associated welfare losses, when central banks lose autonomy to the supranational bank, making it harder for them to use macroeconomic tools to adjust for perturbations in their local economies. My point is that a digital clearing house is possible to make these African currencies “disappear” and “dissolve” into bits operationally.
I do think we need to begin that conversation at the African Union as very soon, China will be offering loans in e-yuan, and giving discounts to countries that adopt it. Most African banks would sign up as agents to enable trade in China, and just like that, the United States will understand that empires rise and fall on trade.
Yes, if China disintermediates dollars across countries via e-yuan, everyone will understand that being called the manufacturing capital of the world is not just a statement. Possibly, e-yuan will save many countries about 8-15% lost which is lost during conversion first to US dollars, and then to Yuan as they import from China! This is China 3.0.
The United States government has been rattled by China’s push to develop a digital alternative to its currency yuan.
Bloomberg reported that the Biden administration is stepping up scrutiny of China’s plans for a digital yuan, with some officials concerned the move could kick off a long-term bid to topple the dollar as the world’s dominant reserve currency, according to people familiar with the matter.
Recently, China has increased efforts on many fronts to put the digital yuan in circulation as soon as possible.
Now that China’s digital-currency efforts are gathering momentum, officials at the Treasury, State Department, Pentagon and National Security Council are bolstering their efforts to understand the potential implications, the people with the knowledge said.
American officials are less worried about an immediate challenge to the current structure of the global financial system, but are eager to understand how the digital yuan will be distributed, and whether it could also be used to work around U.S. sanctions, the people said on the condition of anonymity.
A Treasury spokeswoman declined to comment. A National Security Council spokeswoman did not reply to a request for comment.
The People’s Bank of China has rolled out trial issuance of a digital yuan in cities across the country, putting it on track to be the first major central bank to issue a virtual currency.
The first trial was held in Luohu District, where the central bank issued 10 million e-yuan in October 2020, while a second round was conducted in Futian District at the beginning of this year.
A broader roll-out is expected for the Winter Olympics in Beijing next February, giving the effort international exposure.
China is teaming up with Hong Kong, Thailand and the United Arab Emirates (UAE), along with the Bank of International Settlements (BIS), to explore cross-border payments for digital currencies.
In its report, Bloomberg noted that many key details of the digital yuan are still in flux, including specifics on how it would be distributed. China’s recent establishment of a joint venture with SWIFT, the messaging nexus through which most cross-border settlements pass through today, suggests it is possible a digital yuan could work within the current financial architecture rather than outside of it.
U.S. officials are reassured that China’s intentions aren’t to use the digital yuan to evade American sanctions, according to people familiar with the matter. The dollar’s current dominance in cross-border transactions gives the U.S. Treasury the power to cut off much of a business or even a country’s access to the global financial system.
China’s officials have said the main intentions of the digital yuan are to replace banknotes and coins, to reduce the incentive to use cryptocurrencies and to complement the current private-sector run electronic payments system — dominated by Ant Group Co.’s Alipay and Tencent Holdings Ltd.’s WeChat Pay. The PBOC has been working for years on the digital yuan, also called the e-CNY, having set up a specialist research team in 2014.
Chinese leaders are pragmatic
“To provide a backup or redundancy for the retail payment system, the central bank has to step up” and provide digital-currency services, Mu Changchun, the director of the PBOC’s digital-currency research institute, said at an event last month.
The Biden administration isn’t currently planning to take any action to counter longer-term threats from China’s digital currency, the people familiar with the discussions said. However, China’s plans have given renewed impetus to efforts to consider the creation of a digital dollar, they said.
Members of Congress have also been increasingly interested in a digital dollar, aware of China’s moves, and asked Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen about the issue in hearings earlier this year.
Powell said in February the Fed was looking “very carefully” at a digital dollar. “We don’t need to be the first. We need to get it right.”
Yellen has signaled interest in research into the viability of a digital dollar, a shift from a lack of enthusiasm under her predecessor, Steven Mnuchin.
“It makes sense for central banks to be looking at” issuing sovereign digital currencies, she said at a virtual conference in February. Yellen said a digital version of the dollar could help address hurdles to financial inclusion in the U.S. among low-income households.
A recent report from the U.S. Director of National Intelligence said the extent of the threat of any foreign digital currency to the dollar’s centrality in the global financial system “will depend on the regulatory rules that are established.”
China’s currency makes up little more than 2% of global foreign exchange reserves compared with nearly 60% for the U.S. dollar. Policy decisions, rather than technical developments, will also be necessary to push forward yuan internationalization, as China maintains a strict regime of capital controls.
China’s financial system is too “fragile and weak” to pose a real threat to the dollar’s status as the world’s reserve currency, according to Mark Sobel, U.S. chairman for the Official Monetary and Financial Institutions Forum.
“At the end of the the day the markets have more confidence in the Fed” than China’s central bank, said Sobel, a former senior U.S. Treasury official for international matters.
Appzone, a fintech software provider that builds proprietary solutions for these financial institutions and their banking and payments services, has announced it raised $10 million in a new Series A investment.
Founded by Emeka Emetarom, Obi Emetarom, and Wale Onawunmi in 2008, the Lagos-based company provides commercial banks with custom software development services.
The Series A was led by Nigeria-based investors such as CardinalStone Capital Advisers, a Lagos-based investment firm. Other investors based in the country include V8 Capital, Constant Capital, and Itanna Capital Ventures. New York-based but Africa-focused firm Lateral Investment Partners also participated.
The Series A round being led by Nigeria-based investors is welcome shift in the Nigerian tech ecosystem, where foreign investors have dominated most fundraising series.
Appzone launched its first core banking product targeting microfinance institutions in 2011. In 2012, it launched its first product (branchless banking) for commercial banks. It went live with its mobile and internet banking service in 2016 and launched an instant card issuance product in 2017. In 2020, the company launched services catered to end-to-end automation of lending operations for banks and blockchain switching.
“We started Appzone with the intention to build out innovative local solutions for banking and payments on the continent,” CEO Obi Emetarom told TechCrunch. “The focus was to leverage our ability as an enabler to create proprietary technology for both segments.”
Appzone is a Google for Startups Accelerator that has made a remarkable difference by introducing first-of-its-kind technology to the African fintech industry.
The company says it created the world’s first decentralised payment processing network, the first core banking and omnichannel software on the cloud, and the first multi-bank direct debit service based on single global mandates.
The investment round coincidentally happened at the same time the company is introducing the scaling of a third layer that focuses on end-user applications.
So far, we’ve touched on two layers of this ecosystem—the digital core banking service providing software that runs financial institutions’ entire operations and interbank processing, which integrates these institutions into a decentralized network powered by blockchain, Emetarom said.
Appzone plans to develop a unit outside its banking and fintech layers, to connect individuals and businesses to their services. This is where most new-age fintech startups operate, and although Appzone is coming late to the party, it has a bit of an edge, the CEO said.
“Most of these companies operating in end-user applications have to depend on services from core banking and interbank processing to be able to get their own offerings out there. For us, I think we have an advantage in terms of costs and flexibility because we are already operating in both layers,” Emeratom said in relation to what he thinks of competition.
Tech Crunch reported that the company is planning to blitzscale its products and services after working silently for more than a decade.
To do this, it will focus on its pan-African expansion sternly even though a large part of its 450 clients are based in Nigeria. Other countries with a presence include the Democratic Republic of Congo, Ghana, Gambia, Guinea, Tanzania, and Senegal. Before now, Appzone lacked the resources to push into these markets aggressively even though they showed promise. But having closed its Series A, the plan is to drive growth in these countries and expand across more African countries.
In addition, another means Appzone plans to achieve scale is by growing its engineering team — a department it takes pride in. These engineers make up half of Appzone’s 150 employees and there are plans to double down on this number. Like most Nigerian startups these days, Appzone is big on senior engineers. Still, while it might present a problem to other companies, Emetarom says the company has no issue training promising junior talent to grow in expertise.
“Our proprietary tech allows us to innovate at a fraction of a cost, and they are built by essentially the best local talent available. Because those systems are really complex and the level of innovation required is on another level, we literally seek out the to 1% of talent in Nigeria,” he remarked. “We know that even though the expertise isn’t there, we can accelerate acquiring that expertise when we train the very best talents. The more we train our engineers, the faster they grow in terms of expertise, and they will be able to deliver at the same level of world-class quality we expect.“
Appzone had earlier, closed a $2 million from South African Business Connexion (BCX) in 2014. And in 2018, it raised $2.5 million in convertible debt and bought back shares from BCX in the process. But overall, the company said it has raised $15 million in equity funding.
It was notsupposed to be this way: “Today, in line with our growth strategy, we’re excited to announce that we are now actively building a team in Ghana. To truly serve the public conversation, we must be more immersed in the rich and vibrant communities that drive the conversations taking place every day across the African continent.” People, Ghana is Twitter Africa’s headquarters!
Lagos state is bigger than Ghana’s economy and across all domains most would have expected Nigeria to be Twitter’s destination. But as I have written here – our technophobic attitude of banning things will influence decisions by many leaders. People expect regulations to deal with issues, and not absolute ban. The cryptocurrency ban diminished the perception that Nigeria has the readiness to handle complexity in its markets.
Ghana, Kenya, and other African countries have not collapsed because of cryptocurrency. And with an apostle like Twitter CEO, Jack Dorsey, Nigeria disqualified itself for those good jobs and tax naira that Twitter would have brought to the nation. Would you expect Tesla’s boss to use Nigeria to serve its West African market in future? Your first leg during a dance should reveal how ready you are!
I want to congratulate Ghana for its diplomacy. It is positioning itself the way Israel has positioned itself to serve the United States. In Israel, you do not build for the nation, rather, you plan from day 1 on how to reach the American market. Today, most of Ghana’s companies are focused on the Nigerian market – and they are making real progress.
Twitter founder and CEO Jack Dorsey on Monday announced Twitter presence in Africa. The bird app, which has been increasingly embraced by Africans was operating outside the continent.
To change that and increase its growth potential in Africa in line with its mission to increase the number of people who feel comfortable participating in public conversation, the social media platform is setting up its first African office.
“Today, in line with our growth strategy, we’re excited to announce that we are now actively building a team in Ghana. To truly serve the public conversation, we must be more immersed in the rich and vibrant communities that drive the conversations taking place every day across the African continent,” Twitter announced in a blog post.
However, Ghana as the choice destination for Twitter’s first office in Africa has not gone down well with Nigerians, who are top users of the app in the continent.
Nigeria's population approx. 200million
Ghana's population approx. 32million
Nigeria Social network users approx 33million,(Ghana's population)
Twitter said Ghana was chosen because of her democratic tendencies, support for free speech and the African Continental Free Trade Area (AfCTA).
“As a champion for democracy, Ghana is a supporter of free speech, online freedom, and the Open Internet, of which Twitter is also an advocate. Furthermore, Ghana’s recent appointment to host The Secretariat of the African Continental Free Trade Area aligns with our overarching goal to establish a presence in the region that will support our efforts to improve and tailor our service across Africa,” it said.
Although Twitter mentioned AfCTA as part of the reasons it chose Ghana, it has more to do with the country with more freedom of expression and tech viability.
Nigerian government has been severally caught in attempts to muzzle free speech. The notorious social media bill, which was introduced in a bid to curb dissent voices on across social media platforms got global attention, thus sending the intolerant message that has put Nigeria on the spotlight on freedom of expression.
Government’s stance on free speech was further exposed during the End SARS protest, which Dorsey supported, as security agents and other government’s institutions clampdown on protesters. A former presidential aspirant under the ruling All Progressive Congress (APC), Adamu Garba, filed a suit against Dorsey for using Twitter to incite insurrection in Nigeria. Although the suit has been withdrawn, it is believed to one of the reasons Twitter does not consider Nigeria a suitable destination for office.
Nigerians said that given the government’s record in handling dissenting voices, it wouldn’t think twice to shut down Twitter’s office whenever it feels the social media platform is being used to attack the government, if it is situated in Nigeria.
Government’s recent decision to prohibit financial institutions from cryptocurrency transactions, is also fingered to be among the reasons while Dorsey, a famous bitcoin fan, chose to ignore Nigeria.
Apparently, Dorsey had been in love with Ghana. In 2019, when he visited Africa, the tech guru who also doubles as the CEO of Square, a payment platform also founded by him, hinted on staying in Africa, Ghana precisely for at least three months. He has touted the West African even before the many actions of the Nigerian government made this decision such an easy one.
On his way out he had tweeted: “Sad to be leaving the continent for now. Africa will define the future (especially the bitcoin one!). Not sure where yet, but I’ll be living here for 3-6 months mid 2020.”
Although COVID-19 pandemic altered his plan to live in the continent, it didn’t stop his tech development plan for the continent, but it would not start in country that shows apathy for whatever he believes in.
