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Inclusivity and Financial Aid: Problems Tokenized Gold Can Solve for Africa

Updated Dec 28 2023
7 Min
mr slava
Nick Patel
CEO & Founder at Clinq.Gold, Bank of Bullion | Keynote Speaker

Africa is a mighty continent with a huge, largely unexplored economic and resource potential. The majority of countries in this region have been kept in the third-world status by colonial rule, numerous limitations to growth, and unequal trading partnerships with Western states. The resulting massive bottleneck for African development is the growing public debt, which equaled $365 billion in 2010 and grew to $700 billion by 2022. Following these figures, one can see that the public debt of African states is growing by 7% every year, depriving these countries of healthy economic perspectives. 

The growing public debt of Africa has many hazardous implications, with Eurobonds being the main instrument for borrowing. It suggests the debt should be paid out in EUR, which becomes increasingly hard with the quick depreciation of African national currencies. Therefore, it is evident that African states need alternative financial solutions that would allow them to benefit from their rich resource reserves in a much fairer and economically inclusive manner. 

One such option is resource tokenization – the method of backing assets with commodities with stable prices, like gold and oil, instead of rapidly inflating national currencies. This technologically advanced approach has many benefits besides financial stability and offers liquidity, transparency, and accessibility. 

Tokenization’s Quick Pace in Africa 

While most governments in the West are only considering commodity tokenization, the process is already in full swing in Africa. Blockchain-based currencies and digitization give African states unique opportunities to overcome their pressing financial challenges and economic growth bottlenecks. That’s why the continent has already witnessed several groundbreaking innovations in this sphere, including: 

  • The 2021 approval of tokenized coin offerings by Nigeria’s Securities and Exchange Commission. The tokens’ collateral was allowed in the form of equity and property. 
  • In 2022, Nigeria also launched a pilot program for government bond tokenization. The project’s initial takeaways are improved government bond efficiency and lower trading costs compared to traditional bonds. 
  • Ghana is currently working on a tokenized debt platform for governmental debt instruments. 
  • Kenya is considering a tokenized debt platform to give investors access to Kenyan government debt instruments trading in a DEX format. 

These and other initiatives are on the rise in different African states, actively considered as an alternative path for economic empowerment and diminishing the state debt. 

Gold Tokenization: Benefits for Africa 

The African continent is rich in gold and oil, which are its two strategic assets in the global commodities market. However, most African countries’ economic paths have been hampered by a long history of colonialism, serious indebtedness to international financial institutions, and corruption in the government-level financial structures. All these negative factors have been hindering state development and eroding citizens’ and international investors’ trust in African currencies. 

Commodity-backed digital currencies open a new page in the way African governments can approach financial inclusivity and economic development. With gold-backed currencies enjoying greater stability than severely inflated national currencies, tokenized gold can allow self-sustainability for African economies instead of the vicious cycle of reliance on the World Bank’s loans. With the help of tokenized commodities, African states can attain: 

  • Sustainability. African economies can become more sustainable by using eco-friendly practices and standards in the key commodities mining, production, and consumption processes. As a result, they are likely to achieve considerable carbon footprint reduction and improve their citizens’ quality of life. 
  • Financial inclusion. Decentralized, innovative digital currencies give Africans much better access to financial transactions and services. End users can grow more reliant on gold-backed tokens for financial operations and investments because the latter are immune to the inflation of national currencies, thus contributing to economic development. 
  • Wealth creation. Commodity-backed tokens are sure to empower African economies by giving them ownership of their rich natural resources and attracting more investments from the global market to national economies. Instead of being pressured to sell their resources at low prices for tiny economic aid, African states will regain control over their resource bases and use that money for properly arranged economic stimulation. 

Experts note that the adoption of gold-backed cryptocurrencies in African countries will offer much-needed transparency and decentralization to the African trading and financial sectors, thus curbing corruption and hindering the illegal financial activities that cause African economies to stagnate. With transparent, legal, and fair financial markets put in place, African businesses are sure to gain a much better image among foreign investors, which will also drive economies forward. 

Gold-Backed Tokens: The New Tool for African Rise 

As this review shows, African states can step on the path of financial digitization and innovation to overcome their long-standing economic troubles and bottlenecks, in part perpetuated and intensified by Western aid arrangements. By using their state reserves of stable and universally recognized commodities like gold and oil, African states can improve their financial resources and economic standing without the doping of international financial aid. Therefore, gold tokenization is a big market opportunity for Africa today, and the pace of blockchain adoption determines the competitive advantage of newly rising African economies in the gradually evolving multi-polar global economic landscape. 

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