The meeting of the Joint Committee of the ECOWAS Parliament holding in Ouagadougou, Burkina Faso has cautioned against the use of cryptocurrencies as a mean of exchange and commerce.
The joint committee meeting on Wednesday, which also had in attendance cryptocurrency experts and resource persons, while highlighting the prospects of cryptocurrencies as facilitator for investment in West Africa. noted that there is a cause for concern with regards to the risk factors involved.
The meeting also noted that the sharp decline in the value of Bitcoin over recent weeks is a reminder for all that cryptocurrencies are not safe assets hence their use on the African continent is not without dangers for several reasons.
The joint committee also reminded that cryptocurrencies can be refused for payment without contravening legal provisions, further stating that crypto-assets are not a means of payment and cannot be likened to e-cash, even as cryptocurrencies also identified as extremely volatile, owing to restrictive issuance mechanism that encourage speculation.
The joint committee further highlighted the security risks involved, like all other digital payment instruments, Bitcoin is always attacked by pirates and therefore cryptocurrencies enthusiasts need to guard against the risk of theft because if the cryptocurrency is by nature inviolable, portfolios, on the other hand, are not.
Among the risk factors identified is the fact that cryptocurrency is an insecure liquidity; given the shallow depth of the foreign exchange market and high concentration of assets (96% of bitcoins are believed to be held by 2.5% of users), a liquidity problem may arise.
Another risk factor of cryptocurrencies identified is that it is an irreversible transactions, in other words the transaction cannot be cancelled when the sender notices a mistake, only the receiver can decide to return them, with another source of concern to its use being that there is almost no regulatory authority.
The joint committee however said that with the boom of Bitcoin and the growing popularity of virtual currencies have caught the attention of financial authorities and governments who have started given them a thought. It has been noted that even some countries have made efforts to put in place regulations, and have made some progress.
Michael Olugbode in Abuja