The State of Crypto Adoption in Guinea-Bissau
Guinea-Bissau has launched a blockchain platform to enhance the transparency and efficiency of its salary and pension payment system.
This blockchain-based solution is designed to address some key challenges faced by Guinea-Bissau's government, such as high wage bill-to-tax revenue ratios and concerns about corruption.
The platform provides a secure and transparent way to track salary data, detect discrepancies, and generate timely reports for policymakers and the public.
The implementation of this blockchain system is part of Guinea-Bissau's broader efforts to improve fiscal governance and economic development, with support from the International Monetary Fund (IMF) and other international partners.
The platform's ability to integrate with artificial intelligence (AI) models in the future suggests that Guinea-Bissau is also exploring ways to further enhance data analysis and decision-making capabilities.
While this specific initiative is focused on wage bill management and not on broader cryptocurrency or blockchain adoption, it does demonstrate Guinea-Bissau's willingness to embrace emerging technologies to address its governance and economic challenges.
The successful implementation of this blockchain-based system could pave the way for further exploration and adoption of crypto and blockchain technologies in other areas of the country's public and private sectors.
Crypto Law In Guinea-Bissau
In 2024, Guinea-Bissau does not have a specific law regulating cryptocurrencies. The country is still trying to understand the risks and benefits of digital currencies.
The Central Bank of West African States (BCEAO), which oversees the financial system in Guinea-Bissau, has been cautious about cryptocurrencies. They have warned the public about the dangers of investing in them, as there is no legal protection for these investments.
The government of Guinea-Bissau recognizes the potential of blockchain technology, the technology behind cryptocurrencies, to improve different areas like agriculture, healthcare, and governance.
However, they are yet to create any laws or regulations to govern the use of cryptocurrencies in the country.
Guinea-Bissau faces challenges in regulating this new form of digital money, including a lack of a robust technological infrastructure and regulators' and financial institutions' limited understanding of cryptocurrencies.
The country is taking a cautious approach, trying to balance the potential benefits and risks of cryptocurrencies.
Crypto Usage in Guinea-Bissau
Guinea-Bissau developed in collaboration with the IMF and supported by technological advisor Ernst & Young, is a significant step forward for the country in enhancing transparency and accountability in government finances.
The new blockchain platform acts as a secure digital ledger, tracking, and recording salary and pension payments in near real-time. This helps to ensure the integrity of the data, identify any discrepancies, and provide reliable information for decision-makers and the public.
By automating and streamlining the management of the wage bill, the platform has already helped to reduce the ratio of wages to tax revenues, which is a crucial fiscal indicator for the country.
Moreover, the project has the potential to expand beyond just the wage bill, with plans to scale it up to include other government ministries and agencies.
This could further enhance transparency and efficiency across the public sector, helping to build trust in the government's fiscal institutions and reduce any perception of corruption.
Economic Situation in Guinea-Bissau
Source: Envato
The economy of Guinea-Bissau has faced some challenges in recent years.
The country's GDP grew by 4.3% in 2023, up from 4.2% in 2022, driven mainly by a good harvest of rice, the main crop. However, the country also saw higher inflation at 7.2% in 2023, up from 6.9% the previous year, due to rising food and international rice prices.
The government's budget also ran a larger deficit, reaching 7.3% of GDP in 2023 compared to 6.5% in 2022.
This was caused by lower tax revenue and higher spending related to elections. As a result, Guinea-Bissau's public debt has risen to over 80% of GDP, putting the country at high risk of debt problems.
Poverty remains a major issue, with over 60% of the population living on less than $3.65 per day. Youth unemployment is also high, at around 4% in 2023.
In this context, cryptocurrency could potentially help boost Guinea-Bissau's economy in a few ways:
- Increasing financial inclusion: Cryptocurrency and blockchain technology can provide banking services to the large unbanked population in Guinea-Bissau, allowing more people to participate in the formal economy.
- Enabling cross-border transactions: Cryptocurrency can facilitate faster, cheaper, and more secure international payments and money transfers, which could benefit small businesses and entrepreneurs looking to expand their customer base globally.
- Reducing transaction costs: The low fees associated with cryptocurrency payments could be advantageous for small businesses in Guinea-Bissau, helping them keep more of their earnings.
However, for cryptocurrency to truly benefit Guinea-Bissau's economy, the country would need to create a supportive regulatory environment and work to increase the overall adoption and use of digital assets.
Challenges to Crypto Adoption in Guinea-Bissau
Adopting cryptocurrencies in Guinea-Bissau faces several challenges:
- Lack of Regulatory Framework: Without specific regulations, there's uncertainty and risk for both users and investors. This ambiguity can deter potential adopters.
- Technological Infrastructure: The country's digital infrastructure is still developing, with limited internet access and low international bandwidth. This makes it difficult to support widespread cryptocurrency transactions.
- Financial Literacy: Many people in Guinea-Bissau lack the necessary knowledge and skills to understand and use cryptocurrencies safely
- Economic Stability: The local economy's volatility can make cryptocurrencies a risky investment for many residents.
- Public Awareness: There's a need for greater public education about the benefits and risks of cryptocurrencies to build trust and understanding.
Potential Benefits of Crypto Adoption in Guinea-Bissau
Adopting cryptocurrencies in Guinea-Bissau could offer several potential benefits:
- Financial Inclusion: Cryptocurrencies can provide access to financial services for the unbanked and underbanked populations, enabling them to participate in the global economy.
- Remittances: Cryptocurrencies can facilitate cheaper and faster cross-border transactions, reducing the cost of sending money back home for the diaspora.
- Economic Growth: By attracting international investment and fostering innovation, cryptocurrencies can contribute to economic development and job creation.
- Transparency and Efficiency: Blockchain technology, which underpins cryptocurrencies, can enhance transparency and efficiency in sectors like agriculture, healthcare, and governance.
- Reduced Corruption: Just as it is currently being deployed, the immutable nature of blockchain records can help reduce corruption by providing a transparent and tamper-proof system for financial transactions and government operations.
Conclusion
With cryptocurrency, Guinea-Bissau has an opportunity to leapfrog traditional financial systems and unlock new avenues for economic growth and social development.
By embracing digital currencies, the country could potentially increase financial inclusion, reduce the cost of remittances, and attract international investment.
Additionally, the underlying blockchain technology could enhance transparency and efficiency in various sectors, such as agriculture, healthcare, and governance.
