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Could Blockchain-Powered Anarcho-Capitalism Thrive in Africa?

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Anarcho-Capitalism

Africa is home to some of the most corrupt governments in the world. According to the Transparency International Corruption Perception Index 2017, 11 out of the 20 most corrupt countries are located on the African continent. These nations are also among some of the worst performing countries when it comes to socio-economic development.

This data suggests that the state is at least partly responsible for many of the economic and social challenges faced by Africans today. This begs the question: “Would African nations fare better if they were not restrained by the state?”

In this article, we will explore a political school of thought called anarcho-capitalism, which promotes the replacement of the state with a free-market based system that empowers citizens through self-ownership and private property and whether blockchain-driven anarcho-capitalism could provide a viable alternative model for socio-economically struggling nations in Africa.

What is Anarcho-Capitalism?

Anarcho-Capitalism

Anarcho-capitalism, also referred to as libertarian anarchy or free-market anarchism, is a political philosophy that advocates the elimination of the centralised state in favour of individual sovereignty and free markets.

Anarcho-capitalists believe that in the absence of statute societies self-regulate through what is referred to as spontaneous order – an order which emerges as a result of the voluntary activities of individuals and not one that is created by a government.

In an anarcho-capitalist society, instead of having government-run public sector institutions such as law enforcement and courts that are funded by taxation, these services would be operated by privately-funded businesses who are chosen by consumers in the open market. This, in turn, should create a more efficient economy with better services.

Legal disputes would be resolved using tort and contract law through dispute resolution organisations as opposed to through punishment determined by political monopolies, which tend to become corrupted.

As opposed to the public image of anarchy, which often associates this political concept to chaos and lawlessness, anarcho-capitalism is based on the non-aggression principle (NAP). In simple terms, the non-aggression principle states that you should not assert aggression towards others or their property as this is deemed unethical.

Anarchism is also often linked to left-wing political schools of thought such as socialism and communism. However, while there is a large anarcho-communist community, not all anarchists are opposed to private ownership of property and free-market economics. In fact, the anarcho-capitalist movement has been growing in recent years in places like the United States and Europe due to the dissatisfaction with the performance of recent and current governments.

The term “anarcho-capitalism” was coined by Murray Rothbard, an American economist, historian and political theorist, in the 20th century. Rothbard believed that:

“Capitalism is the fullest expression of anarchism, and anarchism is the fullest expression of capitalism.”

Anarchism in Africa

Africa is not foreign to anarchist societies. Author Sam Mbah and I. E. Igariwey suggest in their book, ‘African Anarchism: The History of a Movement’, that many traditional African societies were built on anarchic elements and lacked state-like hierarchies.

“To a greater or lesser extent, all of […] traditional African societies manifested “anarchic elements” which, upon close examination, lend credence to the historical truism that governments have not always existed. They are but a recent phenomenon and are, therefore, not inevitable in human society. While some “anarchic” features of traditional African societies existed largely in past stages of development, some of them persist and remain pronounced to this day.”

“What this means is that the ideals underlying anarchism may not be so new in the African context. What is new is the concept of anarchism as a social movement or ideology. Anarchy as an abstraction may indeed be remote to Africans, but it is not at all unknown as a way of life. This is not fully appreciated because there is not as yet a systematic body of anarchist thought that is peculiarly African in origin,” the authors wrote.

How a Blockchain-Powered “Decentralised Economy” Could Disintermediate the State

The power of decentralised applications (DApps) and the new “decentralised economy” lies in the disintermediation of central authority. This does not only apply to businesses who act as intermediaries (such as financial institutions for financial transactions for example) but can also apply to public sector institutions.

Through the adoption of decentralised services, many centrally governed services that governments (aim to) provide could be largely replaced. The issuance of identities, business lending, asset and land ownership, startup funding, legally binding smart contracts, a direct peer-to-peer sharing economy, and decentralised digital currencies are among the possibilities that blockchain technology could provide to disintermediate many of the state’s functions.

anarcho-capitalismThe issuance of digital identities could be performed using a blockchain-powered database that does not require a centrally governed authority to oversee it. Instead, individuals could create their identities on the platform, and third parties who may require information on the individual could access it with the individual’s permission.

Business lending, as well as startup funding, which is often conducted through government grants or investment schemes, could be run by the private sector using blockchain solutions instead. Business lending, for example, could be performed on a peer-to-peer lending basis where investors lend to businesses directly without an intermediary taking a cut. Startup funding, on the other hand, could be conducted through initial coin offerings or security token offerings.

Asset and land ownership and transfers could be conducted on blockchain-based platforms for all stakeholders to view in a transparent and immutable manner. This way, there would be no need for public sector officials to become involved in the process and fees – and the potential for corruption – would thus be reduced.

Contractual agreements between businesses and individuals could be coded into immutable self-executing smart contracts, which would reduce the need for centrally-governed courtroom interventions in the matters between individuals and businesses. Moreover, the widespread adoption and societal implementation of smart contracts could drastically reduce the need for laws and bureaucratic legislation.

A true peer-to-peer sharing economy could also be created using blockchain technology, which could replace many public sector services with private sector solutions such as specialised healthcare or transport services, for example.

Furthermore, decentralised digital currencies such as bitcoin would eliminate the need for a central bank to meddle in the monetary affairs of a country and could empower citizens to “be their own bank” as opposed to relying on financial intermediaries to conduct their financial affairs.

Could Blockchain-Powered Anarcho-Capitalism Work in Africa?

It is difficult to know with any degree of certainty whether socio-economically struggling African nations would benefit from introducing blockchain-driven anarcho-capitalism as there have been little to no anarcho-capitalist societies to date.

According to freeblr, anarcho-capitalist societies have existed in the past, most notably in Celtic Ireland from 650 to 1650 and in the Icelandic Commonwealth from 930 to 1263. However, as these historical instances of anarcho-capitalism date back several hundred years it is difficult to determine whether these societies were truly 100 percent stateless and capitalist, and how well these societies functioned.

Anarcho-capitalism thus remains largely a political ideal and theoretical model that stands untested in modern history. This makes it difficult to judge whether an anarcho-capitalist society would flourish in countries that have suffered under corrupt governments.

In theory, however, anarcho-capitalism has the potential to create more wealth for a larger number of people in a society where it would be introduced. If you take away the state and its restrictive regulations, crony capitalism, and taxation, entrepreneurship and innovation could thrive while workers would be able to take home their entire paycheck as opposed to giving a share to their politicians.

The economy, in an anarcho-capitalist society, would become more efficient as private companies would have to compete to offer the best possible products and services that the consumer can then choose from. That would mean lower prices, higher quality products, and better services than in the current state of the economy.

Anarchy in AfricaInterestingly, one could argue that a high degree of economic and entrepreneurial freedom already exists in most African nations due to its thriving informal sectors that stay mostly untouched by government rules and regulations. Vendors in poor areas, for example, are often able to sell their goods wherever they please without government interference and taxation is only sporadically enforced in many African slums. This would suggest that anarcho-capitalism can be found in pockets of Africa’s society today.

The lack of effective state-led policing in many African nations would also feed into this argument as punishment for crimes is often enacted by local communities themselves as a form of self-governing, which could be considered as quasi-dispute resolution organisations.

In light of Africa’s experience with anarchy in many of its traditional societies, the lack of state-control in many of the poorer parts of the continent, and African citizens’ general distrust of governments and their institutions would suggest that the continent may be fertile ground for anarcho-capitalism. Through the widespread adoption of decentralised blockchain solutions, many of the government’s functions could be disintermediated and would thus become redundant, which would also feed into the argument that anarcho-capitalism could potential thrive in Africa.

Whether struggling African nations would be better off through the adoption of a free-market economy without government interference will remain unknown until the first libertarian society that embraces anarcho-capitalist ideals comes to fruition on African soil.

Unfortunately, due to corrupt government officials and the omnipresent corporate cronyism found all over Africa, it would be an uphill battle for the brave souls who attempt to create a free society based on the non-aggression principle, individual liberty, and personal financial sovereignty.

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Temasek Partners with SGX to Launch Singapore’s First Security Token Offerings Platform

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Bitcoin Remain dominant

Temasek Holdings, recently partnered with the Singapore Stock Exchange (SGX) to launch iSTOX, a security token offerings (STO) platform. This move marks the first of such services in a country and is yet another example of the rising stock of security tokens within the general cryptocurrency ecosystem.

Raising Capital Via STOs

According to finews.asia, SGX, and Temasek recently invested in iSTOX, the country’s first STO platform. Reports indicate that iSTOX will function as a capital market, allowing entrepreneurs to raise business capital through the sale of security tokens.

Commenting on the development, Danny Toe, CEO of ICHX – the operators of iSTOX, said:

The demands of the next generation of investors and issuers will be different, and this calls for a shift in how we should approach the process of capital funding. Utilising blockchain technology, iSTOX is able to offer STOs and address needs of both investors and issuers which are not adequately met today.

STOs differ from ICOs in that the latter involves the sale of tokenized securities. Many experts believe that STOs will provide the necessary regulatory compliance needed for blockchain-based crowdfunding.

Fiat Deals Only

The iSTOX platform will deal only in fiat transactions for the sale of tokenized securities. Despite being a blockchain-based platform with associated smart contract protocols, iSTOX is technically not a cryptocurrency exchange. Thus, the platform will not list ICO tokens or popular cryptocurrencies like Bitcoin, Ether, XRP, etc.

According to available reports, ICHX is currently pursuing licensing from the country’s Monetary Authority. Once granted, iSTOX will begin offering the issuance and trading of STOs. Also, the platform plans to provide access to liquidity in the form of a secondary trading service. Fiat currencies will be used to facilitate all the transactions on the platform.

The Emergence of Security Tokens in the Cryptocurrency Narrative

Bitwise 10 Crypto Index TokenSTO platforms are fast becoming a common feature of the evolving cryptocurrency ecosystem. While ICOs undoubtedly captured the imagination in 2017, stricter regulations in many countries coupled with numerous incidences of fraud seem to be dampening the ICO craze.

In its place, STOs present a more regulatory compliant form of blockchain-based fundraising. In places like the United States, for example, regulators say that most ICOs are selling securities in the guise of utility tokens. However, STOs, being securities, must comply with laid down rules and regulations.

In 2018, numerous STO platforms have emerged. The growing consensus is that security tokens could upstage utility tokens providing a more assured entry point for mainstream investors to come into the cryptocurrency space.

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Mauritius Gets First Blockchain Securities Exchange And Will Award Digital Custodian Licences

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Blockchain Securities Exchange

Mauritius will soon start issuing custodian licenses to companies holding digital assets on behalf of their clients because the current licensing regime is not suited for that purpose. Moreover, Mauritius is about to receive its first blockchain securities exchange.

Digital Asset Custodian Licenses

The Financial Services Commission (FSC) of the Republic of Mauritius released the draft framework intended for the fintech companies. They define “digital assets” as electronic tokens representing the holder’s access rights to a service or ownership of an asset. The FSC is currently accepting feedback on the proposal from industry representatives, stakeholders and the public. With the discussions and consultations going on till the end of November.

The FSC considers them a digital representation of value which can be a medium of exchange, the unit of account and store of value. The tokens can also represent assets such as debt or equity in the promoter or “provide access to a blockchain-based application, service or product.”

Mauritius FlagCurrently, the two kinds of licenses for traditional financial services the FSC provides do not support the specifics of safekeeping cryptographic assets. The proposed license is, therefore, specific to address this difference and comply with the current relevant regulations and laws.

One requirement includes an obligation to “have and maintain a minimum stated unimpaired capital of not less than 500,000 Mauritian rupees ($14,409.64).” Businesses wanting to apply for the license will need to have offices set up in Mauritius and also have permanent representatives to deal with the FSC as well as maintain records of the custodian. The boards of directors will need three members and up, “at least one of whom shall be resident in Mauritius.”

Additionally, those providing the custodian service providers will be required to have insurance protection for the assets that are kept in custody. They are subject to providing evidence of such arrangements to the FSC. They must also have systems in place that ensure compliance with all reporting requirements under Mauritian law.

Mauritius Receives a Blockchain Securities Exchange

As a result of Mauritius’ openness to digital assets, Mindex, GMEX Group and Hybrid Stock Exchange Corporation Limited (HYBSE) have partnered to create Mauritius’ first blockchain securities exchange. The joint venture – called HYBSE International Marketplace – plans to “integrate blockchain solutions and technology with traditional financial industries providing a complete and governed ecosystem that digitalises assets onto the blockchain.”

“As we embark on a journey to pave a previous uncharted way forward, this will inevitably create an ideal prospect to move the evolution of all financial systems, light-years ahead. We must also maintain a conscious belief of the power of this evolutionary step, as not to disrupt current global markets, but to rather bolster a new way of thinking that encompasses a decentralised and truly free market entity,” HYBSE’s operations manager, Daniel Liu, said.

The firms claim SMEs will be able to use the marketplace for an initial blockshare offering (IBO), such as block-shares, from businesses registered on the marketplace at “special discounted rates”. IBO is a time-limited offer to purchase cryptonised equities and other cryptonised instruments.

Asset classes that will be facilitated for trade will include cryptonised shares, cryptonised currencies, commodities, indices, forex, ETCs (exchange-traded commodities), ETFs (exchange-traded funds), and CETFs (crypto exchange-traded funds).

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Microsoft Partners with Interswitch to Launch New Blockchain-Powered Supply Chain Financing Platform in Nigeria

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Interswitch

Pan-African payments and commerce company, Interswitch Group, partnered with Microsoft to launch a new blockchain-backed supply chain financing service in Nigeria.

Seamless Supply Chain Financing

This new blockchain initiative will bring together different stakeholders – such as banks and corporations – on a single platform that will provide end-to-end visibility, ensuring fast, seamless trade financing in supply chain operations.

Interswitch Blockchain Service is said to be built and hosted using the Microsoft Azure blockchain solution, which provides proven security, compliance and also a scalable cloud platform that accelerates and supports next generation blockchain applications. 

Interswitch“In our 15 years of operation, we have experienced the bottlenecks associated with the existing corporate-based financing infrastructure in Nigeria.” Mitchell Elegbe, Group Managing Director and Chief Executive Officer at Interswitch, said.

“This is why we are happy to partner with Microsoft, by leveraging the advanced technology of the Microsoft Azure Blockchain, to prove the possibility of building a distributed ledger that is practical, viable and has the propensity to solve some of Nigeria’s most difficult financial and logistic problems,” he added.

Launching the Interswitch Blockchain Service (Supply Chain Finance Module) allows small and medium-sized enterprises (SMEs) access to more funding in a shorter time of up to three weeks. The participating banks include United Bank for Africa Plc, Guaranty Trust Bank Plc, and Zenith Bank Plc.

SMEs will also be able to enjoy increased sales cycles from participating corporations such as the Dangote Group.

Transaction Enquiries and Verifications

The Interswitch Blockchain Service does not deploy the use of cryptocurrency in its application. Instead, transaction inquiries and verifications will be authorised by officials from participating entities without the incentives of a cryptocurrency.

Principal Program Manager, Microsoft Azure Blockchain at Microsoft Corporation, Michael Glaros, expressed excitement about the partnership with Interswitch. Glaros said: “The blockchain technology is still in its infancy in Nigeria and we are happy to pioneer its deployment in partnership with Interswitch, an innovative and forward-thinking company which has evolved its business around financial technology.”

“This will be the first enterprise-grade blockchain service in Nigeria, and one of only a handful of production blockchain applications in use by banks and corporates globally,” Glaros added.

The Interswitch Blockchain Service, allows Nigerian lenders and suppliers to identify and build relationships with high performing entrepreneurs. Therefore, according to Mitchell, the platform allows anyone to build blockchain-based solutions easily and more cost-effectively.

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