In recent years, Ghana has seen a surge in cryptocurrency demand, with more people turning to digital assets as a means of financial exchange. However, this trend has been challenging, particularly for the country’s banks, which are losing millions of dollars as a result of the widespread adoption of crypto in the country.
Ghanaian banks have lost millions of dollars because of a surge in crypto purchases. Here's how and why:
— Kofi (@0xKofi) January 5, 2023
One of the main issues facing banks in Ghana is the difference in value between the local currency, the Cedi, and the U.S. Dollar when citizens buy Crypto from Centralized exchanges.
When customers make purchases using their credit cards, the banks deduct Cedi from their accounts. However, the value of the Cedi is often lower than the Dollar value that the banks have to pay to the crypto exchanges, resulting in significant losses.
For example, let’s say a customer in Ghana uses their credit card to purchase $100 worth of cryptocurrency, the bank will deduct the equivalent value in Cedi from the customer’s account, which might be something like GHS 500 (based on an exchange rate of GHS 5 per $1).
However, when the bank goes to pay the crypto exchange, it might have to pay closer to GHS 700 for the same $100 worth of cryptocurrency, due to fluctuations in the exchange rate. This means that the bank is losing GHS 200 (the difference between the GHS 500 it collected from the customer and the GHS 700 it had to pay to the exchange) on this transaction.
The difference in rates has the potential to negatively affect Ghanaian banks, therefore, solutions must be provided if Crypto will not be banned in Ghana. One solution might be for banks to adjust the exchange rates they use when processing crypto transactions so that they are more in line with the rates being offered by the exchanges.
This would help to reduce the amount of money being lost on each transaction and could make it more attractive for banks to offer services related to cryptocurrency.
Another solution might be for banks to invest in blockchain technology and cryptocurrency themselves, as a way to better understand the market and mitigate their own exposure to exchange rate fluctuations. By being more involved in the crypto industry, banks could take a more active role in shaping its development and direction, which is ultimate to their benefit.
It is clear that the increasing demand for cryptocurrency in Ghana is presenting both challenges and opportunities for the country’s banks. While it is important to address the issues that are causing banks to lose money, it is also necessary to recognize the potential benefits that the crypto industry can bring.