Tokenization

Commodity tokenization would enable African countries — such as Ghana and Botswana — an opportunity to empower themselves without relying on international aid.

In my youth, amid Ghana’s cocoa farms, I walked with my grandfather, a soldier turned farmer. He shared how these beans fueled our nation’s pride and economy. As the digital age unfurls, I often wonder: Could the modern marvel of crypto tokenization be the change my grandfather and countless cocoa farmers need?

Despite their vast agricultural and mineral wealth, many African countries face issues such as limited access to global markets, unfair trading conditions, lack of transparency in transactions and susceptibility to market manipulation. These challenges hinder economic growth, perpetuate poverty and prevent many Africans from realizing their full potential.

For decades, Africa’s economic potential has been stifled by external forces with vested interests. Colonial-era tactics of economic control might have faded, but modern neocolonialism is subtly pervasive. It thrives through unfair trade agreements, economic policies dictated by global financial powerhouses and a sheer lack of transparency in international dealings.

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Take, for instance, Ghana’s government under President Nana Akufo-Addo, which has procured $3 billion in loans from the International Monetary Fund since 2017. While these loans might have temporarily filled coffers, they also deepened the country’s indebtedness.

Instead of seeking IMF loans, Akufo-Addo could have championed commodity tokenization. Tokenizing Ghana’s key commodities — such as gold, cocoa and oil — on the blockchain would create significant economic opportunities. In 2022, Ghana produced an estimated 3.7 million ounces of gold, valued at $6.7 billion; a record 689,000 tonnes of cocoa, valued at $1.65 billion; and produced oil at a rate of approximately 150,000 barrels per day.)

Considering the numbers, it’s conceivable that such an initiative in Ghana could enhance trade volumes for these commodities by several billion dollars. With the current market prices being $1,909 per ounce for gold, $3,340 per tonne for cocoa, and $82 per barrel for oil — and the possibility of significantly reduced transaction fees through tokenization, which could be as much less than traditional avenues, according to the Boston Consulting Group — the resultant economic activity from global trading could substantially increase Ghana’s revenue.

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Tokenizing commodities, specifically Ghana’s gold reserves, presents a fresh avenue to drive the economy forward. Let’s delve into what it means: Ghana could use its physical gold to back digital tokens, like the decentralized stablecoin Dai (DAI), which is backed by several real-world assets. These tokens, anchored by tangible gold, become a globally recognized digital currency.

Why would anyone buy this digital currency backed by gold? Investors and countries looking for a stable digital currency would be attracted. This isn’t just a digital number — each token holds the value of real gold. It’s a way for investors to hold gold without the physical constraints, making it especially attractive in a digital age.

How would this diversify Ghana’s revenue streams? Well, tokenizing opens up new avenues for income. Traditional gold sales remain, but now there’s an additional stream: digital gold sales. Each time a token is bought, Ghana benefits. Plus, the nation can also introduce fees or premiums on these digital transactions.

Lastly, the move would place Ghana at the digital forefront. With the rise of digital economies, being a pioneer in such initiatives could be a game-changer, allowing Ghana to dictate its economic narrative in the digital realm.

The potential revenue from tokenized commodities, if explored, could have provided a viable alternative to borrowing sprees. Consider Ghana’s finance minister, Ken Ofori-Atta. His policies lean on taxing impoverished citizens. It’s baffling that in a rapidly advancing digital age, establishing a clear regulatory framework for crypto technologies hasn’t been a priority. Could this hesitancy stem from a fear of losing control over traditional financial power structures? Or is it simply a lack of foresight?

Moreover, international institutions like the World Bank are exhibiting inertia when it comes to promoting innovations like crypto tokenization. Why do they appear keener on advancing loans than fostering an environment that encourages self-sustainability through technology? Do they have underlying motives that prioritize their interests over Africa’s genuine development?

The promise of blockchain technology offers a beacon of hope to address these injustices. By adopting blockchain, countries like Ghana can ensure a level of transparency where every transaction is recorded and remains unalterable. This transparent approach will serve as a formidable weapon against corruption and illicit financial flows, and will be a step toward better governance.

Tokenization of commodities via blockchain also makes direct trade possible, effectively removing the need for middlemen who, historically, have pocketed undue profits. This ensures that farmers and producers earn their rightful share.

Rather than being dependent on external financial juggernauts, a decentralized financial system might pave the way for greater self-reliance, while also curtailing the overarching influences of neocolonial interests. Furthermore, the potential of tokenized commodities showcases the vast opportunities blockchain presents in introducing new revenue avenues, diminishing external debts and uplifting the economy on the whole.

Ghana could similarly offer to back DAI with its gold reserves. Botswana could do the same with its diamond reserves. These commodities, which traditionally have been undervalued or traded suboptimally, could now generate considerable revenue. By tokenizing these assets, Ghana could not only sell its gold at international market rates but also introduce a tokenization premium and fee, which could be a whole new revenue stream.

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If the actions of companies like Goldman Sachs and BackRock are any indication, tokenization could be a big market opportunity. Embracing blockchain could add trillions to the continent. It could spur job creation, increase investment, and so much more.

However, to realize this potential, there is a need to address challenges in logistics, including storage, transport and tax considerations. Trust and security are also paramount, potentially requiring third-party audits from reputable globally recognized firms. Audits from companies like KPMG or PwC would lend significant credibility and assurance to the entire tokenization process, bolstering global investor confidence in the integrity and security of Ghana’s tokenized commodity market.

If Ghana grants visionary crypto entrepreneurs a strong regulatory regime, blockchain-driven growth could spearhead an economic revolution in their country. That revolution could have a ripple effect across the continent, with or without African governments that have woefully failed their people. To me, this is more than just speculation. It’s a call for reflection — and for action.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.