The rise of stablecoins in sub-Saharan Africa is transforming the financial landscape and providing a lifeline to millions of desperate individuals grappling with economic instability.
According to a recent report, stablecoins currently account for 43% of all crypto transactions in the region. These go hand in hand with currency devaluation and inflation, leading most individuals and businesses to seek potentially less volatile alternatives to meet their financial needs.
Changes in monetary policy decisions
Countries like Nigeria and Ethiopia have seen large-scale adoption of stablecoins even as inflation hits traditional currencies, with citizens turning to currencies like USDT and USDC to preserve their savings. relying on the use of digital money.
In Nigeria, for example, stablecoin transactions of less than $1 million approached $3 billion earlier this year, demonstrating the importance of stablecoins for small and medium-sized remittances. Moyo Sodipo, chief operating officer (COO) of Nigerian crypto exchange Busha, said many Nigerians are using cryptocurrencies to pay their bills and other transactions. “It’s now practical in everyday transactions,” he says.
Source: Chainalysis
This is consistent with the more general sub-Saharan trend. The region, which accounts for 2.7% of global transaction volume, increased on-chain value by $7.5 billion from July 2023 to June 2024. In Chainalysis’ global rankings, countries such as Kenya and South Africa are also progressing in the adoption of cryptocurrencies, with Kenya ranked 11th and South Africa ranked 31st. Cryptography Adoption Index.
Stablecoins as economic stabilizers
Stablecoins have proven to be central to stabilizing economies that tend to be easily disrupted by currency fluctuations. Yellow Card CEO Chris Morris said the digital currency would be a practical alternative for businesses involved in international trade, given Nigeria’s lack of foreign currency. “Banks don’t have dollars, governments don’t have dollars,” he said, underscoring the urgent need for alternatives.
As of October 3, 2014, the market capitalization of cryptocurrencies was $2.8 trillion. Chart: TradingView.com
Ethiopia is another country where the use of stablecoins is increasing significantly. Retail-scale transfers of stablecoins are up 180% year over year. The increase followed the government’s significant devaluation of the Birr currency by restricting the local currency to reduce borrowing from foreign financial institutions. These trends are best illustrated by how stablecoins act as a buffer for economies seeking to become more resilient to financial stress within the economically volatile region of sub-Saharan Africa. has been.
Source: Chainalysis
The future of cryptocurrencies in sub-Saharan Africa
As sub-Saharan Africa continues to embrace cryptocurrencies, particularly stablecoins, the potential for economic development becomes clearer. The World Bank predicts that in 2021, only 49% of people in the region will have access to a bank account. For many unbanked or underbanked people, cryptocurrencies are showing promise as a result of a lack of access.
A clearer regulatory regime in different jurisdictions will also help support the growth of the cryptocurrency space. South Africa is leading the way with a comprehensive ex-ante regulatory framework that empowers crypto entities without putting consumers at risk. Sub-Saharan Africa will drive global cryptocurrency adoption as more people seek greater access and stability through digital currencies.
Featured image provided by SEGURA Consulting LLC, chart provided by TradingView
