Nigerians have been using stablecoins for years to protect against declines in asset values. Cryptocurrency transactions in Nigeria totaled $59 billion last year. Nigerian authorities blame stablecoin trading for the Naira’s decline.
In a sign that Nigeria’s cryptocurrency crackdown is having an impact, stablecoin trading volume fell 38% to $23.6 billion in the 12 months to July, according to blockchain information firm Chainalysis.
The sharp decline in stablecoin usage in Nigeria comes as the country faces an economic downturn and the devaluation of its currency, the naira.
Nigerians who have been big users of cryptocurrencies for years should invest in dollar-backed stablecoins like Tether’s USDT to protect their wealth.
However, a bitter legal standoff with Binance and a crackdown on cryptocurrency exchanges in Nigeria appear to be curbing the use of stablecoins.
Alleged blackmail
In February, Nigerian authorities accused foreign cryptocurrency exchanges including Binance, OKX, and Kucoin of foreign exchange extortion.
These platforms, especially peer-to-peer services, were flagged for causing a 90% decline in the value of the naira against the dollar.
Nigerian officials have claimed that exchanging stablecoins and naira on these platforms is hurting the economy.
Additionally, Nigeria has focused its anger on Binance for facilitating money laundering and illegal currency speculation.
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In March, it indicted Tigran Gambariyan, a US-based compliance executive, on money laundering charges and has been holding him without bail for almost seven months. Binance and Gambarian denied the allegations.
have a hard time coping
Last week, U.S. Ambassador to the United Nations Linda Thomas-Greenfield implored the Nigerian government to immediately release former federal agent Gambariyan.
Meanwhile, Nigerians are struggling to cope with dire economic conditions. Inflation is skyrocketing, the economy is shrinking, and households and businesses are finding it difficult to access stablecoins to protect them from falling asset values.
Foreign exchanges, including Binance, have disbanded small domestic organizations.
Nigerians currently have to rely on Telegram groups and other unofficial P2P dealers to access USDT.
Still, platforms like Noons, a trading platform founded by Ray Youssef, former CEO of crypto exchange Paxful, are trying to fill the void left by Binance’s exit.
individual user
Despite these challenges, Nigeria still accounted for 40% of Africa’s stablecoin trading volume last year, according to a Chainalysis report released this week.
South Africa was a distant second with $14 billion in the period.
Adoption of Nigerian stablecoins continues to be driven by retail users as well as businesses.
Still, 85% of stablecoin circulation came from transactions of less than $1 million, the report said.
driven by investors
Nigeria’s introduction of cryptocurrency last year certainly resulted in a remarkable feat.
According to a report by Chainalysis, Africa’s most populous country recorded a total of $30 billion received by DeFi services.
This achievement was a huge moment, as it enabled Africa to become a world leader in global DeFi adoption for the first time.
In the last reporting period, Africa ranked third in DeFi adoption after India, North America, and Western Europe.
According to the report, DeFi adoption in Nigeria is primarily driven by investors seeking to maximize returns from activities such as crypto lending.
This trend shows that Nigeria’s use of cryptocurrencies is expanding beyond stablecoin-based payments and remittances into more sophisticated markets.
It also helped Nigeria’s overall cryptocurrency trading volume reach $59 billion despite the stablecoin shortage.
Osato Abang Nomayo is a DeFi correspondent based in Nigeria. He covers DeFi and technology. To share a tip or information about a story, contact osato@dlnews.com.
