Economic challenges specific to Kenya and, by extension, Africa, spanning dollar shortages, inflation and currency devaluation, are some of the key factors driving the accelerated adoption of stablecoins, a new report shows.
According to a study by global blockchain technology company Emurgo Africa, the growing interest in using stablecoins is mainly for crypto trading, US dollar exchange, cross-border remittances, as well as online purchases and savings. It is shown that there is.
Stablecoins are cryptocurrencies designed to have a relatively stable price, usually by being pegged to some external reference, including an asset such as fiat currency or gold, or by having the supply regulated by an algorithm. .
Stablecoins are typically touted as being more useful than unstable cryptocurrencies as a medium of exchange.
According to market capitalization, some of the most popular stablecoins include Tether (USDT), USDC (USDC), Dai (DAI), Ethena USDe (USDE), and First Digital USD (FDUSD).
“Stablecoins, which are digital money typically pegged to fiat currencies such as the US dollar, are widely used in the Sahara region, a region that faces unstable local currencies, inflation and limited access to traditional banking services. It is rapidly becoming the preferred medium of exchange in Africa and beyond,” said Emurgo. Report.
“While the use of stablecoins is generally increasing around the world, Africa is leading the way in stablecoin adoption.Stablecoins are reshaping the continent’s economic landscape and are fueling the growth of Web3 It has emerged as a powerful tool to open up new opportunities for the future.
According to a recent report by Financial Sector Deepening (FSD) Kenya, African stablecoin trading volume reached more than $30 million (Sh3.9 billion at current exchange rates) in the 12 months to July last year. , which corresponds to 50% of the world. Total amount of virtual currency originating from Africa during the period.
In Kenya, Emurgo Africa believes that the integration of Safaricom’s mobile money service M-Pesa with platforms that provide stablecoin and fiat exchanges such as Binance will help expand financial services to individuals in underserved areas. He points out that this is an important step.
“Africa’s unique economic challenges, such as dollar shortages, inflation, and currency depreciation, as well as its vibrant fintech ecosystem and relatively high smartphone and internet penetration rates, are driving mass adoption of stablecoins.” It is written in the book.
“Thereby, stablecoins bridge the gap between expensive dollar conversions and loss of local currency value by providing a digital alternative to traditional banking, which takes days to complete cross-border transactions.” I was able to do that.”
The report lists Kenya among the top six countries on the continent with the highest number of stablecoin adoption and use cases, along with Nigeria, South Africa, Ghana, Mozambique and Uganda.
According to the study, the fascination with cryptocurrencies in Kenya has been fueled by the recent anti-financial bill protests across the country in June and July this year, as well as the sharp fluctuations in the local currency mainly seen last year. are.
“Social unrest has reinforced the view that cryptocurrencies, and Bitcoin in particular, are a better store of value and a potential hedge against local currency devaluation,” Emurgo writes.
The report also highlights a peculiar trend in the country’s crypto scene where young investors are looking to participate in various crypto airdrops.
“Airdrops, which distribute new tokens for free to existing crypto holders or participants in certain activities, are becoming increasingly popular as a potential way to participate in new projects without upfront costs. ”
Last August, Kenyan authorities suspended global cryptocurrency company Worldcoin’s operations in the country, citing privacy and security concerns over how user data was obtained.
The following month, a parliamentary select committee recommended a nationwide shutdown of Wordcoin, resulting in Wordcoin losing a significant portion of its user base.
The Directorate of Criminal Investigation (DCI) was scheduled to allow the company to resume operations in late June after police closed all investigations into the company.
