Stablecoins have emerged as a popular solution to combat currency devaluation in Sub-Saharan Africa. In a research published on 2 October 2024, Chainalysis found that stablecoins now account for approximately 43% of the region’s total transaction volume.
“Stablecoins have become a key element of Sub-Saharan Africa’s crypto economy,” Chainalysis noted. “In countries where local currencies are highly volatile and access to US dollars is limited, dollar-pegged stablecoins like USDT and USDC have gained traction, offering businesses and individuals alike a reliable way to store value, facilitate international payments, and support cross-border trade.”
Unlike volatile cryptocurrencies such as Bitcoin or Ethereum, stablecoins are pegged to stable assets like the US dollar or gold, providing a more predictable store of value.
Furthermore, this stability makes them an attractive option for individuals looking to hedge against inflation and preserve their wealth.
Related: Coinbase CEO Calls For Payments To Be Next Big Thing In Crypto, Following Stablecoins
Currency Devaluation Drives Stablecoin Adoption
The rapid devaluation of local currencies across Sub-Saharan Africa has become a significant catalyst for the adoption of stablecoins in the region.
As economic instability and inflation continue to erode the purchasing power of traditional currencies, many individuals and businesses are turning to stablecoins as a reliable alternative for preserving value and facilitating transactions.
This trend is reshaping the financial landscape in Sub-Saharan Africa.
Chris Maurice, CEO and Co-Founder of Yellow Card—one of Africa’s leading crypto-asset exchanges, which operates across 20 countries on the continent—commented on the trend. “About 70% of African countries are facing an FX shortage, and businesses are struggling to get access to the dollars they need to operate,” he said.
Meanwhile, Rob Downes, Head of Digital Assets, Absa Group noted a similar trend among institutional clients in South Africa. “Our institutional clients are particularly interested in using stablecoins as a tool for managing liquidity and reducing exposure to currency volatility,” Downes said.
Blackrock, PayPal and XRP all creating stablecoins with dozens more on the way and your bearish $CRV? Ok.. 👀 https://t.co/Y71kVJ7SNt pic.twitter.com/bIw5vSJdOh
— Cryptovestor (@Cryptovestor77) October 1, 2024
Is Crypto Answer to Sub-Saharan Africa’s Economic Challenges?
Sub-Saharan Africa has been grappling with economic challenges, including high inflation rates, political instability, and fluctuating commodity prices. These factors have contributed to the devaluation of local currencies, making it increasingly difficult for individuals to maintain their purchasing power.
For instance, countries like Nigeria and Zimbabwe have experienced significant currency devaluation, leading to a loss of confidence in their national currencies.
As a result, citizens are seeking alternatives that can provide stability and protect against further economic decline.
“We see stablecoins as a game-changer,” Downes said. For individuals sending money to family members abroad or paying for expenses, stablecoins provide a faster, more affordable alternative to traditional remittance services.
The increasing adoption of stablecoins presents significant opportunities for growth in Sub-Saharan Africa. By embracing digital currencies, the region can enhance financial inclusion, stimulate economic development, and attract foreign investment.
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Related: Russian Regulators Soften Stance On Crypto. Are stablecoins the solution to Russia’s sanctions?
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
