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A new frontier has been opened in Africa for the use of stablecoins, which are blockchain-based ‘tokens’ backed by stable assets, such as the US dollar, euro or even gold.
“It was inevitable that African companies beset by a scarcity of fiat US dollars would seek out ways to solve this shortage of liquidity. Stablecoins are proving to be that solution,” says Omer Iqbal, CEO of Cape Town-based crypto company Fivewest.
Stablecoins are the fastest-growing subset within cryptocurrencies, accounting for two of the five largest cryptos as measured by market cap.
The two stablecoin frontrunners are USD Tether (USDT) and USD Coin (USDC), which together account for a total market value of about US$37 billion (R663 billion).
Crypto ‘the default bank of Africa’
“There is a massive demand [for stablecoins]. Crypto has become the default bank of Africa,” says Jon Ovadia, head of crypto company OVEX.
“Opening a USD account for most Africans was out of reach until now.”
While the demand is there, regulators are lagging behind. “We’re treading with extreme caution in each market while we engage with regulators to understand the regulatory landscape in each market,” adds Ovadia.
In central Africa, companies like Eversend, a Ugandan start-up barely three years old, is on a fund-raising drive after growing transaction volumes 46-fold in 2021. – Bloomberg
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