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As businesses turn to dollar-pegged options, stablecoins now represent over 40% of Sub-Saharan Africa’s crypto economy.
Stablecoins have emerged as a vital component of Sub-Saharan Africa’s crypto economy, accounting for approximately 43% of the region’s total transaction volume, according to a recent report from Chainalysis.
Importance of Stablecoins in Sub-Saharan Africa
In nations grappling with volatile local currencies and limited access to U.S. dollars, dollar-pegged stablecoins such as Tether (USDT) and Circle (USDC) have gained prominence. These digital assets enable businesses and individuals to store value, facilitate international payments, and bolster cross-border trade.
Chris Maurice, the chief executive of Yellow Card, commented to Chainalysis, “about 70% of African countries are facing an FX shortage, and businesses are struggling to get access to the dollars they need to operate.”
Impact on Local Economies
As a result of these challenges, Ethiopia, Africa’s second-most populous nation, has seen retail-sized stablecoin transfers grow by 180% year-over-year. This surge is fueled by a recent 30% devaluation of its local currency, the birr.
While traditional financial institutions struggle to meet the demand for U.S. dollars, stablecoins are increasingly viewed as a “proxy for the dollar.” Maurice added, “if you can get into USDT or USDC, you can easily swap that into hard dollars elsewhere.”
Future Outlook for Stablecoins in Africa
Rob Downes, head of digital assets at ABSA Bank, a major African bank operating in 12 African countries, foresees stablecoins playing a pivotal role in Africa’s economic landscape. He stated that dollar-pegged tokens are going to be the “primary use case for crypto in South Africa over the next three to five years.”
“Dollar-pegged tokens are going to be the primary use case for crypto in South Africa over the next three to five years.”
Stablecoins offer a viable solution for regions facing currency volatility and limited access to stable foreign currencies. As these digital assets continue to gain traction, their role in Sub-Saharan Africa’s economy will likely expand, providing more stability and opportunities for businesses and individuals alike.
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