Stablecoins driving increased crypto adoption in Africa

The crypto market is notoriously unpredictable, but even here there are some things you can hang your hat on. When Chainalysis published its latest Geography of Cryptocurrency Report last month, it once again noted that Sub-Saharan Africa has the smallest crypto economy of all regions, accounting for 2.3 percent of global transaction volume over the past year.

No surprise there, but a closer look reveals that change is in the air. The region is also the fastest growing in terms of crypto transactions. Ghana is one of three countries in Sub-Saharan Africa to rank in the Top 30 Global Crypto Adoption Index – the other two are Nigeria and Kenya. One of the key drivers is a shift of focus from Bitcoin to stablecoins.

Stablecoins – a little background

The property that sets stablecoins apart from other cryptocurrencies is that their value is pegged to some other asset. Typically, it is a fiat currency such as USD, but it could be a precious metal like gold.

This means the price of the stablecoin mirrors the asset to which it is pegged, and so it is not subject to the levels of volatility that are usually associated with cryptocurrencies. A stablecoin has all the appeal of cryptocurrencies in terms of security, privacy and transaction speed, but without the volatility risk of traditional cryptocurrencies.

In Africa,we are seeing increasing use cases for crypto assets, and specifically stablecoins.

Use Case One – Trading

Traditionally, traders buy and sell crypto on the markets using fiat currency to buy their crypto. This carries risk due to the potential volatility of cryptocurrencies like Bitcoin. On-ramping with a stablecoin such as Tether reduces the exposure.

Buying more volatile cryptocurrencies using a stablecoin instead of fiat reduces risk because all trades are within the four walls of the crypto exchange and can therefore be completed quickly. African traders can onboard to Tether and can just as easily offboard at the end of the trading day, or can leave funds in Tether in a digital wallet.

Use Case Two – Payments / purchases

Volatility has always been the primary barrier to using crypto for everyday payments, for example to buy groceries, fill the car with fuel or pay your electricity bill or internet subscription. Stablecoins have opened the door to this, especially for online payments, but also in traditional shops. A modern payment gateway like UniPayment can process USDT payments with Tether as easily as it can process Bitcoin payments.

It works just like any other payment app, and while it is most commonly associated with online transactions, it can also be used in physical stores with a simple piece of payment hardware that can process payments from customer smartphones. Payments like these are instant, direct and cost-effective. Transparency and accountability are optimized.

Use case three – Cross border remittances

Cross-border payments to low and middle-income countries, which include Ghana, account for more than $600 billion per year. Thousands of families have loved ones who work overseas and regularly send money back home. Recent research by the World Bank revealed that sending $200 incurs an average fee of seven percent, and can be significantly more depending on the country.

Most of that fee is taken by middle men – platforms like Western Union or MoneyGram. There are also transaction costs and exchange rate losses. Stablecoins make overseas remittances fast, easy, and safe. They also cut transaction costs by 200%, saving the sender a significant amount of money on every transfer.

Use case four – Payroll

Data from Payoneer shows Africa is home to one in ten of the world’s freelancers. Platforms like Fiverr and Upwork are great for getting gigs, but they take a significant slice from both employer and worker. The last thing workers need is to lose yet more in transaction fees when they get paid. Companies are now starting to use stablecoins to pay their global employees to improve transparency and minimize transaction costs.

These are just four popular use cases. Look again in a year’s time and there will undoubtedly be many more.

#FeaturedBy: FDMA

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