Stablecoins now account for approximately 43% of the total cryptocurrency transaction volume in sub-Saharan Africa, says the latest 2024 Geography of Cryptocurrency Report by Chainalysis.
A major driver of stablecoin adoption in Africa is the foreign exchange (FX) crisis gripping many countries.
“About 70% of African countries are facing an FX shortage, and businesses are struggling to get access to the dollars they need to operate,” said Chris Maurice, CEO of YellowCard.
In countries like Nigeria, where the local currency, the Naira (NGN), has seen significant devaluation, stablecoins provide a much-needed alternative.
“The banks don’t have dollars, the government doesn’t have dollars, and even if they did, they wouldn’t give them to you,” Maurice noted.
Small to medium-sized stablecoin inflows, which we measure under $1 million, tend to align with the Naira’s depreciating value, as we see below.According to Chainalysis, Ethiopia has become the continent’s fastest-growing market for retail-sized stablecoin transfers, experiencing a 180% year-over-year (YoY) growth.
Recall that Ethiopia’s local currency, the Birr (ETB), depreciated by 30% in July 2024 following the government’s decision to relax currency controls.
🇪🇹REGULATION | Ethiopia Floats Exchange Rate in a Significant Policy Shift as it Intensifies Reforms Towards a Free Market Economy
According to a separate statement by Prime Minister of #Ethiopia, Abiy Ahmed, the new exchange rate system aims to align the Ethiopian currency… pic.twitter.com/q7i8aBqSzH
— BitKE (@BitcoinKE) July 29, 2024
This devaluation is expected to drive increased interest in stablecoins.
Stablecoins have become indispensable to companies involved in international trade, says Chainalysis.
Stablecoins are enabling transactions that would otherwise be delayed by currency shortages, benefiting both small-scale importers purchasing goods abroad and large multinational corporations importing raw materials from Europe.
“Stablecoins are a proxy for the dollar,” Maurice said.
“If you can get into USDT or USDC, you can easily swap that into hard dollars elsewhere.”
Nigeria has emerged as a global leader in crypto adoption, ranking second overall on the Chainalysis 2024 Global Adoption Index, the country received approximately $59 billion in cryptocurrency value between July 2023 and June 2024.
Similar to Ethiopia, Ghana, and South Africa, stablecoins are also a major part of Nigeria’s crypto economy, accounting for approximately 40% of all stablecoin inflows in the region – by far the highest in all of Sub-Saharan Africa.
“Cross-border remittances are a major use case for stablecoins in Nigeria,” said Moyo Sodipo, COO and Co-Founder of Nigerian exchange, Busha.
“It’s much faster and more affordable.”
Alongside the growing importance of stablecoins, DeFi is having a significant surge in Nigeria, mirroring the larger trend of Sub-Saharan Africa leading the world in DeFi adoption. Nigeria is at the forefront of this movement, with DeFi services receiving over $30 billion in value in 2023.
🇳🇬REPORT | #Nigeria Ranked 2nd Globally in #DeFi and the Only African Country in Top 20 by Chainalysis 2024 Crypto Adoption Index
“When we look at year-over-year growth in terms of types of services, we see that DeFi activity increased significantly in Sub-Saharan Africa, Latin… pic.twitter.com/foXhFCjaM1
— BitKE (@BitcoinKE) September 13, 2024
DeFi platforms are providing Nigerians with new opportunities to earn interest, take out loans, and engage in decentralized trading, in addition to the traditional financial systems.
“DeFi is a key area of growth, as users explore ways to maximize returns and access financial services that might otherwise be unavailable to them,” said Sodipo.
Follow us on X for the latest posts and updates
Join and interact with our Telegram community
__________________________________________
__________________________________________
