The crypto exchange, FTX, lured customers from Africa to use its platform by promising that Africans could use stablecoins to protect their wealth from the effects of devaluation.
This is according to a Wall Street Journal report which indicates that the exchange pitched itself to customers with the idea that its dollar-pegged stablecoins would never lose their value, and therefore represent a safe haven in economies that have been continually hit by inflation and dollar strength.
In addition, FTX ran glamorous events for young Nigerians and offered all new customers a $5 sign-up bonus.
As we previously reported, the Sam Bankman-Fried led organization was already processing billions of dollars monthly in Africa and was going to set up an office in Nigeria on its way to increase activities on the continent ahead of its collapse.
Just few days prior to filing for bankruptcy, Bankman-Fried took to Twitter to announce that the exchange had started accepting deposits in West African CFA francs.
Hello, West Africa!
XOF deposits are live.https://t.co/sXsXgpUE5m pic.twitter.com/cT3Lnp0TNY
— SBF (@SBF_FTX) November 3, 2022
FTX had also managed to acquire over 100,000 customers in Africa, many of whom were trading on the platform while other customers used the platform to convert their local currencies to dollars and gain yield on savings.
Some of the Africans using the platform for their savings were left ruing their trust in the crypto company, and crypto in general.“All my UK ISA Individual Savings Account, which I saved for the past 15 years was what I lost,” said Victor Asemota, a popular opinion leader in the Nigerian tech industry and strong advocate for FTX in Africa.
Devaluation remains a real concern for Africans who hold wealth in local currencies, while inflation drives up cost of goods. The U.S. dollar is a culprit in this case, with most African currencies including the Nigerian Naira, the Ghanaian Cedi, and the Malawian Kwacha drastically losing value against the dollar in 2022 as a result of the Federal Reserve’s aggressive monetary tightening which fueled capital outflows from developing markets.
Until FTX’s collapse, trust was developing over the ability of cryptocurrencies to protect against such wealth loss.
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