Stablecoin crypto narrative is reshaping the African economic landscape

Previously, VISA's stablecoin report provided us with the following data: The total supply of stablecoins is about $170 billion. They settle trillions of dollars worth of assets each year. About 20 million addresses on the chain conduct stablecoin transactions each month. More than 120 million addresses on the chain hold non-zero stablecoin balances.

In addition, the report also surveyed five major emerging market economies (Brazil, India, Indonesia, Nigeria and Turkey), indicating that stablecoins have grown in non-cryptocurrency transaction uses, especially in emerging markets. They are used for currency substitution (to escape volatile or depreciating local currencies), as a substitute for dollar-based bank accounts, for B2B and consumer payments, for obtaining various forms of income products, and for trade settlements.

These figures all show that stablecoins, a currency running on blockchain financial infrastructure, are reshaping the economic landscape of emerging markets. This currency, which is parallel to the traditional financial infrastructure, just started from scratch five years ago.

Chainalysis’ recent report on crypto adoption in Sub-Saharan Africa further demonstrates that these emerging markets (Sub-Saharan Africa) are fully adopting stablecoins for commercial payments, hedging against inflation, and for more frequent, smaller (i.e. retail) transfers. Cryptocurrency is promoting Sub-Saharan Africa as a global example of how cryptocurrency can drive real-world impact, especially in areas underserved by the traditional financial system, by virtue of its position as a frontier of financial innovation and inclusion.

Therefore, we can no longer limit our vision to the trading use cases of stablecoins in the native crypto market, but should look at the use cases of stablecoins in non-crypto native scenarios from a new perspective. Stablecoins have become an important part of the crypto narrative in Sub-Saharan Africa and a popular hedge against long-term inflation and currency depreciation.

1. Overview of Crypto Adoption - Sub-Saharan Africa

Sub-Saharan Africa accounts for the smallest share of the global cryptocurrency economy (2.7%), accounting for 2.7% of global transactions between July 2023 and June 2024, reflecting the region's smaller GDP relative to other regions. Despite this, Sub-Saharan Africa still achieved moderate growth, with an estimated $125 billion in on-chain value during the period, an increase of $7.5 billion from last year.

Cryptocurrency is undoubtedly changing the financial landscape in the region, which is home to many countries that rank high in our Global Adoption Index. Nigeria maintained its global leadership, ranking second globally, while Ethiopia (26), Kenya (28), and South Africa (30) also made the top 30.

The real-world adoption of cryptocurrencies in Africa is particularly noteworthy. Africans use cryptocurrencies for commercial payments, to hedge against inflation, and to make more frequent, smaller (i.e., retail-scale) transfers.

Notably, Sub-Saharan Africa leads the world in DeFi adoption, likely driven in part by the region’s growing demand for accessible financial services, as only 49% of adults in the region had a bank account as of 2021, according to the World Bank.

With its position at the forefront of financial innovation and inclusion, Sub-Saharan Africa is becoming a global example of how cryptocurrencies can drive real-world impact, particularly in regions underserved by traditional financial systems.

Second, stablecoins are driving economic development and global connectivity in Africa

Stablecoins have become a key element of the crypto economy in sub-Saharan Africa. In some countries where local currencies are highly volatile and the use of the US dollar is limited, stablecoins pegged to the US dollar (such as USDT and USDC) have gained favor, providing businesses and individuals with a reliable way to store value while further facilitating international payments and supporting cross-border trade.

Stablecoins currently account for about 43% of the total crypto transactions in the region.

To further understand the growing importance of stablecoins, the Chainalysis team interviewed two key figures shaping the African cryptocurrency landscape: Rob Downes, Head of Digital Assets at ABSA Bank, CIB, a major African bank with operations in 12 African countries, and Chris Maurice, CEO and co-founder of Yellow Card, one of Africa’s leading crypto asset exchanges with operations in 20 countries on the continent.

The main driver of stablecoin adoption in Africa is the foreign exchange (FX) crisis facing many countries. Maurice explained: “Around 70% of African countries are facing a shortage of foreign exchange, making it difficult for businesses to obtain the US dollars they need to operate.” In countries such as Nigeria, where the local currency, the Naira (NGN), has depreciated significantly, stablecoins provide a much-needed alternative. Maurice noted: “Banks don’t have dollars, the government doesn’t have dollars, and even if they did, they wouldn’t give it to you.”

Small to medium-sized stablecoin inflows under $1 million measured by the Chainalysis team tend to align with the depreciation of the naira. “As the naira depreciates, we can see an increase in stablecoin inflows for transactions under $1 million, and the activity is more pronounced during periods of large currency depreciations.”

Ethiopia, Africa’s second most populous country with 123 million people, is currently its fastest growing market for retail-scale stablecoin transfers, up 180% year-over-year.

The local currency, Ethiopia’s birr (ETB), lost 30% of its value in July as the government eased currency controls in exchange for a $10.7 billion loan from the International Monetary Fund and the World Bank. The depreciation of the birr could further fuel demand for stablecoins.

For many African businesses, access to stablecoins through platforms like Yellow Card offers an alternative to traditional financial institutions that can’t meet their dollar needs. “Stablecoins are an alternative to the dollar,” said Maurice. “If you can get USDT or USDC, you can easily exchange it for hard currency elsewhere.”

This reality makes stablecoins indispensable for companies involved in international trade. From small importers buying goods overseas to large multinationals importing raw materials from Europe, stablecoins are facilitating transactions that would otherwise be stalled by currency shortages. Stablecoins are also revolutionizing cross-border payments across Africa. “People don’t care about cryptocurrencies,” said Maurice, stressing that the focus in the region is on real use cases for cryptocurrencies. He cited businesses served by Yellow Card, such as a large food producer that uses stablecoins to pay overseas suppliers. In addition, many African fintechs rely on stablecoins to manage large amounts of local currencies, which they can then exchange into stablecoins to facilitate cross-border payments. Absa Group’s Downes noted a similar trend among institutional clients in South Africa. “Our institutional clients are particularly interested in using stablecoins as a tool to manage liquidity and reduce currency volatility risk,” Downes told us. In countries where the value of the local currency fluctuates, stablecoins can be an attractive option for businesses seeking to hedge currency risk. Downes also noted the growing use of stablecoins in remittances and international payments. “We think stablecoins are going to be a game changer,” he said. For individuals sending money to family members overseas or paying for expenses, stablecoins offer a faster and more affordable alternative to traditional remittance services.

Starting at the end of 2023, stablecoins continued to grow on local exchanges in South Africa - growing by more than 50% month-on-month in October 2023. Stablecoins have replaced Bitcoin as the most popular cryptocurrency in recent months.

While the use of stablecoins is rapidly expanding across Africa, the regulatory landscape is also gradually evolving. In South Africa, the Financial Sector Conduct Authority (FSCA) has provided regulatory clarity by classifying crypto assets as financial products, although there are no specific regulations for stablecoins.

“We are working closely with regulators such as the South African Reserve Bank to ensure we are prepared for any developments in stablecoin regulation, which we expect will soon become a major area of ​​focus,” Downes added.

Maurice noted that in many cases stablecoins exist in a “grey area” where they are neither clearly regulated nor banned. He stressed the importance of working with regulators to ensure that stablecoin users remain compliant.

“We do a lot of work with local regulators,” said Maurice. “We are working with central banks and financial authorities in 20 countries to help them understand how to use stablecoins safely and effectively.”

Looking ahead, both Downes and Maurice believe that stablecoins will continue to play a central role in African economies.

“I think stablecoins will be the main use case for cryptocurrencies in South Africa over the next three to five years,” said Downes.

Maurice agreed, adding that stablecoins can help open up African economies to global markets. “Stablecoins are actually opening up a whole new market for African currencies that have never had a place internationally,” he said. By offering businesses a way to transact in non-volatile currencies, stablecoins are increasing price transparency and encouraging foreign investment. “It’s creating a more open economy and actually encouraging investment,” Maurice added.

Three, Nigeria – a hub of cryptocurrency activity

In recent years, Nigeria has become a global leader in cryptocurrency adoption, thanks to innovative use cases that address economic challenges. The country ranked second overall in the Chainalysis team’s Global Adoption Index, receiving approximately $59 billion worth of cryptocurrency between July 2023 and June 2024.

Crypto activity in Nigeria is driven primarily by small retail and professional-sized transactions, with approximately 85% of transfers valued at less than $1 million.

The Chainalysis team spoke to Moyo Sodipo, COO and co-founder of Nigerian cryptocurrency exchange Busha, to understand the realities of cryptocurrency adoption in the country. Sodipo said that everyday activities such as bill payments, mobile phone top-ups, and retail shopping are increasingly being driven by cryptocurrencies. “People are beginning to see the real-world utility of cryptocurrencies, especially in everyday transactions, as opposed to the previous view of cryptocurrencies as a means to get rich quick,” he explained.

Like Ethiopia, Ghana, and South Africa, stablecoins are a big part of Nigeria’s crypto economy, accounting for about 40% of all stablecoin inflows in the region — the highest in Sub-Saharan Africa.

Many Nigerians rely on stablecoins for cross-border remittances due to the inefficiency and high costs of traditional remittance channels. “Cross-border remittances are the main use of stablecoins in Nigeria. It’s faster and more affordable,” Sodipo noted.

As shown below, the average cost of sending $200 from Sub-Saharan Africa using stablecoins is about 60% lower than traditional remittance methods using fiat currencies.

Like other African countries, the main drivers for stablecoin adoption in Nigeria are inflation and the depreciation of the naira, which hit an all-time low in February 2024. We can see the impact of this trend by looking at the size of transfers under $1 million. In the first quarter of 2024, stablecoins were worth nearly $3 billion, making stablecoins the largest segment of transactions under $1 million in Nigeria.

While Bitcoin and altcoins remain significant, representing billions of dollars in value, stablecoins are clearly becoming the medium of choice for small and medium-sized transactions, suggesting that they will be widely adopted.

In addition to the rise of stablecoins, DeFi is also experiencing a major moment in Nigeria, echoing a broader trend of sub-Saharan Africa becoming a global leader in DeFi applications. Nigeria is at the forefront of this trend, with DeFi services valued at more than $30 billion last year.

In addition to the traditional financial system,DeFi platforms have provided Nigerians with new opportunities to earn interest, take out loans, and participate in decentralized exchanges."DeFi is a key growth area as users explore ways to maximize returns and access financial services that they may not otherwise have access to," said Sodipo.

In December 2023, the Central Bank of Nigeria lifted a ban on banks that provide services to cryptocurrency companies, which also played a key role in this momentum. “Since the banking ban was lifted, it has opened up a lot of possibilities for collaboration and smoother transactions,” Sodipo explained. Building on this, in June 2024, the Nigerian Securities and Exchange Commission (SEC) launched the Accelerated Regulatory Incubation Program (ARIP), which seeks to require all Virtual Asset Service Providers (VASPs) to register and undergo an assessment before being fully approved. “The industry is optimistic about the ARIP; it is a shift away from uncertainty and a positive step towards regulatory clarity,” Sodipo said.

Despite Nigeria’s progress with initiatives such as the ARIP, many financial institutions are still hesitant to fully dive into the cryptocurrency space due to regulatory ambiguity. “Banks remain cautious and are waiting for clear signals from the central bank and the SEC before fully entering the market,” Sodipo explained.

Nigeria’s cryptocurrency market is still thriving. Looking ahead, Sodipo is optimistic about the future of cryptocurrency in Nigeria, especially with the ongoing regulatory reforms. "Open dialogue with regulators is key. We hope that further clarity will drive more banks and financial institutions into the space," said Sodipo.

4. South Africa - Cryptocurrency market booms, driven by TradFi participation

As Africa's largest economy, South Africa has become one of the largest cryptocurrency markets on the continent, with approximately $26 billion worth of cryptocurrency in the past year. South Africa has seen significant growth in the number of licensed companies and increasing institutional-scale activity.

The chart below shows the growing influence of institutional and professional-scale transactions on South Africa, which have become the largest contributors to the total index value, especially from the end of 2023 to the first quarter of 2024.

This connection between traditional finance and cryptocurrency is particularly active in South Africa. Rob Downes of Absa Group said that South Africa is at a critical moment where traditional finance and digital assets are beginning to merge. "We are seeing growing interest from institutional clients, especially in digital asset custody solutions, which will play a key role in supporting the cryptocurrency ecosystem here," Downes said.

While institutional players drive most of the market activity, participation from retail and professionals remains stable. To gain insight into the business environment, the Chainalysis team interviewed Carel van Wyk, founder of MoneyBadger, a company focused on integrating crypto payments for retailers. Van Wyk noted that the crypto market in South Africa has been steadily maturing, especially in the payment space.

“In the past, people tried to make payments on-chain, but this is impractical because blockchain transactions can get expensive and are not suitable for small, fast transactions.” He spoke of advances in Layer2 and payment APIs that are making crypto payments more suitable for everyday use, allowing retailers to accept cryptocurrencies while settling in fiat currencies.

The FSCA’s decision to regulate crypto assets under existing financial regulations has been a major catalyst for market growth. This has provided much-needed clarity for businesses and investors, allowing licensed companies to develop responsibly and encouraging financial institutions to explore crypto services. “The regulatory environment here is relatively favorable compared to other regions. This gives us the confidence to explore more robust solutions such as custody and payments,” said Downes.

Trading pairs with the South African rand (ZAR) are also booming, with hundreds of millions of dollars in transactions each month.

The performance of the ZAR indicates that South Africa’s crypto ecosystem is maturing, which Downes believes will drive further institutional participation. “We are seeing exchanges becoming more sophisticated, which is important in building trust with both retail and institutional investors,” he explained.

South Africa’s regulatory clarity and market growth have attracted the interest of financial institutions.One of South Africa’s largest banks, Absa Group Bank, is actively exploring blockchain and cryptocurrency initiatives. Downes stressed that the main focus of the Absa Group is on providing institutional-grade cryptocurrency custody services, which they see as a key near-term opportunity. “The thing I’m most excited about – and our biggest near-term revenue opportunity – is custody,” Downes shared. Absa Group sees secure custody services as fundamental to institutional cryptocurrency adoption, providing security and compliance to exchanges, investment firms and other large market participants.

Absa Group and other South African banks are increasingly interested in participating in the cryptocurrency industry, although challenges remain in terms of risk management and compliance. Downes acknowledged that banks need to build trusted relationships with cryptocurrency exchanges and service providers to facilitate services such as banking and payments. Downes said Absa Group has taken a "learn and experiment" approach and has the support of leadership. "We have deliberately positioned our efforts as a relatively light-hearted approach, focused on learning and engaging with the market," Downes explained. This exploratory approach has enabled Absa Group to participate in regulatory sandboxes and work closely with regulators to ensure compliance while advancing its blockchain initiatives.

Client demand for crypto-related services is growing steadily. "Inquiries have tripled in the past 18 months," Downes noted, adding that the interest covers crypto payments, investments and exchange banking services. Institutional clients, especially family offices and asset managers, are beginning to explore how to integrate digital assets into their portfolios. “It’s still relatively early days for traditional financial institutions in the crypto space, but client demand is driving us to move faster,” Downes added.

As banks like Absa Group continue to innovate and explore blockchain technology, they are helping to bridge the gap between traditional finance and cryptocurrencies. “Traditional financial institutions are uniquely positioned to leverage our regulatory expertise and controls to help usher in blockchain-based finance,” Downes said. As the technology becomes increasingly integrated, both corporate and consumer adoption will accelerate, further cementing South Africa’s position in the global crypto economy.

Five, Africa’s Key Moments

Although Sub-Saharan Africa accounts for a relatively small share of the global crypto economy, the region is gaining momentum. Nigeria and South Africa are leading the way, driving a lot of on-chain activity and positioning the region as an increasingly influential hub for cryptocurrency adoption and financial technology.

Stablecoins have become an important part of the crypto narrative in Sub-Saharan Africa, serving as a popular hedge against long-term inflation and currency debasement, and now account for the majority of crypto transactions across the continent. Meanwhile, DeFi is booming, with the region leading the way in global adoption of decentralized platforms.

Countries such as South Africa, Nigeria, Ghana, Mauritius, and Seychelles have made significant progress in establishing regulatory frameworks, while others are exploring regulatory pathways against the backdrop of growing trading volumes and demand for cryptocurrencies. With the continued deepening involvement of a variety of market participants, including banks and other financial institutions, the need for clear regulation has never been more urgent.

Africa’s real-world use cases for cryptocurrencies offer valuable lessons for global markets. With a thriving fintech landscape, expanding mobile penetration, and the potential for collaboration between regulators, traditional finance, and crypto companies, the continent is well-positioned to become a global cryptocurrency leader and is poised to drive innovation and financial inclusion at scale.