Kenya’s, and by extension, Africa’s unique economic challenges that span dollar scarcity, inflation as well as currency devaluation are part of the key factors that are driving the accelerated uptake of stablecoins, a new report shows.
The survey by global blockchain technology firm Emurgo Africa indicates that the elevated appetite for stablecoins use is chiefly for crypto trade, US dollar conversions, cross-border remittances as well as for online purchases and savings.
A stablecoin is a cryptocurrency that is designed to have a relatively stable price, typically through being pegged to some external reference including assets such as fiat currency or gold, or by having its supply regulated by an algorithm.
Stablecoins are usually touted as being more useful as a medium of exchange than volatile cryptocurrencies.
Some of the most popular stablecoins, according to market capitalisation include Tether (USDT), USDC (USDC), Dai (DAI), Ethena USDe (USDE) and First Digital USD (FDUSD).
“Stablecoins, digital money typically pegged to fiat currencies like the US dollar, are rapidly becoming a preferred medium of exchange in Sub-Saharan Africa, a region grappling with volatile local currencies, inflation and limited access to traditional banking services,” notes Emurgo in the report.
“While there’s a general rise in the use of stablecoins across the globe, Africa is leading the way in the adoption of stablecoins, which have emerged as powerful tools in reshaping the continent’s economic landscape and unlocking new opportunities for Web3 growth.”
A recent report by Financial Sector Deepening (FSD) Kenya shows that stablecoin volumes in Africa hit more than $30 million (Sh3.9 billion at current conversion rates) during the 12-month period to July last year, which translates to 50 percent of the total crypto volume attributed to Africa during the period.
In Kenya, Emurgo Africa notes, the integration of Safaricom’s mobile money service M-Pesa with platforms offering stable-coin-fiat exchanges such as Binance, has been a key step in extending financial services to individuals in underserved areas.
“Africa’s unique economic challenges, such as dollar scarcity, inflation and currency depreciation coupled with its vibrant fintech ecosystem, relatively high smartphone and internet penetration, have driven the mass adoption of stablecoins,” reads the report.
“This has bridged the gap in expensive dollar conversions and loss of value of local currencies, with stablecoins offering a digital alternative to traditional banking which takes days to complete cross-border transactions.”
Kenya is cited in the report as among the top six countries on the continent with significant stablecoin adoption and use cases, alongside Nigeria, South Africa, Ghana, Mozambique and Uganda.
According to the survey, the crypto appeal in Kenya has most recently been fuelled by the nationwide anti-finance bill protests that were staged in June and July this year, as well as the rapid fluctuations on the local currency majorly witnessed last year.
“The social unrest reinforced the view that cryptocurrencies, especially Bitcoin, are a better store of value and a potential hedge against local currency devaluation,” writes Emurgo.
The report further takes note of a peculiar trend in the country’s crypto scene which is a rush among young investors to participate in various cryptocurrency airdrops.
“Airdrops, which involve the free distribution of new tokens to existing cryptocurrency holders or participants in specific activities, have become increasingly popular as a way to potentially gain exposure to new projects at no initial cost.”
In August last year, Kenyan authorities suspended operations of global crypto firm Worldcoin in the country citing privacy and safety concerns with respect to its method of obtaining user data.
The following month, an ad hoc committee of Parliament recommended a shutdown of Wordcoin’s operations nationwide, which resulted in the firm losing a significant portion of its user base.
The Directorate of Criminal Investigations (DCI) would later in June this year clear the firm to resume its operations after police dropped all investigations against it.
