Cryptocurrency and stablecoins are emerging across Africa

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Cryptocurrency and stablecoins are emerging across Africa

The influx of money across borders can be a lifeline or a chokehold for nations in the modern-day world. For too long, the global financial system has dominated the elite, leaving many countries in the Global South facing economic inequality and the political instability that entails it. However, Web3 technologies are routering around the incumbents, with new tools for financial inclusion and economic empowerment. The cost of moving money from Nigeria to Ghana is much more expensive than physically driving it across borders. Innovators such as Dickson Nsofor, Nigeria's inventor, have recognized the necessity for a better way. Nsofor started Korapay, a pan-African payment-infrastructure company, four years ago. He viewed blockchain and cryptocurrencies as media of exchange, not speculative assets. He invented a platform that utilized these Web3 inventions for cross-border payments.

Today, Korapay is the largest trans-border business-to-business remitter in Nigeria. The company generates billions in payments using Bitcoin,USDC, and other crypto assets while settling transactions in traditional fiat currencies. Many global businesses use Korapay's services to exchange Nigerian naira for US dollars without even knowing they're using cryptocurrencies and stablecoins. This evidences how innovators like Nsofor are already retooling the engine of traditional finance from the bottom up.

Why are stablecoins like USDC being so popular in Africa? The answer is reflected in thebroader context of economic disparities, currency instability, and the desire for financial independence.

In Nigeria, for example, over 40% of the population is younger than 15 years old. Cryptocurrencies are becoming a platform for young people to transcend the limitations of the local currency, making them a valuable choice for those who want to invest in them. Mobile internet penetration is enabling freelancers and gig workers to pay for digital assets that hold their value better than local fiat currencies, which can be impacted by hyperinflation and market devaluation. Nsofor told me that every one of his Nigerian employees would prefer to get paid in USDC,USDT, or even Bitcoin instead of naira because those assets are a better store of value and in the case of stablecoins, more useful.

This shift toward dollarization, where locals prefer assets likeUSDC over fiat money, has implications far beyond financial convenience. The economy's shift is marked by a surge in economic opportunity, as individuals can work for internet-native organizations globally and accumulate wealth in stable digital assets.

It is uncertain whether dollarization of these economies will be a net positive to the world. With dollarization, the collapse of local currencies could further destabilize unstable governments in unstable regions. The Central Bank of Nigeria, for example, took a hostile stance against cryptocurrencies, advocating for a ban. While its leaders have recently hinted at creating a regulatory framework for stablecoins and tokens, the consequences of such moves remain uncertain. Last year, the governor of the Bank of Pakistan, Reza Baqir, told Saudi Arabia that his bank was considering a ban on all digital assets over concerns about dollarization. He was worried that the bank he ran would cede control of the money and interest rates, and was willing to take severe measures. That ban never took effect, and Baqir is no longer on the job.

Despite these obstacles, the adoption of digital assets continues to grow. Even the United Nations High Commissioner for Refugees has turned to blockchain technology to distribute digital cash to displaced people in war-affected regions like Ukraine. This does not only protects the funds, but also highlights the broader appeal of digital assets.

Cryptocurrency and blockchain technology adoption in Africa and beyond is more than a financial trend. At first, it's a survival strategy, then it's a platform for thriving economically. It's a demonstration of human resilience and innovation in the global South, he said. In Web3: Charting the Internet's Next Economic and Cultural Frontier, Alex Tapscott is the author of the book.