Stablecoins Dominate 43% of Sub-Saharan Africa Crypto Market – Study

Stablecoins now dominate 43% of Sub-Saharan Africa’s crypto market, driven by currency devaluation in Nigerian naira and Ethiopian birr

Stablecoins Make Up 43% of Sub-Saharan Africa’s Crypto Market

Stablecoins now make up 43% of Sub-Saharan Africa’s total transaction volume in the crypto market, according to a new report from Chainalysis. Economic challenges, including significant currency devaluation in countries like Nigeria and Ethiopia, largely drive the rapid adoption of stablecoins.

In Nigeria, a key player in the global crypto scene, nearly $59 billion worth of crypto transactions were recorded between July 2023 and June 2024. Around 85% of the value of transfers received in Nigeria were for amounts less than $1 million, suggesting that retail and professional users dominate the country’s crypto market.

Eric Jardine, Cybercrimes Research Lead at Chainalysis, explained the link between currency devaluation and stablecoin adoption. He stated that stablecoins tied to the US dollar often become the preferred alternative when local currencies lose value.

Jardine also noted that stablecoin use can grow even without severe currency devaluation. Chris Maurice, co-founder and CEO of the African crypto exchange Yellow Card, shared insights into Nigeria’s ongoing currency issues.

He pointed out that banks and the government do not have enough dollars to meet demand, making it difficult for businesses and individuals to access foreign currencies. Maurice explained that stablecoins like USDT and USDC provide a convenient way for people to convert their money into a more stable currency, which is crucial for international trade.

Currency Devaluation: Ethiopia’s Crypto Growth Soars

A similar trend is visible in Ethiopia, where the birr lost 30% of its value after the government eased currency restrictions in July. The Chainalysis study noted that Ethiopia’s crypto market is growing rapidly, with a 180% year-over-year increase in retail-sized stablecoin transfers.

Accordingly, the country now ranks 26th in global crypto adoption. In South Africa, stablecoins have overtaken Bitcoin as the most received cryptocurrency in recent months.

Rob Downes, an executive of the financial services firm Absa Group, mentioned that institutional clients are particularly drawn to stablecoins. They consider it a tool for managing liquidity and reducing currency volatility.

This shift in preference demonstrates how stablecoins are becoming a game changer for businesses in Africa’s finance sector.

USDT Stablecoins Gain Use in Inflation-Hit Countries

Moreover, Tether-issued stablecoin, USDT, has become an important part of the global finance system, especially in countries where inflation has destabilized their local currencies. According to Tether CEO Paolo Ardoino, while the US dollar has many options for transactions in the US, stablecoins like USDT play a much more crucial role outside of America.

In countries like Argentina and Turkey, where inflation is rampant, USDT offers a stable alternative to their volatile local currencies, enabling dollar-like stability for everyday transactions. Ardoino pointed out that these countries lack affordable access to stable currencies, and USDT provides an effective solution without the need for traditional banking systems.

USDT provides a legitimate digital alternative, and its popularity is evident in its market performance. With a market cap nearing $120 billion, it is the largest stablecoin globally and the third-largest cryptocurrency overall, following Bitcoin and Ethereum.

Over half of USDT’s supply is issued on the Tron blockchain, which is favored for its low transaction fees compared to Ethereum, whose higher fees can be prohibitive.

Tether’s US Treasury Holdings and Dollar Stability

Ardoino also highlighted Tether’s growing influence in the global economy through its large holdings of US Treasury bills. These Treasury bills are a crucial part of Tether’s reserves, allowing the company to support its digital dollar while benefiting from interest payments.

Ardoino noted that Tether’s ownership of Treasury bills has helped stabilize the US dollar’s global standing. While China continues to reduce its holdings of US debt, Tether and other stablecoin issuers have increased their investments in these bills, further supporting the US’s financial system.

Furthermore, Ardoino affirmed that Howard Lutnick, CEO of Cantor Fitzgerald, closely monitors Tether’s reserves to ensure transparency in how USDT is backed. Despite conspiracy theories surrounding USDT’s reserves, the market remains confident in the stablecoin.

Ardoino dismissed speculation of insolvency, and recent data shows that the likelihood of Tether declaring bankruptcy is minimal as of this writing.