Stablecoins gain popularity in Africa to circumvent dollar restrictions
Stablecoins are a type of cryptocurrency created for transactions and that promise stability as they are generally backed by the dollar.
They are becoming especially popular in regions where the purchase of US currency is restricted by the government and inflation is running at an accelerated pace, such as in several countries in Africa.
Tether (USDT), USD Coin (USDC) and Binance USD (BUSD) are some examples of digital currencies that have been used to circumvent individual quotas imposed in Nigeria. Samuel, 26, commented in an interview with Rest of World that, like thousands of other Nigerians, he intends to leave the country, but cannot pay for the documentation due to the difficulty of buying dollars in the country.
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For the past 12 months, Samuel has been preparing the paperwork needed to apply for permanent residency in Canada. However, he ran into a difficult hurdle: paying for an academic credential assessment, mandatory for the change process, which costs $170 and cannot be paid in local currency naira.
According to the young man, he is not alone, in groups on Telegram and WhatsApp there are thousands of other Nigerians who face the same problem.
Restrictions on the use of dollars also apply to credit and debit card transactions, for example, which further limits the options for Nigerian citizens. For the past six years, the Central Bank of Nigeria, faced with the economic decline following the drop in oil prices, has sought to protect the value of the local currency through these measures against international transactions and access to foreign currencies.
That’s where stablecoins come into the story. Being decentralized cryptocurrencies, the Nigerian government has no power over them. So Samuel buys USDT using naira and then finds a trusted intermediary in Canada or the United States to exchange them again for Canadian dollars. However, there is always a great risk of being deceived in this process.
Samuel’s case is just one small example of a growing movement across the continent. In sub-Saharan Africa, remittances sent and received through stablecoins can be up to 20 times cheaper than traditional cash transfers. USDT and USDC handling fees typically range from 0% to 1%.