Stablecoins Now Dominate Sub-Saharan Africa’s Crypto Transactions Amid Currency Devaluation

Stablecoins have rapidly become a crucial element of Sub-Saharan Africa’s financial landscape, now representing nearly half of the region’s total crypto transaction volume. 

According to a report published by blockchain analytics firm Chainalysis on Oct. 2, stablecoins account for approximately 43% of the overall crypto activity in the region. This surge is primarily driven by the ongoing devaluation of local currencies, particularly the Nigerian naira and Ethiopian birr.

Adoption of Stablecoins Soars as Fiat Currencies Devalue

The Chainalysis report highlights the strong correlation between currency devaluation and the increasing adoption of stablecoins. Eric Jardine, Cybercrimes Research Lead at Chainalysis, explained, “We have repeatedly noted an association between currency devaluation and stablecoin adoption.” He emphasized that as local currencies lose value, there is a significant shift towards stablecoins like USDT (Tether) and USDC (USD Coin), which are pegged to the US dollar. 

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Jardine added that the adoption of these more stable cryptos is not only limited to instances of currency devaluation but can also grow rapidly under other economic conditions. “Stablecoin use can also grow fast outside of these circumstances,” he noted.

Nigeria Leads in Crypto Adoption and Stablecoin Transactions

Nigeria remains at the forefront of crypto adoption, both globally and within the African continent. Between July 2023 and June 2024, the country saw approximately $59 billion in crypto transactions. Notably, smaller retail transactions dominate the market, with 85% of transfers being under $1 million. 

Nigeria’s reliance on stable cryptos has been exacerbated by the devaluation of the naira, which has made access to the US dollar increasingly difficult. Chris Maurice, co-founder and CEO of African crypto exchange Yellow Card, stated, “The banks don’t have dollars, the government doesn’t have dollars, and even if they did, they wouldn’t give them to you.” As a result, Nigerians have turned to stablecoins as a reliable proxy for the US dollar, facilitating international trade and hedging against local currency depreciation.

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While Nigeria leads in transaction volume, Ethiopia has emerged as Africa’s fastest-growing market for retail-sized stablecoin transfers. With a 180% year-over-year growth, stablecoins have become a lifeline for businesses and individuals in the country. This trend follows a 30% devaluation of the Ethiopian birr in July 2024, when the government relaxed currency restrictions to secure support from the International Monetary Fund (IMF). 

As in Nigeria, the devaluation of the local currency has spurred a rapid increase in stablecoin inflows for transactions under $1 million, particularly during periods of significant economic instability.

Stablecoins Surpass Bitcoin in South Africa

South Africa has also seen a shift in its crypto landscape, with stablecoins overtaking Bitcoin (BTC) as the most popular cryptocurrency in recent months. Financial institutions in the country are increasingly using stablecoins to manage liquidity and reduce exposure to currency volatility. Rob Downes of financial services firm Absa Group noted, “Our institutional clients are particularly interested in using stablecoins as a tool for managing liquidity and reducing exposure to currency volatility.”

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Stablecoins, such as USDT and USDC, offer a convenient alternative to the US dollar in a region where accessing foreign currency is often difficult. Maurice highlighted the practicality of stablecoins for international trade, noting that “if you can get into USDT or USDC, you can easily swap that into hard dollars elsewhere.”

Africa’s Real-World Use of Crypto Sets Global Precedent

Chainalysis concluded that Africa’s innovative and practical use of cryptocurrencies, particularly stablecoins, presents valuable lessons for the global market. The continent’s increasing reliance on stablecoins in the face of currency devaluation positions it as a future leader in the global crypto space.