The Central Bank in Nigeria has struggled to maintain the value of the fiat currency, the Naira, over the past six years as the economy has weakened due to a reduction in oil prices. It imposed a number of limitations that have made it difficult for people and businesses to easily use dollars for cross-border payments.

Africans have started utilizing stablecoins, which are cryptocurrencies backed by dollars, to circumvent this issue.

Stablecoins are backed by conventional assets like the U.S. dollar or gold. Examples of stablecoins include Tether (USDT), USD Coin (USDC), and Binance USD (BUSD). These currencies are intended to have a 1:1 linkage to the US dollar. According to the theory, this shields stablecoins from the volatility that distinguishes popular cryptocurrencies like Ether (ETH) and Bitcoin (BTC).

Stablecoins are often hailed as a practical way to enter the cryptocurrency ecosystem without having to worry about losing money and as a less expensive means to transfer money. Stablecoin remittances in Sub-Saharan Africa can be up to 20 times less expensive than standard money transfers. Transfer costs for USDT and USDC are frequently between 0% and 1%.

While Bitcoin continues to be the most widely used cryptocurrency in Africa, stablecoins are gaining popularity as users look to store foreign currency, conduct digital transactions, and protect the value of their country’s declining currency.