The Rise of USD-Backed Stablecoins in Africa Amidst Local Currency Depreciation

The rapid depreciation of several major African currencies against the US dollar over the past two years has catalyzed a significant shift in the continent’s financial landscape. African residents and businesses are turning to USD-backed stablecoins in an effort to preserve the value of their savings and transactions. Luc Varejes, COO at OVEX, a leading crypto company, explains that stablecoins are gaining traction across Africa, serving as an effective barrier against the weakening of local currencies and political instability.

Stablecoins are a type of cryptocurrency that maintain a stable value by being pegged to real-world assets—most commonly the US dollar. Unlike traditional cryptocurrencies like Bitcoin or Ethereum, which are known for their volatility, USD-backed stablecoins like Tether (USDT), USDC, and Dai are fully collateralised by actual US dollars. These stablecoins offer a vehicle for traders and residents to hedge against the currency risk without exiting the crypto space, thereby avoiding transaction costs associated with traditional banking systems.

The urgency for a stable form of currency is underscored by the dismal performance of several African currencies. The Nigerian naira (NGN) and the Ghanaian cedi (GHS) have nearly halved in value against the US dollar in the last two years. Similarly, the Kenyan shilling has diminished significantly and even the South African rand has lost around 15%. These currencies often trade at a substantially higher parallel market rate due to insufficient USD liquidity in the central banks.

Embracing the benefits of stablecoins, individuals and companies are not only using them to safeguard against depreciation but also as a means for conducting international trade with ease. This is particularly relevant in nations like Nigeria, where traditional export of currency is restricted by exchange controls.

OVEX, which has representative offices across the African continent, provides a gateway for such transactions, offering clients a live price for Bitcoin and other cryptocurrencies in local African currencies. This is part of the company's efforts to make forex and crypto services more accessible while simplifying the process for clients to invest or transact using their local currency in exchange for stablecoins.

Furthermore, OVEX has been instrumental in expanding the availability and accessibility of stablecoins in Africa. With a comprehensive range of stablecoin options and live pricing for multiple African currencies, OVEX stands at the forefront of cryptocurrency services in the continent. The company boasts a Category 1 licence from the Financial Sector Conduct Authority and operates as an exempt CASP in South Africa, plus international authorizations from the South African Reserve Bank, among others.

The OVEX platform also caters to large-volume traders with its over-the-counter (OTC) desk, enabling them to purchase big crypto volumes at a consistent price, unlike retail exchanges where prices vary with each small transaction. The upgraded online platform allows users to receive instant indicative prices for cryptos and fiat currencies, providing a seamless and efficient trading experience for individuals and businesses looking to capitalize on cryptocurrency assets or stablecoins.

OVEX's adaptability and commitment to providing instant, reliable crypto exchange services are empowering Africans to navigate through the complications arising from the volatility of local currencies. As the world of cryptocurrency continues to evolve, the adoption of USD-backed stablecoins in Africa highlights a strategic adaptation by a continent seeking to overcome economic challenges through innovative financial solutions.