Like an inverse proportion, Nigeria and Ethiopia are suffering a decrease in the value of their local currencies, which has only caused an upsurge in the use of Stablecoins. Stablecoins now make up a substantial portion (nearly half) of the average transaction volume in Sub-Saharan Africa, driven by the instability of local currencies.
Details of the surge in the adoption of stablecoins
According to the most recent report by Chainalysis released on October 2, Stablecoins account for about 43% of all the transaction volume in Sub-Saharan Africa. This indicates that residents and users are turning to stablecoins due to the volatility of local currencies.
Eric Jardine, Cybercrimes Research Lead at Chainalysis, made some statements explaining the relationship between stablecoin adoption and currency devaluation.
In his words, “We have repeatedly noted an association between currency devaluation and stablecoin adoption.”
“Stablecoin adoption will grow rapidly whenever local currencies lose their value, but that stablecoin use can also grow fast outside of these circumstances.”
In spite of this, Nigeria remained highlighted by Chainalysis as a key player in global cryptocurrency adoption, receiving about $59B in crypto transaction volume between July 2023 and June 2024.
Nigeria’s high volume of smaller transactions was also revealed; these small transactions were under $1M, posing a solid indication of the use of crypto for smaller retail and professional-sized transactions. Nigeria also ranked as the country with the most total stablecoins received, which has seen significant devaluation in the Naira.
Ethiopia is also undergoing the same situation in terms of an increase in stablecoin usage. Ethiopia is Africa’s fastest-growing market for retail-sized stablecoin transfers, with a 180% year-over-year growth. This growth coincided with a 30% drop in the value of the Ethiopian Birr (ETB) in July.
The drop occurred right after the government eased currency restrictions to secure International Monetary Fund (IMF) support.
What You Should Know
Nigerians are adopting stablecoins in order to hedge against the devaluation of their local currency. Moreso, sending or using stablecoins for remittance helps to reduce fees incurred in cross-border payments.
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