Is Africa’s Stablecoin Dream Just a Mirage? Shocking Conversion Spreads Revealed!

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Amidst the sun-drenched savannahs and bustling markets of Africa, the promise of stablecoins gleams like a mirage-beckoning with the allure of cheaper remittances. Yet, as data from Borderless.xyz reveals, the reality is far less enchanting. In January, the median spread for stablecoin-to-fiat conversions across this great continent ballooned to nearly 300 basis points-around 3%. A stark contrast to Latin America’s modest 1.3% and Asia’s almost laughable 0.07%. That disparity is not just a number; it’s a wallet-crushing reality for those trying to send money home.

Conversion Costs Vary By Market

Diving deeper into the heart of the continent, one finds a patchy landscape of conversion costs. South Africa, gleaming like a diamond among stones, boasts one of the lowest conversion rates at approximately 1.5%, thanks to a fierce competition among providers and the liquidity of its markets.

Conversely, in Botswana, the median spread skyrocketed to an eyebrow-raising 19.4% in January, although it did ease somewhat later that month. Congo, too, found itself mired in high conversion levels, surpassing 13%. With 66 currency corridors and nearly 94,000 rate observations in play, these aren’t mere statistical hiccups-they’re the pulse of a continent grappling with economic complexities.

Competition And Liquidity Shape Rates

The numbers tell a story-a tale as old as time: the players between the stablecoin and local cash dictate the dance of prices. In markets where competition flourishes with multiple payment providers, conversion costs generally frolic between 1.5% and 4%. But when a single provider monopolizes the scene, spreads can shockingly soar beyond 13%. The “spread” here, akin to a bid-ask gap in the grand bazaar of traditional markets, is the hidden cost that a sender must ultimately bear.

Reports suggest that the frictions at play stem more from local market structures and liquidity than the underlying blockchain technology. Ah, isn’t that just a twist?

Stablecoins Compared With Traditional FX

Borderless.xyz also embarked on a quest to measure how stablecoin mid-rates compare to interbank FX mid-market rates, a whimsical metric they’ve dubbed the TradFi premium. Across 33 currencies globally, the median difference lingered around five basis points, or 0.05%, suggesting that stablecoins and traditional mid-market rates often find themselves in harmonious agreement.

However, Africa tells a different tale, with the median gap widening to nearly 120 basis points, or about 1.2%. This larger premium sheds light on why stablecoins don’t automatically transform into instant savings for every corridor-oh, the irony!

What This Means For Senders And Markets

Economists proclaim that stablecoins are indeed slashing remittance costs in Africa, where legacy services typically demand a hefty $6 for every $100 sent. Yet, the recent data adds a layer of complexity: while faster settlements and reduced fees are within reach, they hinge on the efficiency of local on-ramps and off-ramps. For consumers, this translates to potential savings in some corridors, alongside the vexing reality of exorbitant costs in others.

For regulators and market entrants, the message rings clear-enhancing competition and liquidity at the local level is just as crucial as bolstering cross-border pathways. Stablecoins may have paved a path that could be cheaper and quicker; however, the final stretch-the metamorphosis of crypto into local currency-remains tethered to local players, pricing models, and the depth of the markets. A right royal mess, wouldn’t you say?

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2026-02-12 11:12