Emerging Markets See Stablecoins as Viable Alternative to Bitcoin


Shortly after legalizing the use of cryptocurrency, the Central African Republic (CAR) recently became the second country in the world, after El Salvador, to adopt Bitcoin as an official currency.

Related: Central African Republic is the Latest Country to Embrace Crypto

The announcement by the landlocked country, one of the least developed nations on the African continent, was unexpected and took the cryptocurrency world by surprise, and could likely jeopardize CAR’s relations with the International Monetary Fund (IMF), which in December approved a seven-month “staff-monitored program” geared towards the provision of financial assistance for poverty reduction and growth.

Read more: Central African Republic, Like El Salvador, May Soon Regret Adopting Bitcoin

Truth be told, the use of the digital currencies to bypass inefficient traditional banking services and facilitate decentralized peer-to-peer (P2P) lending services without intermediaries has been touted as a key solution to expanding finance options and leveling the economic playing field for consumers in developing markets.

But tackling infrastructure issues and providing basic internet and telecommunication services on which virtual currencies thrive should be the top priority.

“In my opinion, [CAR] is definitely not ready in terms of full-blown adoption, given the infrastructure problem that we all know is obviously quite important in order to adopt cryptocurrencies,” Anthony Oduu, co-founder and CTO at cross-border B2B payment platform Verto, told PYMNTS in an interview.

Last year, CAR’s internet penetration rate was estimated at just 11%, according to DataReportal, and mobile connections were available to only 30% of the population. Another reason why the countrywide use of the new legal tender will be challenging is the lack of 4G and 5G networks, coupled with the low smartphone penetration rate in the gold and diamond-producing country, he said.

“Most people are going to be on 3G and 2G networks, and if you combine that with the lack of access to smartphones due to high costs, we’re talking of a [small] fraction of the population that will be interested or want to spend money on it,” Oduu added.

Africa Divided on Crypto, Bitcoin

The decision to approve Bitcoin as legal tender also comes at a time when virtual currency reception in the African region is mixed.

While countries like Egypt and Morocco have banned the use of cryptocurrencies altogether, Kenya, South Africa and Nigeria are among those to have officially embraced digital assets, while others like Ghana have announced plans to launch a pilot central bank digital currencies (CBDC) project.

See also: Blockchain Technology Could Solve Many Challenges in Africa’s Payments Space

But despite the mixed reception, Oduu noted that the CAR move is a step in the right direction for a government that is trying to be forward looking and keep up with innovation and can use this initiative as a learning ground to plug any regulatory framework holes and build favorable tax systems that will in turn foster business growth and development.

“There’s a lot of work to be done, but I think this is the first step,” he explained. “In the next few years, if they actually want to do it properly, [this move] might make it easier for companies that want to build infrastructure around that to come to CAR and use it as a base for exchanges.”

A Verto Stablecoin

Data published in a recent PYMNTS report revealed that nearly a quarter (23%) of consumers surveyed who made online cross-border peer-to-peer (P2P) payments sent funds using at least one kind of cryptocurrency, while 13% of consumers surveyed said cryptocurrencies were their most used payment method for online cross-border remittances.

Read PYMNTS report: The Digital Currency Shift: The Cross-Border Remittances Report

This impact cryptocurrencies have on remittances alone — flexibility, transfer speed and low transaction fees — despite being in the early stages of continentwide adoption, is a reason why, in Oduu’s opinion, digital currencies have been a “game changer” for payments in emerging markets.

Where he sees even greater potential for faster money movement is through stablecoins and CBDCs, even though he acknowledged the lack of flexibility with central bank-backed currencies as governments can track and control all the transactions in those networks.

Learn more: Crypto Seen as Africa’s Cross-Border Payments ‘Game Changer’

It’s why he sees huge potential for the business-to-business (B2B) payments platform and currency exchange marketplace he co-founded in becoming a decentralized stablecoin platform that can merge different local currencies into one centralized one – “Verto stablecoin.”

“[Now] you have a much better [digital marketplace] solution because we are not relying on USDC but solely relying on the flow that’s coming from every market,” he explained, adding that if a business in Kenya, for example, requests X millions worth of USDC, that can be used to build a pool of liquidity to serve other businesses in the region.

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