Dollar-linked 'stablecoins' Rise In Popularity Among African Users

The use of stablecoins - a type of cryptocurrency which is supposed to be backed by the US dollar or another reference asset - is likely to be given a further boost in Africa, with President Donald Trump making moves to promote uptake and Africans increasingly adopting stablecoins for cross-border payments and other transactions.

Stablecoins are a specific form of cryptocurrency which, in contrast to the high degrees of volatility seen in the prices of Bitcoin and other cryptos, aim to maintain stable values and thereby offer users the ability to make cross-border payments in a cheap and quick way.

To maintain this stability, they are backed by currency reserves, normally the US dollar. The two largest stablecoins currently available on the crypto market are Tether USDT and USD Coin USDC, both of which claim to be backed 1:1 to US dollars or US Treasury securities.

Some consider stablecoins to be controversial because, despite their purported aim, there have been several high-profile collapses. In May 2022 the price of algorithmic stablecoin TerraUSD UST crumbled after it broke its peg with the US dollar, wiping out an estimated 45bn in market value within a week.

There has also been confusion about whether some stablecoins are fully backed by US dollars as they claim. In 2021, Tether paid 41m to settle a case brought by the US Commodity Futures Trading Commission CFTC over allegations that it had lied about its dollar reserves.