South Africa wants more African trade. Stablecoins could help make it happen

Ifelade Ayodele, the chief executive officer of Blaaiz, a cross-border remittance platform, has a straightforward explanation for why Africa's payment infrastructure remains a barrier to trade. "Payments become the friction that businesses feel every single day," he says. For decades, African economies have been built to trade with Europe, Asia, and the United States, but the continent's own trade networks are still struggling to catch up. The result is a payment system that's slow, expensive, and unpredictable, a paradox at the heart of the African Continental Free Trade Area (AfCFTA), Africa's flagship trade pact.

The problem lies in the way Africa's payment infrastructure was designed to support trade with the rest of the world. For decades, African economies exported commodities to Europe, Asia, and the US, and banks, payment networks, and settlement systems evolved to support those trade routes. As a result, payments between neighbouring African countries often still pass through correspondent banks and intermediary currencies, usually the US dollar. This process is cumbersome and time-consuming, and it's not just a matter of moving information quickly, it's about moving value efficiently across fragmented markets.

That's where stablecoins come in. Led by Nigeria and South Africa, fintechs such as Onafriq, Yellow Card, and Flutterwave are increasingly using stablecoins behind the scenes to settle cross-border transactions. The result is that businesses can move money across Africa almost instantly, while custodians like Blaaiz provide the necessary infrastructure to facilitate these transactions. According to Ayodele, stablecoins are beginning to reshape the conversation in Africa, offering a digital settlement infrastructure that could make cross-border trade faster, cheaper, and more predictable.

Stablecoins are not being touted as speculative assets, but rather as a digital settlement infrastructure that could revolutionize cross-border trade. This shift is significant, as it marks a departure from the traditional use of stablecoins as a store of value or a medium of exchange. Instead, they're being used to facilitate the movement of value across fragmented markets, making it easier for businesses to trade with one another.

The African Continental Free Trade Area (AfCFTA) has ambitious goals, but it's clear that the continent's payment infrastructure remains a significant obstacle to achieving those goals. With stablecoins and fintechs like Blaaiz and Onafriq leading the charge, it's possible that the continent's payment infrastructure could be transformed in the coming years. As Ayodele notes, "If those processes remain slow, expensive or unpredictable, the commercial benefits of trade are significantly reduced." By leveraging stablecoins and digital settlement infrastructure, Africa may finally be able to overcome the payment infrastructure challenges that have held it back for so long.

• Only about 15% to 18% of South Africa's trade is with African countries
• Africa's payment infrastructure still reflects a continent built to trade with the rest of the world rather than with itself
• Fintechs such as Onafriq, Yellow Card, and Flutterwave are using stablecoins to settle cross-border transactions
• Stablecoins are being used as a digital settlement infrastructure to facilitate cross-border trade

As I reflect on this story, I'm struck by the potential of stablecoins to transform the way businesses trade across Africa. By providing a digital settlement infrastructure that's faster, cheaper, and more predictable, stablecoins could be the key to unlocking the commercial benefits of trade for African businesses. It's an exciting prospect, and one that I'll be keeping a close eye on in the coming years.