A threat to monetary sovereignty?

While stablecoins are gaining ground as digital currency in Africa, this raises concerns

- SALOMÉ TEUTEBERG

A NOTIFICATION popped up on my LinkedIn the other day. Africans were doing a traditional celebratory dance at the Africa Stablecoin summit in Johannesburg. The picture gave me a sinking feeling.

Why? While stablecoins can advance financial inclusion in Africa, could this celebration mark the potential transfer of monetary sovereignty from African economies to the economy issuing the most coveted currency-denominated stablecoin?

What are stablecoins?

Stablecoins are crypto-assets (or digital currencies) designed to maintain a stable value—typically by being pegged to a reference asset such as a national currency (like US dollars), a commodity (like gold), or a basket of assets.

The use of stablecoins in Africa is on the rise, particularly in Nigeria, South Africa, and Kenya. This rise is driven by currency volatility, inflation, and limited access to stable foreign currency through traditional banking. Those problems prompt some people to adopt US dollar-denominated stablecoins for saving, hedging, and remittances.

Part of their appeal is that they can be moved across borders more quickly, cheaply, and efficiently than conventional assets.

In South Africa, a well-developed regulatory and financial infrastructure has increased institutional confidence, expanding stablecoin use beyond retail into business payments, remittances, and other business-to-business transactions.

Their stability is usually achieved through reserves, collateral, or algorithmic mechanisms that prevent large price swings.

My book, Financial Technology Law and Regulation in Africa, looked at their operation as a crypto-asset in African states. I raised concerns about their potential impact on emerging economies, including African countries, in 2019 and 2020. A recent International Monetary Fund paper has echoed these concerns.

The journey so far