A recent analysis by Borderlessxyz reveals significant disparities in stablecoin-to-fiat conversion costs across Africa, highlighting the challenges faced by users in different regions. The publication provides the following information: the findings underscore the importance of local market dynamics in shaping these financial transactions.
Stablecoin-to-Fiat Conversion Costs in Africa
In January, the median spread for stablecoin-to-fiat conversions in Africa reached nearly 300 basis points, starkly contrasting with Latin America's 13 basis points and Asia's minimal 0.07 basis points. This data indicates a substantial variation in conversion costs across the continent, with South Africa reporting one of the lowest costs at approximately 1.5%. In contrast, Botswana experienced a higher median spread, climbing to nearly 1.94%.
Analysis of Currency Corridors
The analysis encompassed 66 currency corridors and nearly 94,000 rate observations, emphasizing the critical roles of competition and liquidity in determining conversion rates. Economists argue that while stablecoins have the potential to lower remittance costs, the effectiveness of these savings is heavily influenced by the local market structures and liquidity conditions. This highlights the need for tailored solutions to enhance the efficiency of stablecoin transactions in various African markets.
Nomba's recent acquisition of a Canadian payment firm is set to enhance its operations in Africa, particularly following its expansion into the DRC. This strategic move contrasts with the challenges highlighted in the stablecoin-to-fiat conversion analysis. For more details, see Nomba's Acquisition.
