For businesses looking to expand into Africa, navigating payments and settlements without hassle can seem slightly daunting. A major recurring concern for businesses looking to break into the African market is how to get their money out.
Businesses face challenges such as restrictive banking systems, currency volatility, and regulatory uncertainty. These challenges can hinder business operations and discourage potential investors thus, it has become necessary to use alternative financial solutions and, more recently, cryptocurrency has been adopted by many businesses.
By leveraging cryptocurrency, particularly stablecoins, businesses can enjoy seamless cross-border payments, mitigate risks associated with currency fluctuations, and navigate regulatory complexities.
Africa’s population is projected to reach 1.7 billion by 2030, making it the second most populous continent. As such, it is increasingly being recognised as a significant market for global businesses and many are expanding to the continent.
Cryptocurrency has become a viable alternative to traditional banking systems and having reliable crypto exchange partners enables businesses to simplify their settlements. At the same time, cryptocurrency enables borderless transactions, allowing businesses to enjoy easy and fast settlements, with transparent and secure transactions thanks to the underlying blockchain technology.
It is not uncommon for businesses to also have concerns about cryptocurrency particularly around their price volatility. However, stablecoins offer a solution to this.
Stablecoins are becoming increasingly popular worldwide. They are a kind of cryptocurrency designed to minimise the price volatility typically associated with most cryptocurrencies. They are pegged to a stable asset such as a fiat currency or a commodity like gold.
fiat-backed stablecoins – i.eg. Tether (USDT)
crypto-backed stablecoins – i.eg. DAI
commodity-backed stablecoins – i.eg. Tether Gold (XAUT)
algorithmic stablecoins – i.eg. FRAX
Africa has seen massive growth in crypto adoption in recent years. In particular, stablecoins have been a catalyst for financial innovation and a solution for cross-border payments.
Remittances and cross-border payments. Stablecoins facilitate cheaper and faster remittances and cross-border payments, especially when compared to traditional banks. It has become a preferred option as it benefits both sender and receiver.
Ecommerce and international trade. Stablecoins have become an option for payments for both large and small ecommerce businesses, providing a secure and fast way for customers to pay for goods and services from anywhere in the world. Import-export businesses are also increasingly adopting stablecoins to facilitate payments and settlements internationally.
Tokenization of assets. Stablecoins provide a stable value reference in the process of tokenization, which is the representation of real-world assets on the blockchain.
Stablecoins offer other benefits as:
Lower transaction costs
A safer option to store funds in the crypto ecosystem
Seamless transactions
Accessibility
As digital innovation continues to be adopted in Africa and globally, cryptocurrency offers an opportunity for businesses to grow in this rapidly evolving market.
Some industries adopting stablecoins for payments and settlements through OTC Desks include Financial institutions, payment service providers (PSPs), manufacturing, oil and gas, iGaming, imports and exports, travel, tourism, and hospitality, and non-profit aid organisations.
Over-the-counter (OTC) transactions have become necessary for businesses and high-volume traders, allowing them carry out large transactions without directly affecting the market price. For OTC crypto transactions, businesses use on-ramps and off-ramps for efficient and secure transfers of funds in and out of the crypto ecosystem.
In crypto, on-ramps and off-ramps are simply gateways in and out of the crypto ecosystem. On-ramp is the process where fiat currencies such as NGN, USD, KES, EUR, or any national currency are converted to cryptocurrency. This typically looks like transferring funds from a traditional bank to a crypto exchange for crypto, using payment processors to purchase crypto or getting crypto directly through OTC platforms that cater to high-volume trades.
Off-ramp, on the other hand, is simply converting crypto back to fiat. This would involve selling crypto on an exchange and withdrawing fiat into a traditional bank account or using an OTC Desk to execute large trades that can be settled in fiat currency.
Effective on-ramp and off-ramps ensure businesses can easily acquire crypto and trade it for fiat currencies as their business needs require.
Liquidity. On-ramps and off-ramps provide necessary liquidity for smooth transactions between crypto and fiat and vice versa.
Mitigates risks. On-ramps and off-ramps provide a secure and regulated system for moving funds. This reduces the risk of fraud and other security breaches.
Offers speed and efficiency. On-ramps and off-ramps offer a quick and efficient way to convert between crypto and fiat, which is a huge advantage in business.
Confidentiality. OTC transactions require a high degree of confidentiality. On-ramp and off-ramp products and services are designed specifically to provide discretion and a safe way to transact, ensuring transactions are kept private and confidential.
OTC desks and stablecoins provide global businesses in Africa or looking to get into Africa with efficient, transparent, and secure avenues for navigating cross-border transactions, mitigating currency volatility, and unlocking new expansion opportunities.
Ezichim Onweagba is a seasoned expert in cross-border crypto and FX payments, with a strong focus on Over-The-Counter/treasury sales and B2B payment solutions. As the leader of global partnerships and business development at Quidax, he drives strategic initiatives to empower global businesses with innovative payment solutions across Africa. With a proven track record in navigating the complexities of international markets, Ezichim excels in creating impactful partnerships and delivering tailored financial services to Quidax’s institutional clients across the globe.
Quidax is an African-founded cryptocurrency exchange that makes it easy for anyone to buy, sell, store, and transfer cryptocurrencies. Quidax additionally enables OTC trading and gives fintech companies the tools to offer cryptocurrency services to customers through a dedicated crypto API. Quidax was officially launched in 2018 and has customers in more than 70 countries.
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