By Briana Marbury
Stablecoins are rapidly emerging as one of the most dynamic developments in the digital payments landscape, offering faster, cheaper, and more transparent payment options. Unlike the highly volatile cryptocurrencies, stablecoins are backed by reserve assets, such as the US dollar, to ensure price stability in an era marked by uncertainty and fluctuating interest rates. Increasingly, stablecoins are being positioned as a bridge between traditional finance and blockchain-based assets.
And the momentum for its adoption is growing as evidenced by the United States implementing its first comprehensive framework for stablecoins, offering a potential model for other jurisdictions. By providing a clear regulatory structure, the newly enacted Genius Act enhances the safety of launching stablecoins and protects end users, helping to build confidence in digital currencies worldwide.
The appeal of stablecoins lies in its ability for instant settlement, low-cost transfers, and accessibility beyond the conventional banking system. However, one of the biggest questions on both a local and global front is exactly how stablecoins will fit into the broader payment ecosystem and whether they can avoid repeating the same fragmented fate of many of today’s traditional payment networks.
South Africa, despite having one of the most sophisticated financial systems on the continent, suffers from some of the highest costs for cross-border transactions, particularly between the sub-Saharan Africa region. As a result, transferring money from South Africa to other African economies is costlier than from developed countries, especially for smaller sums. Stablecoins have the potential to address this and other inefficiencies for those wanting cheaper and quicker processes, particularly in areas such as trade and remittances.
According to Chainalysis, in sub-Saharan Africa alone, stablecoins accounted for approximately 43% of crypto transactions (a value of approximately $125bn) between June 2023 and July 2024. This is a strong indication of the demand and need for low-cost and reliable digital settlement methods.
Already, countries such as Nigeria and Kenya are working on their own strategies. In Nigeria, the Securities and Exchange Commission have been given oversight of crypto and stablecoins and Kenya is getting close to passing legislation that recognises digital assets as payment and licenses stablecoin issuers.
In South Africa, the South African Reserve Bank (SARB), in collaboration with the Intergovernmental Fintech Working Group that includes both the National Treasury and the Financial Sector Conduct Authority, is exploring how stablecoins should be regulated. Phase one assessed rand-pegged stablecoins and identified risk areas such as weak issuer governance and possible threats to financial stability. During phase two, regulators are expected to develop rules that balance innovation with consumer protection, while ensuring compliance with anti-money laundering and exchange control requirements.
These developments are being closely monitored by local players within the financial services industry, with some stakeholders of the opinion that the SARB could set the benchmark for the rest of the continent.
However, as stablecoins gain traction, the emergence of closed-loop systems is a significant risk. Most companies are not thinking about long-term interoperability (the ability for different stablecoins to transact with one another, irrespective of who the issuer is).
Without interoperability, a South African user might find themselves unable to transfer seamlessly between different stablecoins or between stablecoins and fiat currencies. This is not dissimilar to the fragmentation in today’s payment networks, where users on one app or platform cannot always transact with others outside of it. To avoid repeating this, stablecoins in South Africa and globally will need to be built with open standards from the outset. Interoperability ensures that different stablecoins, regardless of issuer or blockchain, can interact seamlessly, thereby driving an inclusive financial ecosystem.
The benefits of interoperable stablecoins for South Africa are significant:
- Businesses: Global market reach without costly payment integrations, seamless hiring and payment across borders and real-time settlement for accurate cash flow visibility
- Consumers: Easy and affordable purchases from businesses anywhere in the world, the ability to support small and independent sellers directly as well as send or receive money instantly with friends and family (no matter which bank or payment app they use)
- The economy: Strengthen the economy by enabling smoother money flows, thereby boosting financial connectivity, and driving GDP growth. This is similar to the benefits seen in nations (for e.g. India) where payment system interoperability is already regulated and required
As South Africa edges closer to a regulatory framework, the opportunity lies in getting interoperability right from the start. By adopting open and globally aligned standards, South Africa can avoid the inefficiencies of fragmented networks and position itself as a leader in digital payments innovation on the continent.
Stablecoins are no longer a futuristic idea. It is a practical tool that is reshaping how money moves. For South Africa, the question is not about whether stablecoins will play a role in the financial ecosystem, but rather about how effectively it will be integrated. With the right regulatory balance and a commitment to interoperability, stablecoins could deliver on their promise: faster, cheaper, and more inclusive payments for businesses and individuals alike.
Briana Marbury is the CEO of the Interledger Foundation
