Remittances ‘more important than aid’ as Africa turns to stablecoins

A fundamental shift is underway in Africa’s external financial landscape, where private remittances have decisively surpassed Official Development Assistance (ODA), or traditional foreign aid, as the primary source of external financing. For Sub-Saharan Africa (SSA), annual remittances consistently exceed $50 billion, providing a vital economic safety net for millions of households and supporting GDP growth.

Historically, this crucial capital flow has been burdened by the highest transaction costs globally. According to World Bank data, the average cost to send money to SSA remains stubbornly high, often exceeding 8% of the principal amount, substantially eroding the value intended for recipients. This inefficiency, coupled with slow settlement times and limited access for the continent’s large unbanked population, has exposed the deep inadequacies of traditional money transfer operators (MTOs) and correspondent banking systems.

In response, Africans, both within the diaspora and domestically, are increasingly turning to stablecoins—cryptocurrencies pegged 1:1 to reserve assets like the US Dollar (USD). Stablecoins, such as USDC and USDT, offer a transformative alternative. By leveraging blockchain technology, they facilitate instantaneous, near-zero-fee transfers that bypass high-cost intermediaries and traditional banking infrastructure. This shift is particularly impactful for intra-African trade and cross-border family support, where regional currency volatility and lack of financial interoperability are major obstacles.

While regulatory frameworks across African nations remain fragmented and cautious regarding cryptocurrency adoption, the market adoption is outpacing policy development. The ability of stablecoins to empower individuals with direct control over their capital and reduce predatory transfer costs is proving a powerful catalyst. As remittances solidify their position as the most resilient and reliable form of private capital injection into Africa, stablecoins are rapidly becoming the infrastructure that maximizes their economic impact, signaling a definitive move away from reliance on fluctuating and conditional foreign aid.

Source: Remittances ‘more important than aid’ as Africa turns to stablecoins