Stablecoins Are Reshaping Africa’s Liquidity Markets

Source: F-Squared Podcast

Compiled:April

When stablecoins begin entering cross-border settlement in Africa, the industry typically asks three questions:

• Will it exacerbate capital outflows and impact the local currency and regulatory system?
• If connecting counterparties and payment channels is enough to start a business, what is the real barrier to entry?
• As participants increase and spreads continue to narrow, where will long-term value accumulate?

What I’m seeing is quite the opposite: stablecoins are offering Africa an opportunity to restructure its liquidity market.

I once summarized this issue as a plumbing problem.

In many African cross-border trade scenarios, money is not entirely absent—it simply doesn’t reach the right counterparty at the right time, at an executable price.

Trade income may be in Europe or the U.S., but procurement payments must be made in China or Asia, and local fiat currency is still required.

Funds are dispersed across different countries, accounts, banks, and counterparties, lacking a financial hub that enables efficient inflow, outflow, aggregation, and circulation of liquidity.

Therefore, the issue is not just the total amount of dollars, but whether dollars can be mobilized at the right nodes.

A participant holding USD or a stablecoin does not mean that the importer on the other end can obtain a tradable quote; the existence of an exchange rate in the market does not equate to a business being able to complete currency conversion, settlement, and final delivery.

Stablecoins do not create U.S. dollars. But for the first time, they have the potential to transform how these dispersed pools of capital are connected: making it easier to move funds across institutions and time zones, reducing the time lag between quoting, executing, and settling trades, and enabling liquidity previously trapped in separate corridors to form new connections.

And this is precisely where the following three questions truly begin.

Stablecoins naturally reduce friction in dollar liquidity and cross-border transfers.

Therefore, capital outflows, pressure on the domestic currency, and market stability are issues that any regulator must take seriously.

But what I’ve seen in Africa is not regulators’ inherent rejection of stablecoins. On the contrary, many governments and regulators eager to advance trade, capital, and financial systems are actively exploring how to gradually bring fragmented, inefficient, and low-visibility liquidity into a more open and interconnected market.

Relying long-term on official quotations, bank quotas, and fragmented settlement pathways cannot support further opening of trade and regional economies.

The opportunity with stablecoins lies in enabling funds, previously trapped in different accounts, countries, and with different counterparties, to be transferred, settled, and redeployed into the market more quickly.

This does not mean openness comes without cost. For many African markets, this is often not merely a speedup of existing mature systems, but a fundamental transition from fragmented, low-visibility liquidity structures toward more market-driven price discovery.

Existing banking, foreign exchange, payment, and informal settlement chains need to be readjusted; demand, exchange rates, bank positions, and market expectations will also be repriced.

Therefore, wear and tear does not mean a country is unwilling to open up. Precisely because change has significant impacts, opening must be sequenced, paced, and accompanied by regulated channels and liquidity buffers.

The real question to answer is not whether to explore stablecoins, but: which real trade and settlement needs first gain more effective liquidity? Which channels must remain within regulated systems? Who provides buffer liquidity? Under what conditions can the market afford more thorough price discovery?

Stablecoins are not the end goal of openness; they are Africa’s opportunity to turn openness into infrastructure.

From the outside, it looks like a business with low entry barriers: find a stablecoin, locate a local fiat channel, identify a counterparty, and you're ready to quote.

But stablecoins have truly opened the door not to a single trading opportunity, but to the opportunity to build the next-generation liquidity market.

Building a market requires more than one-time matching capability—it requires a foundational set of capabilities that enable continuous, scalable, and widely accepted trading.

First, it’s settlement capability. This includes global USD liquidity and settlement infrastructure—international counterparties, banking networks, SWIFT, stablecoins, custody, and clearing networks—as well as local fiat payment and final delivery capabilities. The real challenge isn’t sending money from one end, but ensuring funds can be successfully settled on both the global and local ends.

Second, it is compliance and regulatory capability. This trust is not an abstract brand feeling—it is demonstrated through customer identity verification, source of funds, transaction records, sanctions screening, anomaly handling, audit capabilities, and ongoing regulatory communication. Only when banks, regulators, and global counterparties can see and manage risk can liquidity move from fragmented bilateral networks into the formal financial system.

Third is institutional-grade foreign exchange trading operations capability. This is not ordinary back-office operations, but encompasses quoting, position management, trade confirmation, fund allocation, settlement timing, failed trade handling, and risk control. Between executing a single trade and operating a stable cross-border liquidity market lies an entire suite of institutional-grade FX capabilities.

The real barrier in this market isn’t whether you can connect a single liquidity source, but whether you can organize global settlement, local delivery, regulatory compliance, and institutional-grade FX operations into a sustained market capability.

Investors will ultimately ask: As participation increases and pricing becomes more transparent, will FX spreads continue to narrow until they descend into a race to the bottom?

If the business is limited to stablecoin trading and FX spreads, the answer is likely yes.

Narrowing spreads are not anomalies, but rather a sign of the gradual maturation of liquid markets.

But the more important question is not whether the spread will decrease, but what new financial capabilities can businesses, banks, and trading markets build on top of more efficiently organized liquidity?

Liquidity → Settlement → Treasury Management → Trade Finance

Liquidity enables funds to be located, quoted, and allocated; settlement enables cross-border transactions to be completed stably, traceably, and reliably; continuous trading and settlement capabilities allow businesses to manage multi-country funds, currencies, and positions; and when orders, invoices, logistics, and repayments are connected, trade finance can develop measurable and priceable credit capabilities.

Here, it’s essential to stay clear: settlement capability does not automatically become trade finance capability. The latter also requires risk models, real trade data, recourse structures, and balance sheets.

But this precisely explains why opportunities won't be limited to just the spread.

Narrowing spreads are not about lost opportunities, but about the market transitioning from trading money to organizing corporate funds and real trade.

Africa does not need to replicate the financial infrastructure of other markets. It has the opportunity to build a new set of market capabilities around its own trade structures, liquidity distribution, and cross-border needs.

The value of stablecoins is not to replace the existing financial system or simply make the dollar move faster. It enables funds that were previously unable to be effectively aggregated or flowed to become financial resources that can be settled, managed, and used to support real trade.

This is the most compelling opportunity for African stablecoins: not a faster rail, but a restructuring of the liquidity market.