African companies hedging against local currency weakness using stablecoins

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Countries with limited access to the US dollar are putting the flexibility of stablecoins to good use. Moneyweb crypto

A new frontier has been opened in Africa for the use of stablecoins, which are blockchain-based ‘tokens’ backed by stable assets, such as the US dollar, euro or even gold. “It was inevitable that African companies beset by a scarcity of fiat US dollars would seek out ways to solve this shortage of liquidity. Stablecoins are proving to be that solution,” says Omer Iqbal, CEO of Cape Town-based crypto company Fivewest.

Phase three takes us in an entirely new direction, commensurate with the rise of stablecoins, into corporate treasuries and institutional adoption. Take Malawi, for example, which devalued its currency by 25% in recent months. That’s a huge hit to the financial statements of companies whose expenses are priced in USD. Allowing them to convert their kwacha into USD-backed stablecoins and hold those on their balance sheets as a near-cash asset protects them from local currency weakness.

 

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