Local stablecoins are great, but who really needs them?

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Over the past six years, several local stablecoins pegged to African currencies have sprung up with one clear proposition: to put African money on-chain.

South Africa has ZARP and ZARsc. Nigeria has cNGN, while Tanzania has nTZS. ZARP, launched in 2019, had about R74.6 million ($4.6 million) worth of tokens in circulation as of September 21, backed by R92.8 million ($5.7 million) in reserves. cNGN’s supply crossed ₦3.75 billion ($2.82 million) as of September 21, according to figures reported by the issuer.

The local stablecoin industry has spent much of its time explaining how putting African currencies on a blockchain could make payments faster, cheaper, and more interoperable. The pitch skips the harder question: who actually needs them on-chain badly enough to use them?

Dollar-backed stablecoins already have something that could take years for local stablecoins to replicate: a global market, network effect, deep liquidity, and a reason for people to hold or use them. In emerging markets, including Africa, users hold dollar-backed stablecoins to protect savings, pay suppliers, move money across borders, or access global markets. In many cases, what they want is exposure to dollars, the underlying currency.

The Bank for International Settlements (BIS) estimated the combined stablecoin market at about $320 billion at the end of May 2026, with about 99.4% of that value tied to the dollar. A local stablecoin does not have an equivalent source of built-in demand.

On the other side of that equation are the rails that already exist today. In parts of Africa, consumers have established ways to move local currencies within their borders. Bank transfers work. Mobile money works. Payment processors have spent years stitching these systems together.

This compounds the chicken-and-egg problem for local stablecoin issuers. Users need a reason to hold a local token before merchants have a reason to accept it. Merchants need enough users and liquidity before accepting it becomes worthwhile. Liquidity providers need enough trading activity to make money, but more trading activity requires more users, restarting the cycle.

The B2C case is weak

Local stablecoins often target integration with cryptocurrency exchanges, which provide distribution for these digital currencies. For example, cNGN, in its early days, sought integration with startups such as Busha and Quidax, while incentivising smaller exchanges through token grants. The strategy was aimed, in part, at retail consumers.

But the retail case, particularly for last-mile payments or currency conversion, is weak.

If a retail user holds Tether’s USDT, wants naira, and can convert directly into a bank account, adding a naira stablecoin in the middle adds another transaction rather than obvious value. It creates an additional leg in the transaction.

***Image Source: Carlo Cadenas for Rest of World ***

The wholesale case is more nuanced, and potentially more compelling.

On the wholesale, or business-to-business (B2B), side, a local stablecoin has to answer three questions before it becomes useful: who wants to hold it, who will accept it, and who will provide liquidity when either side wants to enter or exit?

The first question is especially difficult. A Nigerian who wants dollar exposure has an obvious reason to hold USDT or USDC. A Tanzanian business making a payment to China has a reason to want dollars. An importer, trader, or payment company can use a dollar-backed stablecoin beyond its home market because the other side of the transaction is more likely to recognise it.

A Tanzanian shilling-backed stablecoin does not have the same cross-border network simply because it represents the underlying currency.

But it can still play a useful role as the local leg of a transaction.

Purely as an illustration, a Tanzanian importer could convert shillings into nTZS, move the nTZS on-chain, convert it into USDT, and eventually pay a supplier in China. The local stablecoin has done something useful in that chain: it has provided an on-chain representation of the shilling that connects local liquidity to a global digital asset market.

This is particularly relevant in African markets where directly on-ramping—converting from fiat to digital currencies—is difficult.

The Chinese supplier does not need to want nTZS. A local stablecoin does not necessarily need to become the money used by both sides of a transaction. It can serve as the local leg of a transaction whose other leg is a dollar-backed stablecoin.

Move up the financial stack, and the picture changes.

I spoke with David Machuche, founder of NedaPay and its Tanzanian shilling-backed stablecoin nTZS, in July, days before the product kicked off participation in the Bank of Tanzania’s regulatory sandbox.

He said much of the early demand for nTZS was coming from payment companies, developers, and businesses managing cross-border liquidity, rather than consumers looking for a new way to pay for groceries.

David Machuche, founder and chief executive officer of NEDA Labs, which built NedaPay and nTZS, the Tanzanian shilling-backed stablecoin. Image Source: David Machuche/LinkedIn

Consider a payment service provider (PSP) moving money across several African markets. It may hold local bank accounts, liquidity relationships, and operating balances in each country, with cash sitting idle while it waits for transactions to settle. A local stablecoin could turn part of that inventory into an on-chain asset.

Market makers have their own reason to show up. They quote buy and sell prices for nTZS against shillings or USDT, earning from the difference between those prices. Machuche said market makers can set spreads ranging from 0.1%–0.4%, depending on how they price their liquidity, while swaps settle within seconds. TechCabal could not independently confirm these figures; nTZS saw only a handful of on-chain transfers in the 24 hours before publication, and pricing runs through NedaPay’s internal market-making rather than a public order book.

However, purely as an illustration, at a 0.1%–0.4% spread, a liquidity provider moving $1 million would generate $1,000–$4,000 in gross revenue. Do that 100 times a month, and it becomes $100,000–$400,000 in gross spread revenue.

Circle, the US-based issuer of the dollar-backed USDC stablecoin, said USDC traded with spreads below 0.01% on major exchanges 99% of the time between January and December 2025. Data intelligence firm Kaiko’s 2023 analysis found that USDT pairs had some of the tightest spreads in crypto, while some less-liquid stablecoin pairs had spreads of 0.08% or more.

If market makers see enough activity from merchants and payment companies moving large volumes, the opportunity to earn money from the spread could give them a reason to stay, helping to solve the liquidity problem.

During its initial rollout, Machuche noted that nTZS had about 6.2 million tokens on-chain and roughly 390 holders, as of July. That figure has now crossed 9.66 million, according to AfriFlux, an on-chain intelligence platform, since the stablecoin launched in April.

The opportunity for local stablecoins, then, is to find and operate in pockets where dollar-backed systems are less efficient. Targeting a niche wholesale market may be a more realistic problem to solve than chasing retail adoption.

On-chain foreign exchange

On-chain foreign exchange (FX) gives local stablecoins another possible role: they can become the local-currency leg in a market where the other side is a dollar-backed stablecoin or another local stablecoin.

Across Celo and HyperFX, cNGN is already being used this way. It has integrated with HyperFX, an on-chain FX protocol built by Nigerian startup Polytope Labs, which runs on Hyperbridge.

A business can deposit cNGN and request USDC, for example. A liquidity provider or solver on the other side provides the USDC from its own inventory, while the transaction settles through smart contracts rather than a series of manual transfers.

The point is not for the counterparty to hold cNGN. It needs USDC, dollars, or another currency. cNGN provides the naira liquidity that enters the market, while the other side provides the foreign currency.

Noblocks, a Nigerian payments infrastructure company, is one example. HyperFX said on September 17 that Noblocks had helped move more than ₦573 million ($430,910) in cNGN into naira through 45 orders, putting the average order at about ₦12.7 million ($9,545). The size of those transactions points to a market being used for larger flows rather than everyday retail payments.

According to AfriFlux, HyperFX settled $3.83 million across 1,309 orders between June 1 and September 19, with 1,058 orders filled. The broader opportunity is to connect local currency liquidity to the much larger pool of dollar stablecoins already used for cross-border transactions.

Yield can manufacture demand—but at what cost?

Building network effects for stablecoins is difficult. If the retail use case does not have an obvious reason to exist, yield is one way to manufacture demand.

People respond to incentives. Yield can give users a reason to hold a token even when they have no immediate use for it.

Fiat-backed stablecoin issuers often invest a substantial portion of their reserves in relatively safe assets, such as government securities and bank deposits, which generate income. Purely as an illustration, an issuer with ₦100 million ($75,223) in reserves earning 12% a year could generate ₦12 million ($9,027) in gross income. Some of that income could be passed on to holders as a reward.

But there is a trade-off. A stablecoin that pays users simply for holding it could compete with bank deposits. Banks rely on deposits to fund lending and other financial activity, so moving large amounts of customer money from bank accounts into stablecoins could reduce the pool of deposits available to banks.

A street view of Lagos, Nigeria. Image Source: Modern Diplomacy EU

Regulators are drawing a line around passive yield. In the United States, negotiations over the CLARITY Act moved towards restricting rewards that function like interest on stablecoin balances while allowing some activity-based rewards. The bill failed to advance in the Senate on September 15.

Kenya’s virtual asset regulations prohibit interest and benefits tied to how long a stablecoin is held. Nigeria’s proposed framework for digital assets, issued on August 20, also prohibits virtual asset service providers from paying interest without approval from the capital markets regulator and proper disclosure to customers.

Tanzania has taken a more cautious approach: its current sandbox conditions require separate approval for yield-generating activity.

Yield can create holders. It cannot, on its own, create a reason to use the token.

Where will local stablecoins solve a pain point?

Local stablecoins need serious scaffolding around them to work: exchanges, wallets, market makers, banks, and redemption channels. Without that infrastructure, supply does not equal demand. Retail adoption can follow once the layer works well enough; it does not need to come first.

There is also a regulatory case for local stablecoins. The International Monetary Fund (IMF) has warned that widespread use of dollar stablecoins could indirectly accelerate digital dollarisation and put pressure on monetary sovereignty. As dollar stablecoins become more widely used, regulators may have an interest in keeping more digital payments denominated in local currencies.

Local stablecoins give regulators a potentially more visible and controllable alternative, provided reserves, issuance, and redemption can be properly monitored.

A few African regulators, including Nigeria and Kenya, have signalled they want to keep a close watch on stablecoins, both local and foreign. In Nigeria, where a local stablecoin is already operating, specific rules could spur demand or hold it back.

Local stablecoins can be useful where they connect local currency liquidity to markets that already have demand: cross-border payments, on-chain FX, treasury management, and wholesale settlement, including intra-African trade cases where local currencies are difficult to access or convert directly.

In those markets, the token does not need to replace the naira or shilling. It needs to make moving, exchanging, or settling the underlying fiat currency easier.

None of this means African currencies do not belong on-chain. It means the question worth asking is narrower than the industry’s pitch suggests: not whether a naira or a shilling can become a token, but whether enough institutions moving real money have a reason to keep using it once the incentives are removed.

Exchange rate: $1 = ₦ 1,330.53

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