Stablecoins offer access in emerging markets with FX shortages

It's no news that one of the easiest products to build and achieve product market fit (PMF) in emerging markets like the African region, is a stablecoin solution. From savings, to payments and lending, these emerging markets are high opportunity hubs that are frankly, still not significantly captured.

You look at western countries like the United States and you find that people down here don't really care much about stablecoins (unless there's reasonable yield benefits), it's more of an interest of businesses due to the liquidity benefits and it only makes sense because these tokens mirror market values of the very currency some are trying to get away from.

The west and the rest of the world want very different things.

As a result, stablecoin solutions lack significant market impacts here when compared with emerging markets of African where their economic realities create incentives for citizens to seek stability in alternative currencies like the USD. Bitcoin, for the western region, holds more relevance as a hedge against inflation and is likely an easier product to grow to PMF.

Moving on, with regards to emerging markets, reports highlight that over 70% of African countries face foreign exchange (FX) shortages where businesses struggle to gain access to the USD they need to operate.

As a result, these markets are turning to stablecoins because they are borderless and give access to more stability than they have within their region.

As seen in the chart above, data shows that for the Nigeria market specifically, crypto volumes a predominantly in stablecoins like USDT.

Most people keeping up with global news would know exactly why this is the case. The Nigeria economy has suffered wealth crushing inflation that citizens, especially the youths, have had to turn to stablecoins to preserve the value of their income.

The future of crypto in emerging markets

While there's evidently significant capital opportunities in western markets, emerging markets within the global south of Africa, Asia and Latin America hold significant value flow opportunities.

When building for these markets, you're specifically building for users that generally move money a lot due to day to day spending and on specific occasions, savings come into play.

Products for these markets require high scalability because high user adoption is expected when said product serves the target market well.

For instance, marketing USD savings accounts locally in these regions can easily be a success because USD to them is access to stability and when coupled with yield from savings, the markets treat that as a unique opportunity to grow their income side-by-side with everyday wages.

That said, payments is a piece of the stack that cannot be left out because inasmuch as these markets value savings in USD, they are also high spenders generally due to limited access to value systems to build a better cost cutting spending habit.

There's generally little flexibility, so they have to spend a majority of their wages. As a result, stablecoins with low fees are best suited for these markets. The significant user adoption + consistent value flow ensures that despite the low fees, projects can still generate significant revenue from serving these markets.

Posted Using INLEO