In a sign Nigeria’s crypto crackdown is making an impact, stablecoin volume fell a whopping 38% in the 12 months ending in July, to $23.6 billion, according to a Chainalysis, a blockchain intelligence firm.
The sharp decline in Nigeria’s stablecoin utilisation flies in the face of the country’s ailing economy and devalued currency, the naira.
Nigerians, long big users of crypto, should be piling into dollar-backed stablecoins such as Tether’s USDT to safeguard their wealth.
Yet Nigeria’s bitter legal conflict with Binance and the clampdown on crypto exchanges appears to be dampening stablecoin usage.
Racketeering allegations
In February, Nigerian officials accused foreign crypto exchanges, including Binance, OKX, and KuCoin, of foreign exchange racketeering.
These platforms, especially their peer-to-peer services, were flagged for causing a 90% plunge in the naira’s value against the dollar.
Senior Nigerian officials alleged that swapping stablecoins for naira on those platforms was damaging the economy.
Moreover, Nigeria focused its ire on Binance, which it accused of money laundering and facilitating illegal currency speculation.
In March, it charged Tigran Gambaryan, a US-based compliance executive, with money laundering and has held him in prison without bail for almost seven months. Binance and Gambaryan have rejected the allegations.
Struggling to cope
Last week, Linda Thomas-Greenfield, the US ambassador to the United Nations, implored Nigeria’s government to immediately release Gambaryan, a former federal investigator.
Meanwhile, Nigerians are struggling to cope with terrible economic conditions. Inflation is soaring, the economy is shrinking, and households and businesses are finding it hard to access stablecoins to protect their wealth from devaluation.
Foreign exchanges, including Binance, have dismantled their little apparatus in the country.
Nigerians are now forced to rely on Telegram groups and other informal P2P dealers to access USDT.
Still, platforms like Noones, a trading platform founded by Ray Youssef, former CEO of crypto exchange Paxful, are trying to fill the void left behind by Binance’s exit.
Retail users
Despite these challenges, Nigeria still accounted for 40% of Africa’s stablecoin transaction volume in the last year, according to a Chainalysis report released this week.
South Africa was a distant second, recording $14 billion in the period under review.
Nigeria’s stablecoin adoption continues to be driven not only by retail users but businesses as well.
Still, 85% of its stablecoin volume came from transactions under $1 million, the report stated.
Driven by investors
Nigeria’s crypto adoption in the last year did result in one notable feat.
Africa’s most populous nation recorded $30 billion in total value received by DeFi services, according to the Chainalysis report.
The achievement marks a major moment as it catapulted Africa to become the world’s leader in global DeFi adoption for the first time.
In the previous reporting period, Africa ranked third behind India, North America, and Western Europe in DeFi adoption.
According to the report, Nigeria’s DeFi adoption is largely driven by investors seeking to maximise returns from activities such as crypto lending.
The trend marks an expansion of Nigeria’s crypto utilisation beyond stablecoin-based payment and remittance into more sophisticated markets.
It also helped drive Nigeria’s overall crypto transaction volume to reach $59 billion, despite the stablecoin shortfall.
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.