Africa’s First Stablecoin Project Is Backed By The Naira – And There’s Little Wonder Why
The spike in crypto use in Africa has garnered plenty of attention. Startups on the continent are already feasting on the advantages brought on by the blockchain technology.
Ghana-based cross-border money transfer startup Bit Sika has joined hands with Linova Capital – crypto-focused investment firm – to launch a Naira-backed stablecoin called Africa Stable-Coin (ABCD). The project, which is built on the Binance Chain, was unveiled just last week.
Bit Sika is a new financial payments startup that launched its first application this year after the project was enrolled in the Binance Labs Incubation Program in 2019. CEO of the project met Jack Dorsey during his trip to Ghana.
Why The Naira?
Atsu Davo, founder and CEO of Bit Sika told WeeTracker that the decision to back the token with the naira is based on the proliferation of Bitcoin use in the country.
“Nigeria is one of the busiest places for cryptocurrency in Africa right now, and while we have plans to include other African currencies in the future, the country is a good starting place for us”, Atsu said on a call from Accra.
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Seemingly unconcerned about the deterrent issues by the government on the use of Bitcoin, the use of the digital currency in Nigeria has showed no signs of slowing down.
The crypto industry has been on an uphill trend in the past few years, and the latest reports indicate that the trend is set to continue – and possibly grow – in 2020. Africa’s largest economy has been leading the sector in Africa, claiming the top spot for Bitcoin searches on Google globally.
In October, Binance partnered with Lagos-based fintech startup Flutterwave to launch an initiative that will enable Nigerians buy crypto using their Naira.
Most top crypto exchange platforms that provide fiat-to-crypto trading services shed the limelight on the US dollar – or a yen or euro, at least. Nonetheless, Binance went off the track to add the national currency of an African country as its first fiat service.
The African Stablecoin
ABCD’s on a mission to leverage the liquidity of the Naira and the flexible nature of digital currencies. The token will be issued by the ABCD Collective, led by Bit Sika and Linova Capital, per information obtained from the project’s whitepaper. According to Atsu, the token is interesting not only in that it allows users to purchase crypto coins using their local currency.
“Many people have a hard time differentiating cryptocurrencies and knowing their actual value in their local currency. There are a lot of digital currencies backed by the US dollar. We have seen how well they do.
But I feel we also need cryptocurrencies that are compatible with African national currencies. People can easily acquire US dollars, but still choose to spend their local currencies. This illustrates the power of familiarity, which we aim for”.
National currencies and stablecoins did not start their relationship today. These digital assets are typically designed to minimize the volatility of the price of the cryptocurrencies.
Due to the growth in the popularity of suchy coins there are now a variety of stablecoin projects. By being pegged to real-world assets, these coins can sidestep the wild price swings brought on by the peaky levels of volatility that is very common in cryptocurrency markets.
First Of Its Kind?
Stablecoins have had their own share of scrutiny as a result of the transparency which shrouds the part of the sector. One of the best-known digital assets in the space – Tether (TUSD) – has come under fire due to its lacking in transparency.
But to make sure that the ABCD is trustworthy, its Collective’s funds will be audited by an independent Certified Public Accountant at the end of every month.
Supported by 9 exchanges – including Busha and Bitmama – ABCD is built on the Binance Chain to achieve speed and affordability. The stablecoin, whose adoption is driven by the Bit Sika app, is said to be the first of its kind to be executed. Atsu, who was part of the Bitcoin meetup with Jack Dorsey in Ghana, says it is not necessarily the first of its kind.
“At this stage of crypto development, it is fairly easy for someone to create a token on a laptop. Just like setting up a website, it is not really a big technological achievement.
But when it comes to building the right tools and infrastructure around a stablecoin in the African context, I can say that we are the first to do that. This stablecoin token is interesting because we can have all the features of cryptocurrency without the volatility,” the Ghanaian explained.
Even though the Naira is not one of the strongest currencies in Africa, it is good news that what is the pioneering Africa-focused stablecoin is being backed by it.
Featured Image: Ethex Via Medium
