In a recent interview with CNBC Africa, South African Reserve Bank Governor Lesetja Kganyago cautioned that the increasing adoption of stablecoins—particularly those pegged to the US dollar—could erode the monetary authority of several African nations if left unregulated. Kganyago’s remarks come at a time of rising digital currency usage on the continent, especially in countries grappling with persistent foreign exchange shortages and macroeconomic imbalances.
Kganyago articulated that the rise in dollar-denominated stablecoins presents a nuanced challenge: “The creation of stablecoins, especially the dollar stablecoins, is being used to undermine African currencies. People are using those to short the currencies and we see the rise in the use of stablecoins on the African continent in countries that are experiencing a shortage of foreign exchange.”
This concern is not isolated to South Africa. A growing number of African countries—including Kenya, Egypt, Morocco, and Nigeria—have seen surging demand for decentralised financial instruments, often driven by local currency instability, inflation, and restrictions on accessing foreign currency. While these tools are offering alternative pathways for financial access, they are also introducing volatility and risks not yet fully addressed by existing regulatory frameworks.
An analysis by global banking group Standard Chartered adds weight to Kganyago’s caution, estimating that the surge in dollar-backed stablecoins could drain up to $1 trillion in deposits from emerging markets over the coming years. The report identifies South Africa, Brazil, Kenya, Morocco, and Egypt as particularly susceptible, citing their structural vulnerabilities—including high current account and fiscal deficits—as compounding factors that could amplify capital flight in periods of economic distress.
“The broader concern,” Kganyago explained, “is that people are almost creating their own foreign exchange through these means. I worry that some countries might actually lose monetary sovereignty.” His remarks underscore a complex dilemma: while digital assets may enhance financial inclusion and offer viable tools in markets marked by liquidity constraints, they also pose risks to national fiscal autonomy, especially when such instruments are overwhelmingly pegged to non-African currencies.
Within South Africa, the regulatory response has sought a measured path. Rather than banning stablecoins outright, the South African Reserve Bank has classified them as financial assets—distinct from legal tender currencies. This classification facilitates regulatory oversight while allowing innovation in the digital finance ecosystem. Kganyago emphasised that such an approach aims to protect consumers without stifling technological progress, while promoting structural reforms in domestic currency markets.
Several African central banks are in parallel exploring the feasibility of issuing Central Bank Digital Currencies (CBDCs)—state-backed digital versions of fiat currency—as a sovereign response to the growing presence of private stablecoins. Countries such as Nigeria have already launched pilot projects, while others are in the research phase. However, economists have raised concerns that CBDCs, by offering a safer state-guaranteed alternative, could draw deposits away from commercial banks, creating new risks in financial intermediation.
This broader discourse reveals the interconnectedness of global and local financial systems, and the need for African-led solutions that transcend inherited monetary structures. The continent’s approach to digital financial instruments—be it stablecoins or CBDCs—must be tailored to the specific realities and ambitions of its nations, rather than imported wholesale from non-African contexts. Kganyago’s intervention, far from a rejection of innovation, reflects a call for responsible stewardship in the face of evolving financial frontiers.
Africa’s financial future is increasingly being shaped by decentralised instruments and digital platforms. Ensuring that such transformation is equitable, sovereign, and human-centred requires both regulatory innovation and an unflinching recognition of the continent’s unique monetary ecosystems.
