Stablecoins and the Future of Money: Convergence, Not Competition

Guest Columnist By Ebenezer Onyeagwu

At the recent Africa-Canadian Fintech Forum, one message rang clear: the future of money will not be defined by competition, but by collaboration and convergence. Stablecoins, fiat currencies, and payment systems like PAPSS (Pan-African Payment and Settlement System) are not rivals—they are complementary instruments shaping a new, inclusive, and efficient global financial order.

A Quiet Revolution in Global Finance

Across the world—from Lagos to London, Toronto to Singapore, and Dubai to Nairobi—finance is being redefined. The rise of stablecoins, blockchain-based tokens pegged to fiat currencies such as the U.S. dollar, marks a fundamental shift in how value is stored and transferred.

Initially viewed as speculative crypto assets, stablecoins have evolved into serious tools for cross-border trade, remittances, and financial inclusion. Their appeal lies in three features: instant settlement, borderless accessibility, and programmable automation.

In the United States, stablecoins like USDC (Circle) and PayPal USD are now used by major institutions. In Singapore, the Monetary Authority (MAS) has licensed fully backed issuers. In Nigeria and Kenya, small businesses are embracing USDT (Tether) as a hedge against currency volatility. These developments illustrate how stablecoins are bridging the gap between traditional finance and the digital economy.

The Fiat System Under Pressure

Fiat money remains the cornerstone of global commerce, but it faces growing strain. Cross-border transfers between Africa and Europe remain slow and expensive, while inflation in Argentina and Turkey has eroded public trust in local currencies. In Nigeria, persistent naira volatility has pushed individuals and businesses toward dollar-linked digital alternatives.

This does not signal the end of fiat—it signals the need for transformation. The next generation of money must be faster, cheaper, and more inclusive, harnessing digital innovation without losing regulatory oversight.

The Central Bank’s Expanding Role

Rather than being sidelined, central banks are becoming key architects of the emerging digital monetary ecosystem. Their evolving role encompasses:

•               Regulatory oversight: Defining frameworks to distinguish payment-backed stablecoins from speculative crypto assets.

•               Issuer supervision: Permitting issuance only through licensed banks or regulated payment institutions.

•               CBDC development: Rolling out sovereign digital currencies such as China’s e-CNY, Nigeria’s eNaira, and Brazil’s DREX.

•               Cross-border collaboration: Participating in projects like Project Dunbar (Singapore, Malaysia, South Africa, and Australia) and Project Icebreaker (Nordic region) to test international CBDC interoperability.

•               Liquidity management: Using tokenized reserves to support regional platforms such as PAPSS during periods of foreign-exchange shortages.

In essence, central banks are re-engineering monetary policy for the digital age—balancing innovation with sovereignty and systemic stability.

The Promise of Stablecoins for Africa

Stablecoins are not merely digital cash—they are emerging as infrastructure for the global financial system.

In the UAE, Project Aber demonstrated cross-border settlements using shared digital currencies. Japan and Hong Kong have approved stablecoin issuers for corporate use. In Kenya and Ghana, fintech startups are building blockchain-based regional payment solutions.

For Africa’s AfCFTA vision, stablecoins could serve as bridging assets, reducing transaction costs and currency conversion risks while facilitating intra-African trade.

Complementing PAPSS and AfCFTA

The Pan-African Payment and Settlement System (PAPSS)—a flagship AfCFTA initiative led by Afreximbank—already enables real-time payments across African borders in local currencies. However, its long-term scalability depends on liquidity, interoperability, and trust.

Stablecoins can strengthen PAPSS by:

•               Providing digital liquidity for cross-border settlements;

•               Enhancing interoperability between national systems and digital wallets;

•               Offering transparent and auditable reserve mechanisms; and

•               Powering programmable finance, automating escrow, tax, and trade settlements.

Together, PAPSS and stablecoins can form the backbone of a digitally unified African financial architecture.

The Downsides and Risks

Despite their promise, stablecoins carry notable risks:

•               Reserve opacity: Some issuers have failed to prove full backing, as seen in the collapse of TerraUSD in 2022.

•               Operational fragility: Private issuers face hacking and liquidity risks.

•               Regulatory gaps: Inconsistent frameworks across jurisdictions could enable misuse.

•               Systemic contagion: A major stablecoin failure could disrupt global financial markets.

•               Policy leakage: Widespread adoption of dollar-backed stablecoins could weaken local monetary sovereignty in emerging markets.

These vulnerabilities underscore the need for robust regulation, transparency, and coordination with central banks.

Regulation Will Shape the Future

Governments and regulators are responding.

The European Union’s MiCA framework sets a global benchmark for reserve transparency and investor protection. The U.S. Stablecoin Transparency Act aims to ensure federal oversight. Singapore, South Africa, and Mauritius are establishing regulatory blueprints that balance innovation with prudential control.

Ultimately, regulated innovation—anchored by central bank supervision—will determine which stablecoins endure.

The Road Ahead

Stablecoins will not replace fiat; they will extend and complement it. From the dollar and euro to the naira and dirham, national currencies are being reimagined in tokenized form. For Africa, alignment between PAPSS, AfCFTA, and central-bank-supervised stablecoins can unlock new frontiers of inclusion, trade, and monetary resilience.

The future of money will be multi-layered—fiat as the foundation of trust, stablecoins as the engine of efficiency, and central banks as the guardians of credibility and interoperability.

Conclusion

Stablecoins represent one of the most significant monetary innovations of the 21st century. Their value lies not in speculation but in their capacity to solve real-world frictions—speed, cost, and access.

As central banks from China to Nigeria, the U.S. to Kenya, and Singapore to the UAE embrace digital frameworks, the global economy is edging toward a digital, interoperable, and inclusive future—one where fiat, stablecoins, and PAPSS together drive Africa’s next chapter of growth and global integration.

•Dr. Ebenezer Onyeagwu (immediate past CEO of Zenith Bank Plc) is a financial strategist, thought leader, and advocate for innovation-driven growth in Africa’s financial ecosystem.