Why Africa’s 3% Stablecoin Spread Could Erode Your Remittance Returns

• Median stablecoin‑to‑fiat spread in Africa hit 299 bps (≈3%) in Jan, far above the 0.07% Asian benchmark.
• Single‑provider corridors can charge >13% – Botswana peaked at 19.4% before easing.
• More providers compress spreads to 1.5‑4%, highlighting competition as the price lever.
• Stablecoin rates still track traditional FX within 0.05% globally, but Africa shows a 1.2% “TradFi premium.”
• Investors eyeing crypto‑infrastructure or remittance platforms must factor regional liquidity risk.

You’re probably overpaying on every stablecoin‑to‑fiat swap in Africa—by as much as 19%.

That hidden cost matters whether you’re a diaspora sending money home, a fintech building cross‑border wallets, or an investor allocating capital to the continent’s crypto‑infrastructure. The latest data from payments‑infrastructure firm Borderless.xyz paints a stark picture: while the global median spread between stablecoin buy and sell rates hovers near zero, Africa’s median sits at 299 basis points, roughly three percent of the transaction amount. Below we unpack why this gap exists, how it fits into broader sector dynamics, and what it means for your portfolio.

Why Africa’s Stablecoin Spread Beats Global Averages

Spreads function like the bid‑ask differential in equities – they represent the cost of execution. In the case of stablecoins, the “buy‑sell” gap is the price you pay to convert a token such as USDC into local fiat like the South African Rand. Borderless.xyz tracked 66 currency corridors and nearly 94,000 rate observations in January, revealing a median spread of 299 bps for the continent, compared with 130 bps in Latin America and a negligible 7 bps in Asia.

Several macro factors drive this divergence. First, African FX markets are fragmented, with many economies operating under capital controls or thin foreign‑exchange liquidity. Second, the regulatory environment for crypto‑service providers varies dramatically, limiting the number of licensed operators in certain jurisdictions. Finally, local fiat demand for stablecoins remains nascent, meaning providers must price in higher risk premiums to cover operational costs and potential regulatory exposure.

What the Competition Landscape Reveals About Pricing Gaps

Competition is the single most decisive variable. In corridors where three or more providers compete – for example, South Africa’s Rand‑USDC pair – spreads compress to a range of 1.5‑4 %. By contrast, markets with a sole provider, such as Botswana and the Democratic Republic of Congo, regularly posted spreads above 13 % and, in Botswana’s case, a staggering 19.4 % early in the month.

This pattern mirrors traditional FX: the more liquidity providers, the tighter the market. The implication for investors is clear – backing platforms that can aggregate multiple liquidity sources or that have secured partnerships with local banks can capture a pricing advantage and potentially earn higher margin on the spread differential.

Stablecoins vs Traditional FX: The “TradFi Premium” Explained

Borderless.xyz also measured the “TradFi premium,” the difference between stablecoin mid‑rates and conventional interbank FX mid‑market rates. Globally, the median premium is a modest 5 bps (0.05 %). Africa, however, shows a 119 bps premium (≈1.2 %). In practical terms, a $100 transfer that would cost $0.05 on the interbank market costs $1.25 when routed through a stablecoin bridge in many African corridors.

While stablecoins still offer faster settlement (minutes versus days) and can bypass some legacy correspondent‑bank fees, the conversion step erodes a sizable portion of the promised savings. For an investor, the premium is a risk‑adjusted cost metric that can be modeled similarly to transaction fees in traditional fintech valuations.

Sector Trends: How the Pricing Gap Impacts the African Remittance Market

The African remittance corridor is one of the world’s largest, with an estimated $48 bn moved annually. Traditional providers like Western Union and MoneyGram charge roughly $6 per $100 transferred, a 6 % fee. Stablecoins were heralded as a disruptive alternative that could cut fees to sub‑1 % levels. The new spread data suggests the reality is more nuanced: while the on‑chain transfer itself is cheap, the final fiat conversion can bring the effective cost back up to 3‑5 % in competitive markets and up to 20 % where monopolies exist.

Historically, similar dynamics played out with mobile money in Kenya. Early on, M‑Pesa’s fees were high, but as competition intensified and liquidity deepened, transaction costs fell dramatically. The same trajectory could unfold for stablecoin bridges if regulators foster a level playing field and if new entrants—such as global crypto exchanges or regional fintech consortia—bring additional liquidity.

Investor Playbook: Bull and Bear Cases for Stablecoin Infrastructure Exposure

Bull case: If competition expands, spreads could converge toward the global median of 130 bps, unlocking a multi‑percentage‑point margin upside for providers. Companies that own or partner with on‑ramps (e.g., crypto‑friendly banks, payment processors) stand to capture fee share. Additionally, a tighter spread makes stablecoins more attractive for large‑scale B2B payroll and cross‑border trade, expanding the addressable market.

Bear case: Persistent regulatory friction, capital controls, or a resurgence of traditional correspondent‑bank dominance could keep spreads elevated. Providers operating in monopolistic corridors may face reputational risk and could be forced to absorb part of the premium to stay competitive, compressing earnings.

From a portfolio perspective, consider a two‑pronged approach: (1) allocate to publicly listed fintechs or crypto‑exchange subsidiaries that are actively building African on‑ramps, and (2) maintain a small exposure to private‑equity or venture funds targeting liquidity‑aggregation platforms. Track the number of licensed stablecoin providers per country as a leading indicator of spread compression.

Bottom line: Stablecoins still hold the promise of faster, cheaper cross‑border payments, but the conversion spread is the hidden cost that can make or break that promise in Africa. The competitive landscape will be the decisive factor—watch for new entrants, regulatory nudges, and partnership announcements. Those who get in early on the liquidity‑aggregation side could reap outsized returns as spreads narrow.